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Penalties for Mismanagement, Misrepresentation & Fraud

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The Companies Act 2013 lays down strict rules for the way the business and management is to conduct itself. Failure to comply with these rules and guidelines can attract some penalties, some which may include civil and criminal liability. This article throws light on the penalties for misrepresentation, mismanagement and fraud under the act. Also, read about penalties before and after incorporation.  
No Section No and Description Defaulting party Civil Liability Criminal Liability (Imprisonment)
1) Sec 197 – Breach of the limit of the overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. Any person Min: INR 1 Lakh Max: INR 5 Lakhs
2) Sec 203 – Default in complying with provisions relating to appointment of KMP Company Every director & KMP Min: INR 1 Lakh Max: INR 5 Lakhs INR 50 thousand In the case of Continuing one INR 1 thousand per day
3) Sec 204 – Failure to comply with provisions related to secretarial audit, annexing of secretarial audit report and failure by the Board to provide an explanation to the qualifications stated. Company/ every officer/company secretary in default Min: INR 1 Lakh Max: INR 5 Lakhs
4) Sec 206 – Business of a company has been or is being carried on for a fraudulent or unlawful purpose Company fails to furnish any information or explanation or produce any document required by the registrar. Every officer in default Company and every officer in default Min: Amount involved in the fraud Max:3 times the amount involved INR 1 Lakh In case of continuing failure INR 5 hundred for every day of default Min:6 Months Max:10 Years *Fraud involving public interest: Min: 3 years
5) Sec 207-Director/ officer of the company disobeys the direction issued by the Registrar or the inspector in matters related to inspection and enquiry Director/Officer Min: INR 25 thousand Max: INR 1 Lakh & Max: 1 year
6) Sec 213- Any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud Every officer in default & persons concerned in the formation of the company Min: Amount involved in the fraud Max:3 times the amount involved & Min:6 Months Max:10 Years *Fraud involving public interest: Min: 3 years
7) Sec 217- Disobeying the orders issued by Registrar/inspector A person fails without reasonable cause or refuses -to produce information OR-to appear personally or answer any question OR-to sign the notes of any examination Director or officer Any person Min: INR 25 thousand Max: INR 1 Lakh Min: INR 25 thousand Max: INR 1 Lakh In case of continuing failure INR 2 thousand for every day of default & Max: 6 months
8) Sec 221 – Removal/transfer of assets/fund/property in contravention to orders of the tribunal Company Every officer in default Min: INR 1 Lakh Max: INR 25 Lakhs Min: INR 50 thousand Max: INR 5 Lakhs OR Max: 3 years OR Both
9) Sec 222 – Securities issued/transferred in contravention to orders of the tribunal post restrictions imposed by the tribunal Company Every officer in default Min: INR 1 Lakh Max: INR 25 Lakhs Min: INR 25 thousand Max: INR 5 Lakhs OR Max: 6 months OR Both
10) Sec 229 – Penalty for furnishing a false statement, mutilation, destruction of documents Officer/Employee Min: Amount involved in the fraud Max:3 times the amount involved & Min:6 Months Max:10 Years *Fraud involving public interest: Min: 3 years
11) Sec 232-Contravention of provisions related to merger and amalgamation of companies Transferor /Transferee Company Every officer in default Min: INR 1 lakh Max: INR 25 Lakhs Min: INR 1 lakh Max: INR 3 Lakhs OR Max: 1 year OR Both
12) Sec 238-Issuance of circular without registering the same with the registrar involving a transfer of shares. Director Min: INR 25 thousand Max: INR 5 Lakhs
13) Sec 242- Alteration in MOA/Articles inconsistent with the order of the tribunal. Company Every officer in default Min: INR 1 Lakh Max: INR 25 Lakhs Min: INR 25 thousand Max: INR 1 Lakh Max: 6 months OR Both
14) Sec 243-Acting as a managing director/director/manager in contravention of the order of the tribunal. Managing director/director/manager/every director knowingly contravening INR 5 Lakhs OR Max: 6 months OR Both
15) Sec 245- Failure to comply with the orders of the tribunal pertaining to class actions. Company Every officer in default Min: INR 5 Lakh Max: INR 25 Lakhs Min: INR 25 thousand Max: INR 1 Lakh & Max: 3 years
16) Sec 247 – Contravention of provisions related to valuation by registered valuers Defraud company/members Valuer Valuer Min: INR 25 thousand Max: INR 1 lakh Min: INR 1 Lakh Max: INR 5 Lakhs & Max: 1 year
17) Sec 249 – Filing for removal of name from the register of companies in contravention to provisions enshrined in this section Company Max: INR 1 Lakh
18) Sec 251-Fraudulent application for removal of a name. Persons in charge of the management of the company Min: Amount involved in the fraud Max:3 times the amount involved & Min:6 Months Max:10 Years *Fraud involving public interest: Min: 3 years
19) Sec 267 – 1)  Violation of Provisions of chapter XIX or order of tribunal/appellate tribunal 2) Provides False evidence/false statement before the Tribunal/Appellate Tribunal 3) Attempts to tamper with the records of reference or appeal filed under this Act Any person Max: INR 10 Lakhs & Max: 7 years
20) Sec 274 -Failure to file the statement of affairs. Director or officer in default Min: INR 25 thousand Max: INR 5 Lakhs OR Max: 6 months OR Both
21) Sec 15 – Failure to note  alteration in every copy of the articles or memorandum as the case may be Company and every officer in default INR 1 thousand for every copy issued without alteration
22) Sec 447- Punishment for fraud Any person guilty of fraud Min: Amount involved in the fraud Max:3 times the amount involved &
23) Sec 448- Punishment for false statement Any person guilty of fraud Min: Amount involved in the fraud Max:3 times the amount involved &
24) Sec 449-Punishment for false evidence Any person Max: INR 10 lakhs &
25) Sec 450-Punishment where no specific penalty or punishment is provided Company & every officer un default INR 10 thousand In case of continuing failure INR 1 thousand  for every day of default
26) Sec 451 – Punishment in case of repeated default ( Same offence within a period of 3 years) Company/Officer Twice the amount of fine for such offence
27) Sec 452 – Punishment for wrongful withholding of Property Officer/Employee Min: INR 1 Lakh Max: INR 5 Lakhs
28) Punishment for improper use of “Limited” or “Private Limited” Person INR 500 to INR 2000 for every day of usage of the name
29) Sec 454 – Non-payment of  the penalty imposed by the adjudicating officer or the Regional Director within a period of ninety days from the date of the receipt of the copy of the order Company Officer Min: INR 25 thousand Max: INR 5 Lakhs Min: INR 25 thousand Max: INR 1 Lakh OR
30) Sec 464 – Formation of association or partnership of persons exceeding a certain number Every member of an association or partnership carrying on business Max: INR 1 Lakh
31) Sec 191 – Payment to director for loss of office, etc., in connection with the transfer of undertaking, property or shares in contravention of the provisions Director Min: INR 25 thousand Max: INR 1 Lakh
32) Sec 194 – Entering into forward dealings in securities of company by the director or key managerial personnel. Director/Key managerial personnel Min: INR 1 lakh Max: INR 5 Lakh OR Max: 2 years OR Both
33) Sec 195- Insider trading of securities Any person Min: INR 5 Lakh Max: INR 25 Crores or three times the amount of profits made out of insider trading whichever is higher Max: 5 years OR Both
72) Sec 190 – Failure to maintain a copy of the contract of employment with managing director or whole time director/written memorandum in absence of a written contract & also failure to keep it open for inspection without fee Company Every officer in default INR 25 thousand INR 5 thousand for each default
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