If the company contravenes any of the provisions of Sections 139 to 146:
Company: Fine of ₹25,000 to ₹5,00,000
Officer in default: Fine of ₹10,000 to ₹1,00,000
## 2. Punishment for the AUDITOR [Sec 147(2)]
### (a) Simple Contravention of Sec 139, 143, 144, 145
Fine: ₹25,000 to ₹5,00,000, OR
4 times the remuneration of the auditor, whichever is less.
### (b) Knowingly or Wilfully + Intent to Deceive
If auditor contravenes knowingly or wilfully with intention to deceive company/shareholders/creditors/tax authorities:
Fine: ₹50,000 to ₹25,00,000, OR 8 times the remuneration, whichever is less; AND
Imprisonment up to 1 year.
## 3. Consequences on Conviction u/s 147(2) [Sec 147(3)]
If the auditor is convicted under sub-section (2), he shall:
Refund the remuneration received from the company; AND
Pay damages to:
Company,
Statutory bodies/authorities, or
Any other persons (members, creditors) for loss arising out of incorrect/misleading statements in the audit report.
## 4. Liability of an Audit FIRM [Sec 147(5)]
Where it is proved that the partner(s) of a firm acted in a fraudulent manner or colluded in fraud:
Civil/criminal liability: The firm AND the concerned partners shall be jointly and severally liable.
Imprisonment: Only the concerned partner(s) (not the firm) shall be liable.
## Quick Recap Table
Offender
Sub-section
Punishment
Company
147(1)
₹25K–5L
Officer in default
147(1)
₹10K–1L
Auditor (simple)
147(2)
₹25K–5L or 4× fee
Auditor (wilful + deceive)
147(2)
₹50K–25L or 8× fee + jail up to 1 yr
Audit Firm (fraud)
147(5)
Joint & several liability for damages; jail only for concerned partner
Worked example
### Example 1
Example 1: XYZ Ltd fails to file Form ADT-1 within 15 days of auditor appointment (violation of Sec 139). → Company: ₹25,000–₹5,00,000 fine; Officer in default: ₹10,000–₹1,00,000.
### Example 2
Example 2: Auditor signs the report without verifying records (simple contravention of Sec 143). Audit fee was ₹1,00,000. → Fine: ₹25,000 to ₹5,00,000 OR 4 × ₹1,00,000 = ₹4,00,000, whichever is LESS = ₹4,00,000.
### Example 3
Example 3: Auditor knowingly conceals a ₹10 crore fraud to deceive creditors. Audit fee = ₹2,00,000. → Fine: ₹50,000 to ₹25,00,000 OR 8 × ₹2,00,000 = ₹16,00,000, whichever is less = ₹16,00,000 + imprisonment up to 1 year + refund of ₹2,00,000 + pay damages to creditors.
### Example 4
Example 4: Partner of M/s ABC & Co. colluded with the company management in falsifying accounts. → Firm + concerned partner jointly and severally liable for civil/criminal damages. Only concerned partner faces imprisonment, NOT the firm.
⚠️ Common exam mistakes
Forgetting that for simple contravention the penalty is the LESSER of fixed amount OR multiple of remuneration (4× or 8×).
Missing the 'AND' for wilful contravention — both fine AND imprisonment apply.
Believing imprisonment applies to the firm — only the concerned partner serves imprisonment.
Ignoring the consequential refund + damages obligation under Sec 147(3).
Confusing penalties under 147(1) (Co./Officer) with 147(2) (Auditor).
Bare-Act text Section 147 · Companies Act, 2013 · click to expand
(1) If any of the provisions of sections 139 to 146 is contravened, the company shall be punishable with fine of ₹25,000 to ₹5,00,000 and every officer who is in default shall be punishable with fine of ₹10,000 to ₹1,00,000. (2) If an auditor contravenes provisions of section 139, 143, 144 or 145, the auditor shall be punishable with fine of ₹25,000 to ₹5,00,000 or 4 times the remuneration, whichever is less. If done knowingly or wilfully with intent to deceive, fine ₹50,000 to ₹25,00,000 or 8 times remuneration, whichever is less, and imprisonment up to 1 year. (3) Convicted auditor shall refund remuneration and pay damages. (5) In case of firm, partners who acted fraudulently shall be jointly and severally liable.