Section 147: Punishment for contravention

Companies Act, 2013 · Chapter X: Audit And Auditors · In force

This section is for punishing companies, officers, and auditors who contravene certain provisions of the law, with fines, imprisonment, and liability for damages.

Penalty

(1) If any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable 1*** with fine which shall not be less than ten thousand rupees but which may extend to 2[one lakh rupees].

(2) If an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees 3[or four times the remuneration of the auditor, whichever is less]:

(2) Provided that if an auditor has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year 4[and with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees or eight times the remuneration of the auditor, whichever is less].

The section, clause by clause

What the section says

In plain terms

(1)If any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable 1*** with fine which shall not be less than ten thousand rupees but which may extend to 2[one lakh rupees].

If a company contravenes certain provisions, it will be fined between twenty-five thousand rupees and five lakh rupees, and every defaulting officer will be fined between ten thousand rupees and one lakh rupees.

(2)If an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees 3[or four times the remuneration of the auditor, whichever is less]:

An auditor who contravenes certain provisions will be fined between twenty-five thousand rupees and five lakh rupees, or four times their remuneration, whichever is less, and may also face imprisonment and a higher fine if they acted knowingly or willfully.

provisoProvided that if an auditor has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year 4[and with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees or eight times the remuneration of the auditor, whichever is less].

(3)Where an auditor has been convicted under sub-section (2), he shall be liable to—

A convicted auditor must refund their remuneration and pay damages to the company or affected parties for losses arising from incorrect or misleading statements.

(3)(i)refund the remuneration received by him to the company; and (ii) pay for damages to the company, statutory bodies or authorities 1[or to members or creditors of the company] for loss arising out of incorrect or misleading statements of particulars made in his audit report.

(4)The Central Government shall, by notification, specify any statutory body or authority or an officer for ensuring prompt payment of damages to the company or the persons under clause (ii) of sub-section (3) and such body, authority or officer shall after payment of damages to such company or persons file a report with the Central Government in respect of making such damages in such manner as may be specified in the said notification.

The Central Government will specify a body or officer to ensure prompt payment of damages and file a report on the payment.

(5)Where, in case of audit of a company being conducted by an audit firm, it is proved that the partner or partners of the audit firm has or have acted in a fraudulent manner or a betted or colluded in any fraud by, or in relation to or by, the company or its directors or officers, the liability, whether civil or criminal as provided in this Act or in any other law for the time being in force, for such act shall be of the partner or partners concerned of the audit firm and of the firm jointly and severally.

If an audit firm's partner acts fraudulently, the partner and firm will be jointly and severally liable for civil or criminal acts, with the partner alone liable for criminal liability other than fines.

proviso2[Provided that in case of criminal liability of an audit firm, in respect of liability other than fine, the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud shall only be liable.]

The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.

Amendment notes

1. The words “with imprisonment for a term which may extend to one year or” omitted by Act 29 of 2020, s. 31 (w.e.f. 21-12- 2020).
2. Subs. by s. 31, ibid., for “one lakh rupees, or with both” (w.e.f. 21-12-2020).
3. Ins. by Act 1 of 2018, s. 44 (w.e.f. 9-2-2018).
4. Subs. by Act 1 of 2018, s. 44, for “and with fine which shall not be less than one lakh rupees but which may extend to twenty- five lakh rupees” (w.e.f. 9-2-2018).
1. Subs. by Act 1 of 2018, s. 44, for “or to any other persons” (w.e.f. 9-2-2018).
2. The proviso ins. by s. 44, ibid., (w.e.f. 9-2-2018).
3. Subs. by s. 45, ibid., for “Cost Accountant in practice”(w.e.f. 9-2-2018).
4. Subs. by s. 45, ibid., for “Institute of Cost and Works Accountants of India” (w.e.f. 9-2-2018).
5. Subs. by s. 45, ibid., for “cost accountant in practice”(w.e.f. 9-2-2018).

This section refers to

s. 139 Appointment of auditors s. 140 Removal, resignation of auditor and giving of special notice s. 141 Eligibility, qualifications and disqualifications of auditors s. 142 Remuneration of auditors s. 143 Powers and duties of auditors and auditing standards s. 144 Auditor not to render certain services s. 145 Auditor to sign audit reports, etc s. 146 Auditors to attend general meeting

Referred to by

s. 148 Central Government to specify audit of items of cost in respect of certain companies

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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.