MCA Imposes Penalties for Non-Compliance with the Maintenance of Statutory Register of Members

The Ministry of Corporate Affairs has issued an order dated 27th July 2023 imposing penalties for violations of Section 88(1) of the Companies Act, 2013. This order concerns Sarada Pleasure and Adventure Limited
(CIN: U01132BR2008PLC013364) registered under ROC- Patna and its non-compliance with maintenance of Register of Members as per Section 88(1). 

Show cause notice was issued to the company and its directors, who in absence of response, was found to be in default and hence liable to penalty under Section 88(5) of the Companies Act, 2013.  A penalty of INR 3,00,000 has been imposed on the company and INR 50,000 each on the directors.  

Relevant Provisions 

As per Section 88(1) of the Companies Act, 2013: Every company shall keep and maintain the following registers in such form and in such manner as may be prescribed, namely:  

1. register of members indicating separately for each class of equity and preference shares held by each member residing in or outside India;  

1. register of debenture-holders; and  

1. register of any other security holders. 

Section 88(5) states that:- “If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2), the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees”. 

Please note that in light of Section 446B, if the above noncompliance relates to a One Person Company, Small company, Start-up company or Producer Company, or officer in default of such companies then the maximum penalty shall not be more than one-half of the penalty specified in the above provisions. 

It is evident from the above that the maintenance of statutory registers is not a volunteer act on behalf of companies, it is an ongoing statutory requirement. Any non-conformity of maintenance of the statutory register can incur penalties for non-compliance.