ROC sent us a notice asking for documents: what to do under Section 206
A Registrar of Companies notice asking for documents or an explanation is a Section 206 notice. What it means, how to reply, and what ignoring it costs.
CA Harun Raaj
pvtltd.co
A letter or email arrives from the Registrar of Companies (ROC). It says the office has looked at something your company filed and wants more information, an explanation, or documents. Nobody in the company knows quite what to do with it.
This is a notice under Section 206 of the Companies Act 2013. It is serious, but it is also the lowest rung of a ladder. This article explains what the notice is, what the law says you must do, and how the ladder works if the first reply is not enough.
What the notice actually is
Section 206(1) of the Companies Act 2013 says the Registrar may act in two situations: "on a scrutiny of any document filed by a company" or "on any information received by him". In either case, if the Registrar thinks "any further information or explanation or any further documents relating to the company is necessary", the Registrar may by written notice require the company to do one of two things:
- furnish in writing the information or explanation asked for; or
- produce the documents asked for.
The law says this must be done "within such reasonable time, as may be specified in the notice" (s.206(1), Companies Act 2013). So the deadline is not fixed by the Act. It is whatever date the notice itself states. Read the notice for that date first.
A Section 206(1) notice is a request for information, an explanation or documents. On its face it is not a finding that anything is wrong. This article is about what to do after the notice has arrived.
Who must reply
The duty is placed on two parties. Section 206(2), Companies Act 2013, says it is "the duty of the company and of its officers concerned to furnish such information or explanation to the best of their knowledge and power and to produce the documents to the Registrar within the time specified or extended by the Registrar".
Three points follow from that wording.
- The duty is on the company and on the officers concerned. It is not only the company secretary's or the CA's problem.
- The standard is "best of their knowledge and power". Say what you know. Do not guess, and do not leave a question blank because the answer is awkward.
- The time can be "extended by the Registrar". If you cannot produce everything by the date given, ask in writing before the date passes. Do not simply let the date go by.
There is also a rule for past periods. Under the proviso to s.206(2), where the information relates to a past period, the officers who were in the company's employment for that period can be called on, through a written notice served on them, to give the information "to the best of their knowledge". This matters if the filing in question was made by someone who has since left. The Registrar can ask them directly.
What you can still do today
If the notice has just arrived, do these things before anything else.
- Note the date the notice was issued, the date the reply is due, and how it reached you (email, registered office, MCA portal).
- Tell all directors. Section 206(2) puts the duty on the officers concerned.
- Pull the filing the notice refers to, with the minutes, registers and working papers behind it.
- If you need more time, write to the Registrar before the due date and ask for an extension, with the reason.
The deadline clock
There are three clocks to watch.
The reply date. This is the date stated in the notice (s.206(1)). The Act calls it a "reasonable time" and does not give a number of days. If the notice says nothing clear, ask the Registrar's office in writing.
The extension. The Registrar may extend the time (s.206(2)). An extension is a favour, not a right, so ask early and in writing.
The cost of missing it. Section 206(7), Companies Act 2013, says that if the company "fails to furnish any information or explanation or produce any document required under this section", the company and every officer in default are "punishable with a fine which may extend to one lakh rupees". If the failure continues, there is "an additional fine which may extend to five hundred rupees for everyday after the first during which the failure continues".
In rupees: up to ₹1 lakh, and up to ₹500 for each further day. That is a maximum, not a fixed amount, and it falls on the company and on every officer in default.
"Officer who is in default" is defined in s.2(60), Companies Act 2013. It covers any whole-time director and key managerial personnel. Where there is no key managerial personnel, it covers the directors the Board has specified (with their written consent), or all the directors if none is specified. It also reaches a person who, under the immediate authority of the Board or a key managerial person, is charged with responsibility including maintenance, filing or distribution of accounts or records and who "knowingly permits, or knowingly fails to take active steps to prevent, any default". The definition has further limbs, so ask a CA who is exposed in your company.
Step by step: how to reply
- Read the notice line by line. List every question and every document asked for, and number them.
- Open the filing it relates to. If a figure in it is wrong, you want to know before you write a word.
- Answer in writing. Section 206(1)(a) requires the information or explanation "in writing". State the facts, the date and the document that proves each point, in the same numbers as the notice.
- Attach the documents asked for (s.206(1)(b)), labelled to match your list.
- If the filing was wrong, say so and set out how and when you will correct it.
- Have a director sign off, since the duty is on the officers concerned (s.206(2)).
- Keep proof of delivery and a copy of the reply and every attachment.
- Check the portal inbox and registered email until the Registrar closes the matter.
The exact portal route for filing the reply, and any e-form attached to it, is set by the MCA from time to time. Check the current route on the MCA portal before you file, and follow whatever instructions the notice itself gives.
If the first reply is not enough: the escalation ladder
Section 206 has more than one rung. Knowing them tells you how much is at stake in a careful first reply.
Second notice for books and papers (s.206(3)). The Registrar can send "another written notice" calling on the company to produce for inspection "such further books of account, books, papers and explanations as he may require at such place and at such time as he may specify". The law allows this in three cases: no information was furnished in time; the Registrar finds the reply "inadequate"; or, on scrutiny of the documents, the Registrar is satisfied that "an unsatisfactory state of affairs exists in the company" and the company "does not disclose a full and fair statement of the information required". The proviso adds that before issuing this notice the Registrar "shall record his reasons in writing".
Inquiry on allegations (s.206(4)). If the Registrar is satisfied, on information or a representation from any person, that the business "is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act", or that investors' grievances are not being addressed, the Registrar may by written order tell the company of the allegations, call for information on matters in the order, and carry out an inquiry. The company must be given "a reasonable opportunity of being heard". Where business has been carried on for a fraudulent or unlawful purpose, every officer in default is "punishable for fraud in the manner as provided in section 447" (second proviso, s.206(4)).
Inspection by the Central Government (s.206(5) and (6)). The Central Government may direct an inspector to inspect a company's books and papers, and may by order authorise a statutory authority to inspect the books of account of a company or class of companies.
Conduct of inspection (s.207). When books are called for under Section 206, "it shall be the duty of every director, officer or other employee of the company to produce all such documents" and to render all assistance (s.207(1)). The Registrar or inspector may copy books and mark them as inspected (s.207(2)), and has the powers of a civil court to require production of documents, summon persons and examine them on oath (s.207(3)). Under s.207(4)(i), a director or officer who disobeys a direction is punishable with imprisonment up to one year and a fine of at least ₹25,000, extending to ₹1 lakh. Conviction means the person is deemed to vacate office and is disqualified from holding office in any company (s.207(4)(ii)).
Report and beyond (ss.208-209). After an inspection or inquiry the Registrar or inspector reports in writing to the Central Government, and may recommend further investigation (s.208). Where books are likely to be destroyed or altered, search and seizure needs an order from the Special Court (s.209).
An inadequate first reply is itself a ground for the second notice (s.206(3)). That is why the first reply matters.
What not to do
- Do not ignore the notice because it feels routine. The fine in s.206(7) falls on the company and on each officer in default, and silence is itself a ground for the second notice (s.206(3)).
- Do not send a vague reply. An answer the Registrar finds "inadequate" opens the way to a notice for books and papers (s.206(3)).
- Do not alter, back-date or replace documents. Section 209 exists for cases where books are likely to be "destroyed, mutilated, altered, falsified or secreted". Produce records as they are. If a record is missing, say so and explain.
- Do not forget former officers. If a past officer made the filing, the Registrar can call on that person directly (proviso to s.206(2)).
What to do now
Have a CA review your facts before you act or file.
FAQs
Is a Section 206 notice the same as an inspection or investigation?
No. A notice under s.206(1) asks for information, an explanation or documents. Inspection of books comes later, through a second notice (s.206(3)) or a Central Government direction (s.206(5)). An investigation is a separate, more serious step that the s.208 report may recommend (s.208, Companies Act 2013).
How many days do we get to reply?
The Act gives no fixed number. It says "within such reasonable time, as may be specified in the notice" (s.206(1)). Use the date in the notice. If it is too short, ask for more time in writing; the Registrar can extend (s.206(2)).
Can we be fined for replying late?
Section 206(7) bites where the company "fails to furnish any information or explanation or produce any document required under this section". The time is the date in the notice "or extended by the Registrar" (s.206(2)). Ask for the extension before the date passes.
What if the notice says we are being investigated for fraud?
Then it is likely an order under s.206(4), not a plain request for information. The company must be told the allegations and given "a reasonable opportunity of being heard". Where business is carried on for a fraudulent or unlawful purpose, every officer in default is punishable under s.447. Engage a CA or company secretary at once and do not reply without advice.
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See Also
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