ADJUDICATION OF PENALTIES

The Central Government may by an order published in the Official Gazette appoint Adjudicating Officers for adjudicating penalty under this Act. [Section 454(1)]

The Central Government may appoint any of its officers, not below the rank of Registrar, as adjudicating

officers for adjudging penalty under the provisions of the Act. [Rule 3(1) of the Companies (adjudication of Penalties) Rules 2014]

The Adjudicating Officer may by an order impose the penalties on the company and the officer who is in default stating any non – compliance of default under the relevant provision of the Act. The adjudicating officer shall before imposing any penalty give a reasonable opportunity of being heard to the company or the officer who is in default. [Section 454(3) and (4)]

Before adjudging penalty, the adjudicating officer shall issue a written notice to the company and to every officer of the company who is in default, to show cause, within such period as may be specified in the notice (not being less than fifteen days and more than forty five days from the date of service thereon), why the inquiry should not be held against him. [Rule 3(2)]

Every notice issued under this sub-rule, shall clearly indicate the nature of non-compliance or default under the Act alleged to have been committed or made by such company and officer in default, as the case may be. [First Proviso to sub – rule (2) of Rule 3]

The adjudicating officer may, for reasons to be recorded in writing, extend the period referred to above by a further period not exceeding fifteen days, if the company or officer (as applicable) satisfies the said officer that it has sufficient cause for not responding to the notice within the stipulated period. [Second Proviso to sub – rule (2) of Rule 3]

If, after considering the cause, if any, shown by such company or officer, the adjudicating officer is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of such company, through its authorised representative, or officer of such company whether personally or through his authorised representative. [Rule 3(3)]

On the date fixed for hearing and after giving a reasonable opportunity of being heard to the person(s) concerned, the adjudicating officer may, subject to reasons to be recorded in writing, pass any order as he thinks fit including an order for adjournment of the hearing to a future date. [Rule 3(4)]

Every order passed shall be dated and signed by the adjudicating officer. [Rule 3(5)]

The adjudicating officer shall send a copy of the order passed by it to the concerned company or officer who is in default and to the Central Government. [Rule 3(6)]

While holding an inquiry, the adjudicating officer shall have the following powers, namely:—

1. to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case;
2. to order for evidence or to produce any document, which in the opinion of the adjudicating officer, may be useful for or relevant to the subject matter of the inquiry. [Rule 3(7)]

If any person fails, neglects or refuses to appear) before the adjudicating officer, the adjudicating officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so. [Rule 3(8)]

While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely:—

1. the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
2. the amount of loss caused to an investor or group of investors or creditors as a result of the default;
3. the repetitive nature of the default. [Rule 3(9)]

All sums realised by way of penalties under the Act shall be credited to the Consolidated Fund of India. [Rule 3(10)]