Company Faces Penalty for Not Mentioning DIN in Financial Statements

The company and its directors must comply with the Companies Act 2013 (‘Act’) provisions and its rules, or they will have to face a penalty. Section 158 of the Act provides that a company or every person must mention the Director Identification Number (DIN) while furnishing any return, particular or information. However, such return, particular or information should relate to the director or contain a reference to the director.

Section 172 of the Act provides a penalty for not quoting the DIN on any return, particular or information. It states that a company and every officer of the company in default will be liable for a penalty of Rs.50,000 and Rs.500 for each day the failure continues. The maximum penalty is Rs.3,00,00 for a company and Rs.1,00,00 for an officer in default.

Recently, in the case of M/s. Premier Solution Private Limited (‘company’), a question came up for adjudication before the Adjudicating Officer, Registrar of Companies (ROC), Gujarat, Dadra and Nagar Haveli regarding the failure to mention DIN on the financial statements of a company. The facts of the case, the ROC order for non-compliance with the Act, and the penalty imposed are stated below.

Facts of the case

The company filed its previous three years’ financial statements with the ROC, Ahmedabad (ROC), in the scheme of amalgamation of the company with M/s. D.J. Shah Investment Finance Private Limited and their creditors and shareholders where the ROC observed that the company had not mentioned the DIN of their directors in the financial statements, thus violating Section 158 of the Act.

The ROC filed a report before the Regional Director, Ahmedabad, highlighting violations and non-compliance with the Act. The Directorate instructed to take the required action for violation of Section 158 of the Act regarding the failure to mention the DIN on the company’s financial statements for the last three years.

As per the Directorate’s instructions, an adjudication notice was issued to the company and its directors. The company submitted its reply and sought a personal hearing in the matter. Thus, a written notice was given to the company and its officers for an appearance in the case.

Submissions of parties

The company secretary, who appeared on behalf of the company and its directors during the hearing, contended that financial statements are formal records of the financial positions and activities of an entity or business and are not return, particular, or information related to directors of the company. He stated that it could not be considered a document containing a reference of any director since financial statements are written records of a company’s financial position. He also contended that the necessary details of the directors who have signed the financial statements (including DIN) are provided in e-Forms 23AC or AOC 4 (as applicable) filed on the MCA portal.

The Presenting Officer submitted that a company must not distinguish the financial statements from the information, return or particular, as mentioned under Section 158 of the Act. He submitted that the object of filing information on a financial statement or audit report on the MCA portal or public domain is in the public interest to enable the public, investors, and whosoever is interested in the company can access the information on company directors under the Act.

Non-filing of correct or adequate documents on the MCA portal would result in information denial to the public regarding the DIN of the directors of the company, and the company should avoid the same.

ROC order

After considering the circumstances and facts of the case and submissions made by the Company Secretary and Presenting Officer, the Adjudicating Officer imposed a minimum penalty of Rs.1,50,000, i.e. Rs.50,000 x 3 years, on the company and each of the three directors totalling to Rs.6,00,000.

The Adjudicating Officer mentioned that the company and its officers should pay the penalty from their personal sources or income through e-payment available on the MCA portal. The Adjudicating Officer, ROC Gujarat, has set an example that ignorance of the law can be a costly affair for the company and its directors, who may not be aware that failure to mention the DIN on the financial statements could cost them a penalty of up to Rs.6,00,000.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@clear.in