[Opinion] Failure to File Return of Allotment in E-Form PAS-3 Results in Severe Penalties for the Company and Its Directors

Prof R Balakrishnan – [2024] 162 taxmann.com 62 (Article)

1. A brief about this case

This is a case involving non-filing of the return of allotment with the Registrar of Companies in the prescribed e-form PAS- 3 which is required to be filed within 30 days from the date of allotment of shares pursuant to section 39(4) and section 42(9) of the Companies Act 2013 read with Rule 12 and 14 of Companies (Prospectus and Allotment of Securities) Rules 2014.

In this particular case, M/s. Saiyoga Nidhi Limited having its registered office at Coimbatore made the allotment of shares on 28th September 2020 during the financial year 2020-21 under section 39 (4) of the Companies Act 2013 read with Rule 12 (1) of the Companies (Prospectus and Allotment of Securities) Rules 2014. The company did not file the return of allotment in e-form PAS-3 till the time the matter was taken up with the company by the Registrar of Companies of Coimbatore on 6th January 2023 – over a period of two years.

Under the provisions of the Companies Act, the Registrar of Companies/Adjudication Office issued the show cause notice for which the company responded on 2nd February 2023. However, the reply provided by the company was not found satisfactory and not tenable under the provisions of the Companies Act 2013. Thereafter, the e Adjudication Officer of Coimbatore passed the adjudication order on this matter by levying a penalty upon the company, its managing director and one more director, one lakh each thereby making the total penalty of Rs.3 lakh.

Let us go through this case in detail in order to understand the provisions of the Companies Act 2013 read with the relevant rules and consequences of default/non-compliance.

2. Provisions relating to this case under the Companies Act 2013.

The relevant provisions pertaining to this case are section 39 of the Companies Act 2013, read with Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules 2014 and the extracts of the same are given below.

Companies Act 2013 Part-I public offer Rule 39 – Allotment securities by company
Section	Provision
39 (4)	(Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed.
Companies (Prospectus and Allotment of Securities) Rules 2014 Rule 12 – Return of Allotment
Rule	Provision
Rule 12 (1)	Whenever a company having a share capital makes any allotment of its securities, the company shall, within thirty days thereafter, file with the Registrar a return of allotment in form PAS-3, along with the fee as specified in the Companies (Registration Offices and Fees) Rules 2014
Companies Act 2013 Part-I public offer Rule 39 – Allotment securities by company
Penal section for non-compliance/default if any
39 (5)	In case of any default under sub-section (3) or sub-section (4), the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.]