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A Crtique On Section 10A Of The Companies ACT 2013

  • February 24, 2024
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A newly incorporated company can commence its business or borrow money only after filing a declaration with the Registrar of Companies (ROC)  to the effect that (i) every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and furnished/given  to the Registrar of companies a verification about  its registered office within a period of thirty days of its incorporation.

The declaration is to be filed with the office of  Registrar of Companies in Form No. INC-20A as prescribed by Rule 23A of the Companies (Incorporation) Rules, 2014.

There is a time limit within which Form No. INC-20A is to  be filed with the office of  Registrar of Companies(ROC)  – one hundred and eighty days of the date of incorporation of the company.

If Form No. INC-20A could not be filed within  one hundred and eighty days of the date of incorporation of the company,  the following consequences will emerge

1.  the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

2. possible strike off of  the name of the company by the  Registrar of Companies (ROC)  with or without imposing penalty.

“If Form No. INC-20A could not be filed within  one hundred and eighty days of the date of incorporation of the company the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees”.

The penal provision  ie the provision imposing  penalty is absurd  one and a bad law.  Because, it punishes and treats   one as an offender only for the reason that a company is incorporated with good intentions, but could not be taken off.   

A company may fail to file Form No. INC-20A  within one hundred and eighty days of the date of incorporation of the company due to various reasons such as inadvertence, due to shortage of fund, unfavorable commercial climate etc.

Whatever may be the reason, the penalty prescribed is harsh.  Because, the Registrar of  Companies has given the power  to strike off the companies which failed to file Form No. INC-20A  on the ground company has failed to commence its business.  Striking off of company due to non non filing Form No. INC-20A  is in itself is a punitive and corrective action.  Because , if the name of a running company is struck off  for reason of non filing of Form No. INC-20A, it can approach the National Company  Law Tribunal ( NCLT)  to get its name restored.  If the company is not a running company ,  striking off its name   by Registrar  of  Companies (ROC) for  non filing Form No. INC-20A bring  the promoters  to the situation as no company is promoted.  So, a separate penalty for default in non filing Form No. INC-20A is absurd and not in alignment with the concept ease of doing business.