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According to the Companies Act, 2013, a company may be fined for non-compliance with the rules. But if the same mistake is repeated, the amount of the fine can be increased. Section 454A regulates this matter.
Under this section, if the same default is repeated within three years of the previous penalty order, the person shall be liable to twice the penalty prescribed for that default. So, it is important for companies, directors, company secretaries, and compliance teams to know this rule.
So read this blog to learn more about Section 454A, its applicability, and ways to avoid it.
Section 454A of the Companies Act, 2013 is designed to prevent the repetition of the same default. This section can be applicable if a company or a responsible person commits the same mistake even after the previous penalty.
This section applies to three types of persons:
● Company
● Any officer of the company
● Any other person liable under the law
There must be a previous penalty order for the same default. Thereafter, if the same default occurs again within three years from the date of that order, the person becomes liable to twice the penalty prescribed for that default. This order can be passed by the Adjudicating Officer or the Regional Director.
Section 454A was first introduced by the Companies (Amendment) Ordinance, 2018. Later, the Companies (Amendment) Act, 2019, made the section a part of the permanent legal framework. It is deemed to have come into force on 2 November 2018.
The important points of Section 454A are given in the table below.
Here, the three-year time limit is calculated from the date of the earlier penalty order. Not from the date on which the original default occurred. So, the company should retain the date of the earlier penalty order and the relevant default. This can reduce the risk of the same mistake being repeated in the future.
As per Section 454A, there is no single amount of penalty prescribed for all types of default. This depends on the section under which the default is committed.
Penalty for repeated default = 2 × applicable statutory penalty
Let us assume the penalty prescribed for a default is ₹50,000. If the same default is repeated, the penalty can be ₹1,00,000.
The actual penalty will depend on the provisions of the relevant section, the applicable limit, and the individual liability of the officer.
Section 451 and Section 454A of the Companies Act, 2013, both deal with repeated defaults. However, their scope of application is different. Section 451 applies to the repetition of specific offences. On the other hand,Section 454A provides an enhanced penalty where the same default attracting a statutory penalty is repeated.
Section 454A is important for companies and startups, as many compliance tasks must be done every year or at the time of specific events. For example, filing annual returns, filing financial statements, maintaining registers as per the law, and submitting reports on certain corporate decisions.
If the same mistake is repeated, the financial stress of the company may increase. However, under Section 446B, eligible for Small Companies, One Person Companies (OPCs), Startups, and Producer Companies can get the benefit of a reduced penalty. Certain conditions have to be fulfilled to get this benefit. So, it is important to check the rules and eligibility applicable in 2026.
To avoid a penalty under Section 454A, the first mistake needs to be corrected. Paying a penalty alone does not end all liability. You also need to ensure that the same mistake does not happen again.
A company can do a few simple things:
There may be special benefits for rectifying eligible annual filing defaults under Section 454.
Compliance with company rules is not always easy. Late filing or missing any rules can be a problem. Enterslice can help companies with these tasks. Also, we simplify annual compliance journey for you.
Our services include:
Section 454A of the Companies Act, 2013 plays an important role in preventing the recurrence of the same default. If the same default occurs again within three years of the previous penalty order, the person becomes liable to twice the penalty for that prescribed default. Therefore, just paying the first penalty is not enough. It is important to find the cause of the default, correct it, and ensure future compliance on time.
You can get help from Enterslice to strengthen the company’s compliance process. Get professional advice for compliance reviews, penalty assistance, and regular filings. This will help reduce the risk of re-default. So, contact us today for hassle-free compliance.
Section 454A is a rule for a higher penalty for repeated defaults. Suppose a company has already been subjected to a penalty for a default under an earlier penalty order. But within three years, it makes the same mistake again. Then Section 454A may, apply, making the company liable to twice the prescribed penalty for that default. So, it is important to fix it after the first mistake.
The calculation of this three-year period starts from the date of the previous penalty order. Not from the date of the original default. Therefore, the company should keep a copy of the penalty order and the date. This makes it easy to remember the time limit. The risk of a penalty if the same default is repeated is also understood in advance.
No, this section does not apply to all types of mistakes. The previous default for which the penalty was imposed must be the same default again. Section 454A will not automatically apply if any other rule is broken. However, the penalty may be imposed under another section of the law for that mistake.
If the same default occurs again, the penalty can increase. For example, if the prescribed penalty for the default is Rs 50,000, the repeated default-penalty under Section 454A would be Rs 1,00,000. However, the amount will not be the same in all cases. The penalty depends on which rule is violated.
Section 454A first came into force through the Companies (Amendment) Ordinance, 2018. Later, it was kept in the Companies (Amendment) Act, 2019. This section is effective from November 2, 2018. This rule has been brought about with the aim of making companies more careful if they repeat the same mistake.
Section 451 and Section 454A work differently. Section 451 provides for punishment in case of repeated commission of a specific offence. On the other hand, Section 454A can increase the penalty in case of repeated default. Which section applies depends on the type of mistake made and what provisions are in the law for that mistake.
Yes, in some cases this section may also apply to directors or officers of a company. However, not all directors will be liable if a company makes a mistake. They have to be liable under the relevant law. Therefore, before imposing a penalty, it should be seen whether a specific officer or director can be held responsible for that default or not.
Some small companies, OPCs, eligible startups, and Producer Companies can get the benefit of reduced penalties. This benefit is mentioned in Section 446B. However, not all companies get this benefit. Certain conditions have to be fulfilled. Therefore, the company should first verify its eligibility. If necessary, expert help can be taken.
In some cases, the company can appeal against a penalty order. However, where to appeal depends on the type of order and the relevant law. There is also a specific time limit for appeal. Therefore, after receiving the order, the rules should be checked without delay. If necessary, it is better to seek legal advice.
To avoid the same default, the company needs to fix the first mistake. Only paying a penalty does not end the work. A compliance calendar can be kept to remember the dates of annual returns, financial statements, and other filings. Previous penalty orders should also be saved. Assigning the responsibility of each task to a specific person reduces the risk of mistakes.
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