# What ROC Penalty Orders Teach Foreign Owned Companies

> Source: https://krystal7.com/insights/roc-penalty-orders-foreign-owned-companies-2026
> Publisher: Krystal7 Consultants (Krystal7 Innovations Private Limited), Gurugram, India
> Author: Nihal Srivastava
> Published: 26 Oct 2026
> Summary: ROC penalty orders against four foreign owned subsidiaries, from ₹45,000 to ₹18 lakh, why section 446B relief fails, and five calendar fixes.

*Written by Nihal Srivastava, Krystal7 Consultants. Last updated 26 October 2026.*

## AI Overview Summary

- Four ROC Delhi and Haryana orders, dated April 2023 to May 2024, fined subsidiaries of UK, US and Malaysian parents ₹45,000 to ₹18,00,000.
- Three of the orders refused section 446B half penalties, because section 2(85) excludes every subsidiary from the small company definition.
- Late nominee declarations cost ₹3,13,600 and a late MGT-6 cost ₹9,00,000. An unreported SBO behind a US fund cost ₹18,00,000.
- Under section 454, penalties are due within 90 days of the order. An appeal to the Regional Director must be filed within 60 days.
- A late MGT-7 or AOC-4 filed before the notice, or within 30 days of it, attracts no penalty under the section 454(3) proviso.

**ROC penalty orders show that a foreign owned subsidiary in India pays the full statutory penalty, even for a small filing gap. We read four such orders, dated April 2023 to May 2024, in full on mca.gov.in. The Registrar of Companies for Delhi and Haryana fined subsidiaries of UK, US and Malaysian parents between ₹45,000 and ₹18,00,000. Three of the orders refuse the half penalty relief in section 446B, because a subsidiary cannot be a small company. A compliance calendar would have caught every one of these defaults.**

This case note covers the four orders, what each company did wrong and what it paid. It then explains how adjudication under section 454 runs from notice to appeal. It lists the penalty for each section a foreign subsidiary tends to breach and works through a rupee example. We end with the five changes we would make to any Indian subsidiary's compliance calendar.

## Which ROC penalty orders did we read?

We read four adjudication orders in full on mca.gov.in on 26 Oct 2026. All four come from the Registrar of Companies (ROC), NCT of Delhi and Haryana, which covers companies registered in Delhi and Gurugram. Each company had a foreign parent at the top of its shareholding. The orders date from April 2023 to May 2024.

We also looked for 2025 and 2026 orders. On 26 Oct 2026, MCA's page listing ROC adjudication orders redirected to the portal login. We have therefore used orders we could open and cite directly. All four apply the penalty amounts set by the Companies (Amendment) Act, 2020. Those are the amounts in the text of the Act that MCA publishes.

| Company | Foreign parent, as the order records it | Order date | Section breached | Default | Penalty on company | Penalty on others | Total |
|---|---|---|---|---|---|---|---|
| Etsystore Private Limited | Etsy UK Limited, 100% | 5 Apr 2023 | 118(10) read with SS-1 | Three board meetings in calendar year 2020 | ₹25,000 | ₹5,000 on each of four directors | ₹45,000 |
| BMM Testlabs India Private Limited | BMM International LLC, 100% | 8 Nov 2023 | 89(6) | MGT-6 filed 664 days late | ₹5,00,000 | ₹2,00,000 on each of two directors | ₹9,00,000 |
| Valor Advisory (India) Private Limited | Valor Management Sdn. Bhd., Malaysia, 100% with one share held by a nominee | 16 Nov 2023 | 89(1) and 89(2) | MGT-4 and MGT-5 given 534 days late | Nil | ₹1,56,800 on the nominee and ₹1,56,800 on the Malaysian parent | ₹3,13,600 |
| Leixir Resources Private Limited | US private equity group, through Leixir Intermediate Corp. holding 99.999987% | 6 May 2024 | 90(1), 90(4A) and 90(5) | Significant beneficial owner not identified or reported, and no BEN-4 notices sent | ₹7,00,000 | ₹1,50,000 on each of six officers and ₹2,00,000 on the beneficial owner | ₹18,00,000 |

Source: ROC NCT of Delhi and Haryana adjudication orders published on mca.gov.in (links in Sources), read 26 Oct 2026.

## What happened in each order?

The four orders cover three different failures. One is a board meeting gap. Two are about a nominee shareholder. The last is about who sits behind a foreign fund.

### Etsystore and the missing fourth board meeting

Etsystore Private Limited, a Gurugram company wholly owned by Etsy UK Limited, held three board meetings in calendar year 2020. The meetings were on 10 Mar, 6 Jul and 6 Oct 2020. Secretarial Standard 1 (SS-1), issued by the Institute of Company Secretaries of India, requires at least four board meetings in each calendar year. Section 118(10) makes SS-1 binding.

The company reported the gap itself. It filed an application for adjudication under section 454 on 6 Apr 2022. The ROC issued a show cause notice on 20 Feb 2023 and passed its order on 5 Apr 2023. It imposed ₹25,000 on the company and ₹5,000 on each of four directors under section 118(11).

The order then states why the penalty was not halved. Etsy UK Limited held 100 percent of the shares, so the company was a subsidiary. That put it outside the small company definition in section 2(85). Section 446B therefore did not apply.

Our view: this was the cheapest of the four orders, and the company kept it cheap by reporting first. The lesson is the counting rule. SS-1 counts meetings by calendar year, while the company's financial year ends on 31 March. We fix the four dates each January for that reason.

### BMM Testlabs and the MGT-6 that arrived 664 days late

BMM Testlabs India Private Limited was incorporated on 9 Aug 2021. Its annual return showed BMM International LLC holding 100 percent of the shares, yet the register showed two shareholders. That pattern means one shareholder holds a share for the parent. Section 89 then asks for three filings.

1. The registered owner (the nominee) declares in Form MGT-4 that it holds the share for someone else.
2. The beneficial owner (the parent) declares its interest in Form MGT-5.
3. The company records both and files Form MGT-6 with the ROC within 30 days of receiving them.

The company had received MGT-4 and MGT-5 on 25 Nov 2021, so MGT-6 was due by 24 Dec 2021. The ROC issued a show cause notice on 5 Oct 2023. The company filed MGT-6 on 19 Oct 2023, 664 days late, and asked for no penalty.

The ROC applied section 89(7), which charges ₹1,000 a day. The arithmetic gave ₹6,64,000 for each person. The caps brought this down to ₹5,00,000 for the company and ₹2,00,000 for each of the two directors. The order adds that persons other than the company must pay from their own funds.

Our view: the declarations were sitting in the company's file. One missed form cost ₹9,00,000, and filing it after the notice did not reduce the amount. Section 89 has no rescue window, unlike the annual filings discussed below.

### Valor Advisory and the nominee shareholder

Valor Advisory (India) Private Limited was incorporated on 23 Dec 2021. Valor Management Sdn. Bhd. of Malaysia held all the shares beneficially, with one share in the name of a nominee. The nominee entered the register of members on 31 Mar 2022. Both declarations, MGT-4 from the nominee and MGT-5 from the parent, were due by 30 Apr 2022.

Both arrived on 16 Oct 2023, after the ROC's notice of 5 Oct 2023. In its reply and at the hearing on 1 Nov 2023, the company argued that section 89 did not apply. It said the ROC had known of the nominee arrangement since incorporation. The ROC rejected that argument.

The penalty under section 89(5) is ₹50,000 plus ₹200 for each day of continuing failure, up to ₹5,00,000. For 534 days, that came to ₹1,56,800 each on the nominee and on the Malaysian parent. The order told the Indian company to make sure both paid.

Our view: the penalty fell on the parent itself. A foreign company that holds shares through a nominee has its own filing duty in India. Telling the ROC about the nominee at incorporation is not a substitute for the forms.

### Leixir Resources and the fund manager's CEO

Leixir Resources Private Limited is held 99.999987 percent by Leixir Intermediate Corp., with one share held by another group LLC. The chain runs up to a US holding LLC owned almost entirely by two US private equity funds. The ROC sent a letter under section 206(1) on 7 Feb 2024 asking how the company complied with section 90. The company replied that no individual met the significant beneficial owner (SBO) test.

The company relied on the carve out for pooled investment vehicles in the Companies (Significant Beneficial Owners) Rules, 2018. The ROC then read the investment adviser's filings with the US Securities and Exchange Commission. Those filings showed the adviser was principally owned and controlled by its CEO. The ROC held him an SBO under rule 2(1)(h)(iv), which covers significant influence or control exercised other than through direct holdings.

The ROC issued its show cause notice on 22 Mar 2024 and its order on 6 May 2024. The penalties were as follows.

1. The SBO: ₹2,00,000 under section 90(10), the cap on a calculated ₹10,98,000.
2. The company: ₹5,00,000 under section 90(11) for failing to take the steps section 90(4A) requires to identify its SBO.
3. The company: ₹2,00,000 under section 450, because it never sent BEN-4 notices under section 90(5) and rule 2A(2).
4. Five directors and the company secretary: ₹1,00,000 each under section 90(11) and ₹50,000 each under section 450.

The order holds the non executive directors liable too, on the footing that each knew the holding structure. It says the fund group's nominee directors cannot be absolved. The total came to ₹18,00,000. Our [guide on SBO and Form BEN-2 for a foreign parent](/insights/significant-beneficial-owner-ben-2-foreign-parent) explains the rules. Our [note on the LinkedIn SBO case](/insights/linkedin-sbo-case-parent-ceo-significant-beneficial-owner) covers a similar finding.

Our view: an ROC will look up the parent's public filings abroad. A written SBO analysis that stops at "the fund is exempt" will not survive that review. The BEN-4 notices are the cheap part, and skipping them added ₹5,00,000 to this bill.

## How does adjudication under section 454 work?

Section 454 lets the Central Government appoint officers not below the rank of Registrar to adjudge penalties. Each order we read cites the MCA notification of 24 Mar 2015 that made the ROC an adjudicating officer. MCA's FAQ says the Companies (Adjudication of Penalties) Amendment Rules, 2024 moved the whole process online. Notices, replies, hearings and payment now run through the adjudication module of the MCA V3 portal.

| Stage | What happens | Time limit | Basis |
|---|---|---|---|
| Inquiry, in some cases | The ROC asks for information by letter under section 206(1) | Date set in the letter | Leixir order |
| Show cause notice | The ROC issues a notice with a unique number, naming every violator | Reply date set in the notice; an extension can be requested online | MCA FAQ |
| Reply and hearing | The company replies and may ask for a hearing; an authorised representative can attend by video link | As scheduled by the adjudicating officer | Section 454(4), MCA FAQ |
| Order | The ROC imposes the penalty and can direct the default to be rectified | Not fixed | Section 454(3) |
| Payment and rectification | Each person pays online and the company fixes the default | 90 days from receipt of the order | Section 454(8), MCA FAQ |
| Appeal | Any aggrieved person files Form ADJ with the Regional Director | 60 days from receipt of the order | Section 454(5) and 454(6) |
| Regional Director's order | The Regional Director hears the parties and confirms, modifies or sets aside the order | Not fixed | Section 454(7) |
| Non compliance | Prosecution: company fine of ₹25,000 to ₹5,00,000; officer up to six months in prison, or a fine of ₹25,000 to ₹1,00,000, or both | After the 90 days | Section 454(8) |
| Repeat default | Twice the penalty for the same default | Within three years of the earlier order | Section 454A |

Sources: Companies Act, 2013, sections 454 and 454A; MCA FAQ on e adjudication; Leixir order of 6 May 2024. All read 26 Oct 2026.

### The 30 day rescue window for annual filings

The proviso to section 454(3) covers two defaults only. The first is a missed annual return under section 92(4). The second is missed financial statements under section 137(1) or 137(2). If the company files before the notice or within 30 days of it, the ROC imposes no penalty and the proceedings end. Our [AOC-4 and MGT-7 guide](/insights/aoc-4-mgt-7-annual-filing-foreign-owned-company) sets out those forms.

No other section gets this window. BMM Testlabs filed its MGT-6 within two weeks of the notice and still paid the full capped amount.

### The dates run from the order, so diarise on day one

The Act counts the 60 day appeal period and the 90 day payment period from receipt of the order. MCA's FAQ counts the payment period from the date the order issues, and one of its answers does the same for appeals. It also says the payment page closes after 90 days, and an unpaid case goes to prosecution. On our files, we work to the issue date, because it is the earlier of the two.

## What are the penalties, section by section?

The table below lists the penalties a foreign owned subsidiary meets most often. "Per day" amounts run while the default continues. Some sections count from the first day and some from the day after, as noted.

| Section | Default | Company | Each officer in default |
|---|---|---|---|
| 12(8) | No registered office able to receive notices, name not displayed, or another breach of section 12 | ₹1,000 a day, up to ₹1,00,000 | ₹1,000 a day, up to ₹1,00,000 |
| 10A(2) | Commencement declaration (INC-20A) not filed within 180 days | ₹50,000 | ₹1,000 a day, up to ₹1,00,000 |
| 92(5) | Annual return (MGT-7) filed late | ₹10,000, plus ₹100 a day after the first, up to ₹2,00,000 | Same daily rate, up to ₹50,000 |
| 137(3) | Financial statements (AOC-4) filed late | ₹10,000, plus ₹100 a day, up to ₹2,00,000 | MD and CFO, or a director the board charged, or else all directors: ₹10,000 plus ₹100 a day after the first, up to ₹50,000 |
| 149(3) with 172 | No director who stayed in India for 182 days in the financial year | ₹50,000, plus ₹500 a day, up to ₹3,00,000 | ₹50,000, plus ₹500 a day, up to ₹1,00,000 |
| 89(5) | Nominee or beneficial owner fails to declare (MGT-4 or MGT-5) | Falls on the person: ₹50,000, plus ₹200 a day after the first, up to ₹5,00,000 | Not applicable |
| 89(7) | Company fails to file MGT-6 within 30 days | ₹1,000 a day, up to ₹5,00,000 | ₹1,000 a day, up to ₹2,00,000 |
| 90(10) | Individual fails to declare as SBO | Falls on the individual: ₹50,000, plus ₹1,000 a day after the first, up to ₹2,00,000 | Not applicable |
| 90(11) | Company fails to keep the SBO register, file BEN-2, or take steps under section 90(4A) | ₹1,00,000, plus ₹500 a day after the first, up to ₹5,00,000 | ₹25,000, plus ₹200 a day after the first, up to ₹1,00,000 |
| 203(5) | No whole time key managerial personnel where the rules require them | ₹5,00,000 | Directors and KMP: ₹50,000, plus ₹1,000 a day after the first, up to ₹5,00,000 |
| 118(11) | Minutes or secretarial standards not followed | ₹25,000 | ₹5,000 |
| 450 | Any breach with no specific penalty | ₹10,000, plus ₹1,000 a day after the first, up to ₹2,00,000 | Same daily rate, up to ₹50,000 |

Source: Companies Act, 2013, as amended by the Companies (Amendment) Act, 2020 (MCA text updated to 29 Jul 2022). Section 118(11) as quoted in the Etsystore order. Read 26 Oct 2026.

### Registered office and commencement of business

Section 12(1) requires a registered office that can receive and acknowledge all notices within 30 days of incorporation and at all times after. Section 12(9) lets the ROC verify the office physically and start strike off if it finds a breach. Our guide on [changing the registered office of an Indian company](/insights/change-registered-office-indian-company) covers the filings when the office moves.

Section 10A bars a company from starting business or borrowing until a director files the INC-20A declaration within 180 days of incorporation. The declaration confirms that every subscriber has paid for the shares. The company must also have verified its registered office under section 12(2). See our [guide to INC-20A for a foreign subsidiary](/insights/inc-20a-commencement-of-business-foreign-subsidiary).

### Resident director and key managerial personnel

Section 149(3) requires at least one director who stays in India for 182 days or more in the financial year. A newly incorporated company applies the test in proportion for its first year. Chapter XI has no specific penalty for this breach, so the general penalty in section 172 applies. Our [guide to the resident director requirement](/insights/resident-director-requirement-indian-company) explains the day count.

An expatriate appointed as managing director or whole time director raises a separate point. Part I of Schedule V lists residence in India as a condition. If the appointment varies from Part I, section 196(4) requires Central Government approval. Section 203(5) penalises a company that lacks whole time KMP where the rules require them, at ₹5,00,000 on the company.

### Board meetings

Section 173(1) requires four board meetings a year, with no more than 120 days between two meetings. Section 173(5) relaxes this to one meeting in each half of the calendar year. The relaxation covers only one person companies, small companies and dormant companies. A foreign subsidiary is none of these. Our guide on [board meetings with non resident directors by video conference](/insights/board-meetings-non-resident-directors-video-conference) covers how to hold them.

## Why does section 446B not help a foreign subsidiary?

Section 446B, in the form substituted from 22 Jan 2021, limits penalties for four kinds of company. These are a one person company, a small company, a start up company and a producer company. For them, the penalty cannot exceed half the amount in the relevant section. It is also capped at ₹2,00,000 for the company and ₹1,00,000 for an officer.

The small company definition in section 2(85) excludes a holding company and a subsidiary company outright. Since 1 Dec 2025, the limits are paid up capital up to ₹10 crore and turnover up to ₹100 crore. A subsidiary with ₹1 lakh of capital and no revenue still falls outside, because the exclusion does not depend on size.

The orders say this plainly. The Etsystore order notes that Etsy UK Limited held 100 percent of the shares. It concludes that the company was not a small company, so section 446B did not apply. The BMM Testlabs and Valor Advisory orders say the same.

| Type of company | Section 446B relief | Minimum board meetings |
|---|---|---|
| Small company that is not a holding or subsidiary company | Half the penalty, capped at ₹2,00,000 (company) and ₹1,00,000 (officer) | One in each half of the calendar year, at least 90 days apart |
| One person company | Same as a small company | Same as a small company |
| Private company recognised as a start up by DPIIT | Half the penalty, with the same caps | Four a year, unless it also qualifies under section 173(5) |
| Subsidiary of a foreign company | None as a small company | Four a year, no more than 120 days apart |

Sources: Companies Act, 2013, sections 2(85), 173 and 446B (MCA text); small company limits from 1 Dec 2025. Etsystore, BMM Testlabs and Valor Advisory orders. Read 26 Oct 2026.

One route back to relief remains open on the words of the Act. Section 446B names a start up company separately and defines it as a private company recognised as a start up under the DPIIT notification. That definition does not exclude subsidiaries. If your subsidiary holds DPIIT recognition, the relief should apply on the text. We have not seen an order that tests this for a foreign subsidiary. Our [guide to DPIIT recognition for a foreign owned start up](/insights/dpiit-startup-recognition-foreign-owned-startup) covers eligibility.

## Worked example for a UK owned subsidiary

This example shows how fast the numbers grow when a few defaults sit together. The facts are invented for illustration. The penalty formulas are from the Act.

Assumptions:

1. A Gurugram private company is wholly owned by a UK company. It has two directors, and the board has not charged either with filing. It has no managing director and no CFO.
2. For one financial year, it files neither AOC-4 nor MGT-7. It has no director who stayed in India for 182 days. It never files BEN-2.
3. The ROC issues one notice per default and counts 365 days of continuing default for each. Where a section charges "after the first" day, we count 364 further days.
4. Both directors are officers in default for every item.

| Default | Formula | Company | Each director |
|---|---|---|---|
| MGT-7 late, section 92(5) | ₹10,000 + ₹100 × 364 | ₹46,400 | ₹46,400 |
| AOC-4 late, section 137(3) | Company ₹10,000 + ₹100 × 365; director ₹10,000 + ₹100 × 364 | ₹46,500 | ₹46,400 |
| No resident director, section 172 | ₹50,000 + ₹500 × 365, director capped | ₹2,32,500 | ₹1,00,000 |
| No BEN-2, section 90(11) | Company ₹1,00,000 + ₹500 × 364; director ₹25,000 + ₹200 × 364 | ₹2,82,000 | ₹97,800 |
| Total |  | ₹6,07,400 | ₹2,90,600 |

Source: Krystal7 calculation from sections 92(5), 137(3), 172 and 90(11) of the Companies Act, 2013 (MCA text), read 26 Oct 2026.

The total exposure is ₹11,88,600: ₹6,07,400 on the company and ₹5,81,200 on the two directors. The directors' share comes from their own pockets, as the BMM Testlabs and Etsystore orders direct.

If this company were a small company, section 446B would halve each line. The total would fall to ₹5,94,300. The subsidiary pays the extra ₹5,94,300 only because its shares sit with a parent.

The rescue window changes the picture more than anything else. If the company files AOC-4 and MGT-7 within 30 days of the notice, those two lines drop to nil. The total falls from ₹11,88,600 to ₹9,10,100, a saving of ₹2,78,500.

## What should a foreign parent change in its Indian subsidiary's calendar?

We would make five changes to the calendar of any foreign owned subsidiary. Each maps to an order or a section above.

| Change | Trigger | Deadline to put in the calendar | Order or section behind it |
|---|---|---|---|
| File the nominee share pack | Incorporation, and every transfer to or from a nominee | MGT-4 and MGT-5 within 30 days; MGT-6 within 30 days of receipt | Valor Advisory, BMM Testlabs, section 89 |
| Review SBOs and send BEN-4 | Each April, and every change in the chain above the parent | Before the annual filing season | Leixir Resources, section 90 |
| Fix four board meeting dates | Each January | No gap over 120 days, four in the calendar year | Etsystore, section 173(1), SS-1 |
| Count the resident director's days | Monthly | 182 days by 31 March | Sections 149(3) and 172 |
| Treat the first ROC notice as a rescue window | Any notice on MGT-7 or AOC-4 | File within 30 days; diarise 60 days to appeal and 90 days to pay | Sections 454(3) to 454(8) |

Sources: the four orders and sections cited, read 26 Oct 2026.

### File the nominee share pack at incorporation

A wholly owned private company still needs a second member, so the parent usually puts one share in a nominee's name. On our filings, we prepare MGT-4 and MGT-5 with the incorporation papers, so the parent signs once. The company files MGT-6 within 30 days of receipt. Valor Advisory paid ₹3,13,600 and BMM Testlabs paid ₹9,00,000 for missing these steps.

### Review SBOs every April, and on every upstream change

Send BEN-4 to every member that is not an individual and holds 10 percent or more, as rule 2A(2) requires. Ask the parent for its own chain up to the ultimate owner. Then test any fund exemption against the fund's public filings, because the ROC did exactly that in Leixir. Repeat the review whenever a fund, holding company or controlling person changes.

### Fix four board meeting dates each January

Set the dates in January for the calendar year, one in each quarter and no more than 120 days apart. That clears both section 173(1) and SS-1. Etsystore's ₹45,000 order came from a single missed meeting.

### Count the resident director's days every month

The 182 day test runs on the financial year, from 1 April to 31 March. A director who travels often can fall short by February with no time left to fix it. We prefer a second director who lives in India over relying on one director's travel diary.

### Treat the first ROC notice as a rescue window

When a notice on MGT-7 or AOC-4 arrives, file the missing form first and reply second. The section 454(3) proviso then ends the proceeding with no penalty. For every other notice, diarise the 60 day appeal limit and the 90 day payment limit from the date the order issues. Our [compliance calendar for 2026-27](/insights/compliance-calendar-foreign-owned-company-india-2026-27) lists the annual dates these changes slot into.

## Common mistakes

1. **Treating the nominee's share as a formality.** Fix: file MGT-4, MGT-5 and MGT-6 at incorporation and on each nominee change.
2. **Assuming a fund owner means no SBO.** Fix: trace control to an individual and keep a written analysis with the SBO register.
3. **Filing late after the notice and expecting no penalty.** Fix: the 30 day window covers only MGT-7 and AOC-4 defaults.
4. **Assuming the company pays the directors' penalties.** Fix: warn each director that the order directs payment from their own funds.
5. **Counting on half penalties because the subsidiary is small.** Fix: treat section 446B as unavailable unless the company holds DPIIT start up recognition.
6. **Counting board meetings by financial year.** Fix: count by calendar year, as SS-1 does, and keep every gap under 120 days.
7. **Letting the resident director's day count lapse.** Fix: track days monthly and appoint a backup director who lives in India.
8. **Missing the appeal window while negotiating.** Fix: file Form ADJ within 60 days, counted from the issue date on the portal.

## Checklist after an ROC show cause notice

1. Log in to the MCA V3 portal and open the adjudication module under additional services.
2. Note the notice number, every person named, each section cited and the reply date.
3. If the notice concerns MGT-7 or AOC-4, file the missing form within 30 days of the notice.
4. For any other default, rectify it now and keep the filing receipt for the reply.
5. Request a time extension online if you need one, before you file the reply.
6. Draft a reply that states the facts, the date of rectification and any reason for the delay.
7. Ask for a hearing, and add an authorised representative on the portal if one will attend.
8. Brief every director named in the notice, since the order will name each of them.
9. When the order issues, diarise 60 days for an appeal and 90 days for payment from the issue date.
10. Pay each penalty from the correct person's funds and file proof of payment and rectification.

If a notice has already arrived, our [compliance rescue service](/services/compliance-rescue.html) starts from USD 2,000. We quote a fixed fee in writing within 48 hours of a scoping call.

## Key terms

- **Adjudicating officer**: An officer of the Central Government, not below the rank of Registrar, appointed under section 454 of the Companies Act, 2013 to impose penalties. In practice the Registrar of Companies for the region acts as adjudicating officer and passes the penalty order. (https://krystal7.com/glossary#adjudicating-officer)
- **Section 446B lesser penalty**: Section 446B of the Companies Act, 2013 halves penalties for one person companies, small companies, start up companies and producer companies. The cap is ₹2,00,000 for the company and ₹1,00,000 for an officer. (https://krystal7.com/glossary#section-446b-lesser-penalty)
- **Beneficial interest declaration**: The declarations section 89 of the Companies Act, 2013 requires when a registered shareholder holds shares for someone else. The nominee files MGT-4 and the beneficial owner files MGT-5. The company then files MGT-6 with the Registrar within 30 days. (https://krystal7.com/glossary#beneficial-interest-declaration)
- **ROC show cause notice**: A notice from the Registrar of Companies asking a company and its officers why a penalty should not be imposed for a stated default. Under the 2024 amendment rules, the notice, reply, hearing and payment run on the MCA V3 portal. (https://krystal7.com/glossary#roc-show-cause-notice)

## Frequently Asked Questions

### What is an ROC adjudication order?
It is an order under section 454 of the Companies Act, 2013 that imposes a penalty for a breach of the Act. The adjudicating officer is usually the Registrar of Companies with jurisdiction over the company. The order names the company and each officer in default, with the amount each must pay.

### Who decides the penalty in an adjudication?
The adjudicating officer decides it, and the Central Government appoints officers not below the rank of Registrar to that role. The four orders we read each cite the MCA notification of 24 Mar 2015 that appointed the ROC. The officer must give each person a reasonable opportunity to be heard first, under section 454(4).

### How long does a company have to pay an ROC penalty?
It has 90 days from receipt of the order under section 454(8). MCA's FAQ counts the 90 days from the date the order issues, and the payment page then closes. We plan to the issue date for that reason.

### Can a company appeal an ROC penalty order?
Yes. Any person aggrieved by the order can appeal to the Regional Director in Form ADJ within 60 days of receiving it, under sections 454(5) and 454(6). The Regional Director hears the parties and can confirm, modify or set aside the order.

### Do directors pay their penalties personally?
Yes, in the orders we read. The Etsystore and BMM Testlabs orders direct that persons other than the company pay from their own funds. Each director named in the order is a separate party to it.

### Does section 446B halve penalties for a foreign subsidiary?
No, not as a small company. Section 2(85) excludes every subsidiary from the small company definition, and three of the four orders we read refused section 446B on that ground. A subsidiary that holds DPIIT start up recognition may qualify as a start up company under section 446B instead.

### Can a late MGT-7 or AOC-4 be fixed without a penalty?
Yes, if the company files before the notice or within 30 days of it. The proviso to section 454(3) then bars any penalty and treats the proceedings as concluded. The window covers only defaults under section 92(4) and sections 137(1) and 137(2).

### What happens if we ignore an adjudication order?
The matter goes to prosecution. Under section 454(8), the company faces a fine of ₹25,000 to ₹5,00,000. An officer faces up to six months in prison, a fine of ₹25,000 to ₹1,00,000, or both.

### What if the same default happens again?
The penalty doubles. Under section 454A, a repeat of the same default within three years of the earlier order attracts twice the penalty in the relevant section. The MCA FAQ repeats this rule.

### Does a nominee shareholder have to file anything?
Yes. The nominee files MGT-4 with the company, the parent files MGT-5, and the company files MGT-6 with the ROC within 30 days of receipt. In the Valor Advisory order, the nominee and the Malaysian parent each paid ₹1,56,800 for declarations given 534 days late.

### Who is the SBO when a foreign fund owns the parent?
It is the individual who holds the rights or exercises significant influence or control through the chain. In the Leixir order, the ROC found that individual to be the CEO who controlled the fund's US investment adviser. It rejected the pooled investment vehicle argument after reading the adviser's SEC filings.

### Are nominee directors from the parent liable for penalties?
They can be. The Leixir order fined the non executive directors because each knew the holding structure, and it refused to absolve the fund group's nominees. Being a parent's nominee does not remove the duties of a director in India.

### What is the penalty for having no resident director?
Section 172 applies, because section 149(3) carries no penalty of its own. The company pays ₹50,000 plus ₹500 a day, up to ₹3,00,000. Each officer in default pays the same rate, up to ₹1,00,000.

### Can an expatriate be managing director of an Indian subsidiary?
Yes, but residence in India is a condition in Part I of Schedule V. An appointment that does not meet Part I needs Central Government approval under section 196(4). Plan for that approval before the appointment date.

## Sources

- Ministry of Corporate Affairs, ROC NCT of Delhi and Haryana, Order for penalty under section 118, Etsystore Private Limited, 5 Apr 2023, read 26 Oct 2026, https://www.mca.gov.in/bin/dms/getdocument?mds=fyF5ccIsybhwhG153bCkPw%253D%253D&type=open
- Ministry of Corporate Affairs, ROC NCT of Delhi and Haryana, Order of penalty under section 89, BMM Testlabs India Private Limited, 8 Nov 2023, read 26 Oct 2026, https://www.mca.gov.in/bin/dms/getdocument?mds=ri6wegFZDWfx441ZjgBhtw%253D%253D&type=open
- Ministry of Corporate Affairs, ROC NCT of Delhi and Haryana, Order of penalty under section 89, Valor Advisory (India) Private Limited, 16 Nov 2023, read 26 Oct 2026, https://www.mca.gov.in/bin/dms/getdocument?mds=035Pbmzalw5RLjyYTGxejw%3D%3D&type=open
- Ministry of Corporate Affairs, ROC NCT of Delhi and Haryana, Order for penalty under section 90, Leixir Resources Private Limited, 6 May 2024, read 26 Oct 2026, https://www.mca.gov.in/bin/dms/getdocument?mds=x9hGblTAkWTdeV9X9tkaow%3D%3D&type=open
- Ministry of Corporate Affairs, The Companies Act, 2013 (text updated to 29 Jul 2022), sections 2(85), 10A, 12, 89, 90, 92, 137, 149, 172, 173, 196, 203, 446B, 450, 454, 454A and Schedule V, read 26 Oct 2026, https://www.mca.gov.in/content/dam/mca/pdf/CompaniesAct2013.pdf
- Ministry of Corporate Affairs, Frequently asked questions on e adjudication, read 26 Oct 2026, https://www.mca.gov.in/content/mca/global/en/help-faq/faqs/e-adjudication.html

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