The Registrar of the Companies penalized the company and its directors for a cum-penalty of Rs 5 lakhs for not filing the form DIR-12 after the resignation of the director. Failure to File DIR-12 on Time Can Lead to Heavy ROC Penalties The Update ROC Kanpur levied fines of Rs.5 lakh on the company and its director for non-filing of Form DIR-12 due to resignation of Director.
Despite the Auditor's Due to nature of the form, most corporate filings of director resignation are treated as mere procedural formalities, the recent ROC action warns of the perils of false assumptions.
The Registrar of the Companies penalized the company and its directors for a cum-penalty of Rs 5 lakhs for not filing the form DIR-12 after the resignation of the director.
Key Takeaways
- The Registrar of the Companies penalized the company and its directors for a cum-penalty of Rs 5 lakhs for not filing the form DIR-12 after the resignation of the director.
- Failure to File DIR-12 on Time Can Lead to Heavy ROC Penalties The Update ROC Kanpur levied fines of Rs.5 lakh on the company and its director for non-filing of Form DIR-12 due to resignation of Director.
- The Action The companies need to file the DIR-12 given the appointment and resignation or change in the existing director, on time as there can be penalizations & adjudication proceedings for non compliance.
- The Board filed the resignation on 2 nd March 2020 and later filed the resignation and DIR-11 with the ROC by that director for the resignation.
- Due to non filing of Form DIR-12 after a director resigned, a penalty of a 5 lakh rupees faced by the company as well as every director despite that director had resigned formally.
Failure to File DIR-12 on Time Can Lead to Heavy ROC Penalties
The Update
ROC Kanpur levied fines of Rs.5 lakh on the company and its director for non-filing of Form DIR-12 due to resignation of Director.
The Impact
It further asserts that even administrative filing offences under Companies Act may result in harsh penal measures imposed on the defaults with companies and officers in default.
The Action
The companies need to file the DIR-12 given the appointment and resignation or change in the existing director, on time as there can be penalizations & adjudication proceedings for non compliance.
Background of the Case
The issue pertained to M/s. Alpha Alliance Technology Private Limited being a public company incorporated under the Companies act, 2013. In the inquiry undertaken by ROC Kanpur from the records of MCA and from official enquiry, the authorities noted that one of the director of the company had quit with effect from 1st March 2020. The Board of Directors had formally acknowledged the resignation during Board meeting held on 2 nd March 2020 in the form of video conferencing. The directors who resigned Then submitted a Form DIR-11 with the Registrar but the company itself did not report the resignation and file a Form DIR-12as required under company law. Ultimately, this led to proceedings being brought against it by way of adjudication and to both the company and its directors being financially penalised.
Legal Provisions Relating to DIR-12 Filing
Resignation of Director: Section 168 of the Companies Act, 2013 gives for resignation of directors. Section 168(1) stipulates that if a director of the company tenders his or her resignation, the company shall give notice to the Registrar of Companies in such manner and within such period as may be prescribed. Under Rule 15 Companies (Appointment and Qualification of Directors) Rules, 2014 company shall file Form DIR-12 within 30 days of receipt of the resignation. Independently, even the leave of the director could be made by the director himself by way of submitting DIR-11 at ROC as a secondary intimation. The filing of DIR-11 by the director would not But satisfy the external filing requirement of DIR-12 by the company. The penal provision relevant to this was S172 of the companies act. Section 172 which prescribes punishment for any such provision for directors for not taking the prescribed action where no other punishment is provided.
Facts Identified During ROC Enquiry
Experts say the enquiry was instituted in pursuance of directions issued by Ministry of Corporate Affairs under section 206(4) of the Companies Act. While conducting document inspections, ROC officials noted from: The resignation was effective from 1 st March 2020. The Board filed the resignation on 2 nd March 2020 and later filed the resignation and DIR-11 with the ROC by that director for the resignation.
The company never filed the DIR-12 reporting the resignation Using these decision, the authorities made the determination that the company would have committed an offence under Section 168(1) for not intimating ROC through the normal prescribed filing. The question was then remanded for the adjudication process against the firm and its defaulting officers.
Penalty Imposed by ROC
After that, the ROC issued show-cause notices to the company and its directors why penal action should not be taken. Order offers that no reply was filed or hearing requested by the company or directors within the time limited. And So, the ROC acted ex-parte and penalized the Company on Section 172 of the Companies Act: Put 3 lakh on the company. Each of two directors defaulted on payment of Rs 1 lakh. This would result in a total penalty exposure of Rs 5 lakh. The order further provided that the company and the directors should make good the default and pay the penalty within the time specified.
Key Compliance Lessons for Companies
There are a number of key lessons on compliance for companies and directors to take away from the case. First, there is a caveat to the internal board approval. Internal board approval does not take effect until the required statutory filings with ROc are filed on time. Secondly, companies should not oversimplify the whole procedure by processing the respective form DIR-11 when the CEO step down. It does not solely discharge the company's compliance requirements. DIR-11and DIR-12 are entirely two different things per the law. Third, firms should have proper systems of compliance monitoring director appointment and resignation reporting, filings related to governance affairs. Fourth, failure to adhere to show-cause notices or failure to answer the proceedings during the adjudication process can seriously aggravate the matter and lead to an ex-parte orders. Last but by no means least, directors must themselves keep a vigilant eye on the company and ensure that necessary statutory notices are filed.
Conclusion
The ROC action on Alpha Alliance Technology Private Limited clearly demonstrates that even administrative non-compliance under the Companies Act can attract heavy penal provisions. Due to non filing of Form DIR-12 after a director resigned, a penalty of a 5 lakh rupees faced by the company as well as every director despite that director had resigned formally. This case is a good reminder that corporate compliance is not only in the private confines of the company who promptly seek internal approvals or sign documents before liquidation of the statute of limitations. Where the statute of limitations is not properly extinguished in public files held by ROC. The takeaway for companies, directors and compliance professionals is unambiguous. Even procedural filing requirements under company law must be taken seriously as regulatory authorities are keen on taking stringent actions against late/submitted failures.
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ROC Imposes ₹5 Lakh Penalty for Failure to File DIR-12 After Director Resignation+
The Registrar of the Companies penalized the company and its directors for a cum-penalty of Rs 5 lakhs for not filing the form DIR-12 after the resignation of the director. Failure to File DIR-12 on Time Can Lead to Heavy ROC Penalties The Update ROC Kanpur levied fines of Rs.5 lakh on the company and its director for non-filing of Form DIR-12 due to resignation of Director.