ROC penalizes directors for failing to notify the change of residential addresses in DIR-3.
What is Director identification number (DIN)?
Director identification number (DIN) is a unique identification number allotted to a person wanting to be a director of a company. To obtain DIN, the concerned person needs to make an application in e-form DIR-3.
Facts of the case:
M/s. SVPL is a registered company having its registered office in the state of Bihar. The company has three directors on its board. The company is engaged in the Hospitality & Wellness Industry.
| (a) | M/s. SVPL was having its registered office with effect from 1st August 2019 at the above premises. | |
| (b) | The owner of the premises made a complaint stating that the company is illegal running from his premises. | |
| (c) | The owner of the premises stated in his complaint to investigate the matter and initiate suitable action against the company. |
Two of the directors of M/s SVPL did not intimate the MCA about their change of address, which came to the light when the regulator started investigating the complaint as stated above in the given below:
| Investigation by the ROC / AO: | Response: |
| Upon the receipt of the complaint, the ROC / AO initiated action against the company for violation of S12 relating to registered office of the company and also under S92 and S137 relating to annual return and copy of financial statements to be filed with the ROC and passed an order against the company and its directors vide order dated 27th July 2023 and the same were served upon the company and its directors through registered post. | The copy of the orders which were sent duly got served and delivered upon the company at the registered office address and also to one of the directors. However, two of the order pertaining to two directors of the company retuned undelivered back. |
Opinion formed by the ROC/AO
The ROC, upon return of the orders from other two directors residential address had a strong reason to believed that both the directors were not present at their declared address and that they had failed to intimate their change of address with the Ministry of Corporate Affairs (MCA).
Mandatory annual KYC update requirement: As per MCA, all directors holding the DIN will have to submit their KYC details annually in e-form DIR-3KYC.
Consequences of non-compliance and relevant laws:
| Companies (Appointments and Qualifications of Directors) Rules 2014 Rule 12 – Intimation of Changes in Particulars Specified in DIN Application |
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| Rule | Provision |
| 12(1) | Every individual who has been allotted a Director Identification Number under these rules shall, in the event of any change in his particulars as stated in Form DIR-3. intimate such change(s) to the Central Government within a period of thirty days of such change(s) in Form DIR-6 in the following manner, namely; |
| 12 (1) (i) | The applicant shall download Form DIR-6 from the portal, fill in the relevant changes, verify the Form and attach duly scanned copy of the proof of the changed particulars and submit electronically; |
| 12 (1) (ii) | the form shall be digitally signed by a chartered accountant in practice or a company secretary in practice or a cost accountant in practice; |
| 12 (1) (iii) | the applicant shall submit the Form DIR-6: |
| 12(2) | The Central Government, upon being satisfied, after verification of such changed particulars from the enclosed proofs, shall incorporate the said changes and inform the applicant by way of a letter by post or electronically or in any other mode confirming the effect of such change in the electronic database maintained by the Ministry. |
| 12(4) | The concerned individual shall also intimate the change(s) in his particulars to the company or companies in which he is a director within fifteen days of such change. |
| Penal section for non-compliance / default if any Section 450 – Punishment where no specific penalty or punishment is provided |
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| S450 | If a company or any officer of a company or any other person contravenes any of the provisions or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition direction or exemption in relation to any mater has been accorded, given, or granted and to which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person. |
Calculation of penalty as per S450 mentioned above:
| Nature of default | Violation of Co”s Act 2013 | Penalty imposed upon | No. of days default | Total Penalty | Max. penalty as u/s 450 of the Act | Penalty imposed u/s 450 of the Act |
| ₹ | ₹ | ₹ | ||||
| Failed to intimate their change address in form DIR-6 | Rule 12 of the companies (appointment and qualification of directors) Rules, 2014 | Director (name) | 211 | 10000 + 211*1000 = 2,21,000 | 2,21,000 | 2,21,000 |
| Director (name) | 211 | 10000 + 211*1000 = 2,21,000 | 2,21,000 | 2,21,000 | ||
| Total penalty (both directors) | 4,42,000 | |||||
Conclusion
Every individual intending to be appointed as director of the company shall have to make an application for allotment of a director identification number (DIN) pursuant to section 153 of the Companies Act 2013.
For this purpose, the concerned individual is required to file an e-form DIR-3 with such information as required in the form.
However, the information stated at a particular time or at the time of applying for DIN may not be the same for the lifetime. Therefore, such an individual is required to apply for changes in the particulars of DIN as and when there are any changes in the particulars.
Failure to intimate the changes would attract penal action from the regulators.
The concerned directors are therefore to take all the necessary care to intimate the changes as and when the changes take place in order to avoid the penal actions.
