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Rule 3Chapter 53

Adjudication of penalties

(I)

The Central Government may appoint any of its officers, not below the rank of Registrar, as adjudicating officers for adjudging penalty under the provisions of the Act.

(2)

Before adjudging penalty, the adjudicating officer shall issue a written notice in the specified manner, to the company, the officer who is in default or any other person, as the case may be, to show cause, within such period as may be specified in the notice (not being less than fifteen days and more than thirty days from the date of service thereon), why the penalty should not be imposed on it or him.

(3)

Every notice issued under sub-rule (2). shall clearly indicate the nature of non -compliance or default under the Act alleged to have been committed or made by such company officer in default, or any, other person, as the case may be and also draw attention to the relevant penal provisions of the Act and the maximum penalty which can be imposed on the company, and each of the officers in default, or the other person.

(4)

The reply to such notice shall be filed in electronic mode only within the period as specified in the notice:

Proviso

Provided that the adjudicating officer may, for reasons to be recorded in writing, extend the period referred to above by a further period not exceeding fifteen days, if the company or officer in default or any person as the case may be, satisfies the adjudicating officer that it or he has sufficient cause for not responding to the notice within the stipulated period or the adjudicating officer has reason to believe that the company or the officer or the person has received a shorter notice and did not have reasonable time to give reply.

(5)

If, after considering the reply submitted by such company, its officer. or any other person, as the case may be, the adjudicating officer is of the opinion that physical appearance is required, he shall issue a notice, within a period of ten working days from the date of receipt of reply fixing a date for the appearance of such company, through its authorised representative, or officer of such company, or any other person, whether personally or through his authorised representative:

Proviso

Provided that if any person, to whom a notice is issued under sub-rule (2), desires to make an oral representation, whether personally or through his authorised representative and has indicated the same while submitting his reply in electronic mode, the adjudicating officer shall allow such person to make such representation after fixing a date of appearance.

(6)

on the date fixed for hearing and after giving a reasonable opportunity of being heard to the person concerned, the adjudicating officer may, subject to reasons to be recorded in writing, pass any order in writing as he thinks fit including an order for adjournment:

Proviso

Provided that after hearing, adjudicating officer may require the concerned person to submit his reply in writing on certain other issues related to the notice under sub-rule (2), relevant for determination of the default.

(7)

The adjudicating officer shall pass an order,-

(a)

within thirty days of the expiry of the period referred in sub-rule (2) or of such extended period as referred therein, where physical appearance was not required under sub-rule (5);

(b)

within ninety days of the date of issue of notice under sub-rule (2). where any person appeared before the adjudicating officer under sub-rule (5):

Proviso

Provided that in case an order is passed after the aforementioned duration, the reasons of the delay shall be recorded by the adjudicating officer and no such order shall be invalid merely because of its passing after the expiry of such thirty days or ninety days as the case may be.

(8)

Every order of the adjudicating officer shall be duly dated and signed by him and shall clearly state the reasons for requiring the physical appearance under sub-rule (5).

(9)

The adjudicating officer shall send a copy of the order passed by him to the concerned company, officer who is in default or any other person or all them and to the Central Government and a copy of the order shall also be uploaded on the website.

(10)

For the purposes of this rule, the adjudicating officer shall exercise the following powers, namely:-

(a)

to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case after recording reasons in writing;

(b)

to order for evidence or to produce any document, which in the opinion of the adjudicating officer may be relevant to the subject matter.

(11)

If any person fails to reply or neglects or refuses to appear as required under sub-rule (5) or sub-rule (10) before the adjudicating officer, the adjudicating officer may pass an order imposing the penalty. in the absence of such person after recording the reasons for doing so.

(12)

While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely:-

(a)

size of the company

(b)

nature of business carried on by the company;

(c)

injury to public interest;

(d)

nature of the default;

(e)

repetition of the default;

(f)

the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the deflate: and

(g)

the amount of loss caused to an investor or group of investors or creditors as a result of the default:

Proviso

Provided that, in no case, the penalty imposed shall be less than the minimum penalty prescribed, if any, under the relevant section of the Act.

(13)

In case a fixed sum of penalty is provided for default of a provision, the adjudicating officer shall impose that fixed sum, in case of any default therein.

(14)

Penalty shall be paid through Ministry of Corporate Affairs portal only.

(15)

All sums realized by way of penalties under the Act shall be credited to the Consolidated Fund of India.

Explanation

1- For the purposes of this rule, the term “specified manner” shall mean service of documents as specified under section 20 of the Act and rules made thereunder and details in respect of address (including electronic mail ID) provided in the KYC documents filed in the registry shall be used for communication under this rule.

Explanation

2.- For the purposes of this rule, it is hereby clarified that the requirement of

submission of replies in electronic mode shall become mandatory after the creation of the adjudication platform.

(1)

The Central Government may appoint any of its officers, not below the rank of Registrar, as adjudicating officers for adjudging penalty under the provisions of the Act.

(2)

Before adjudging penalty, the adjudicating officer shall issue a written notice to the company and to every officer of the company who is in default, to show cause, within such period as may be specified in the notice (not being less than fifteen days and more than forty five days from the date of service thereon), why the inquiry should not

be held against him:

Proviso

Provided that every notice issued under this sub-rule, shall clearly indicate the nature

of non-compliance or default under the Act alleged to have been committed or made

by such company and officer in default, as the case may be:

Proviso

Provided further that the adjudicating officer may, for reasons to be recorded in writing, extend the period referred to above by a further period not exceeding fifteen days, if the company or officer (as applicable) satisfies the said officer that it has sufficient cause for not responding to the notice within the stipulated period.

(3)

If, after considering the cause, if any, shown by such company or officer, the adjudicating officer is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of such company, through its authorised representative, or officer of such company whether personally or through his

authorised representative

(4)

On the date fixed for hearing and after giving a reasonable opportunity of being heard to the person(s) concerned, the adjudicating officer may, subject to reasons to be recorded in writing, pass any order as he thinks fit including an order for adjournment of the hearing to a future date.

(5)

Every order passed under sub-rule (4), shall be dated and signed by the adjudicating officer.

(6)

The adjudicating officer shall send a copy of the order passed by it to the concerned company or officer who is in default and to the Central Government.

(7)

While holding an inquiry, the adjudicating officer shall have the following powers, namely:-

(a)

to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case;

(b)

to order for evidence or to produce any document, which in the opinion of the adjudicating officer, may be useful for or relevant to the subject matter of the inquiry.

(8)

If any person fails, neglects or refuses to appear as required under sub-rule (7) before the adjudicating officer, the adjudicating officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so.

(9)

While adjudging quantum of penalty, the adjudicating officer shall have due regard

to the following factors, namely:-

(a)

the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

(b)

the amount of loss caused to an investor or group of investors or creditors as a result of the default;

(c)

the repetitive nature of the default.

(10)

All sums realised by way of penalties under the Act shall be credited to the Consolidated Fund of India.

Notes, amendments & references (1)

3. Adjudication of penalties.- Substituted vide the Companies (Adjudication of Penalties) Amendment Rules, 2019 dated 19.02.2019. To view the Notification, Click Here .