# Punishment for Contravention — Section 147

This section creates a three-tier punishment grid: for the company, for the auditor, and for an audit firm.

## Tier 1 — Contravention by Company (Sections 139 to 146)

Person	Punishment
Company	Fine: not less than ₹25,000, extendable upto ₹5 lakhs
Officer in default	Fine: not less than ₹10,000, extendable upto ₹1 lakh

No imprisonment for company contraventions under this tier.

## Tier 2 — Contravention by Auditor (Sections 139, 144 & 145)

### Ordinary contravention (without fraudulent intent)

Fine: not less than ₹25,000, extendable upto lower of ₹5 lakhs or 4 times auditor's remuneration.

### Aggravated contravention (knowingly or wilfully with intention to deceive)

When the contravention is committed knowingly or wilfully with intention to deceive the company, shareholders, creditors or tax authorities:

Imprisonment: upto 1 year, AND
Fine: not less than ₹50,000, extendable upto lower of ₹25 lakhs or 8 times auditor's remuneration, AND
Refund of remuneration to the company, AND
Pay damages to company, members, creditors or statutory body for any loss arising from incorrect or misleading statements in the audit report.

## Tier 3 — Contravention by Audit Firm

When any partner of an audit firm has acted fraudulently or abetted/colluded with the company, director or officer:

1. Civil liability (refund/damages): of concerned partners AND firm — jointly and severally.

2. Criminal liability: only the concerned partners who acted fraudulently are liable for liability other than fine.

3. The firm is also liable under Section 447.

## Memory Aid — The Multiplier Pattern

Ordinary: max fine = lower of ₹5 lakhs OR 4 × remuneration
Aggravated: max fine = lower of ₹25 lakhs OR 8 × remuneration

Five becomes twenty-five, four becomes eight — fines escalate 5×.

Worked example

### Example 1

Q. Auditor Mr. Z's remuneration is ₹2 lakhs. He knowingly issued a misleading audit report to deceive lenders. What is his maximum fine, and what other consequences follow?

A. Aggravated contravention applies. Max fine = lower of ₹25 lakhs or 8 × ₹2 lakhs (=₹16 lakhs) = ₹16 lakhs (subject to minimum of ₹50,000). He can also be imprisoned upto 1 year, must refund ₹2 lakhs remuneration to company, and must pay damages to affected parties (company, members, creditors, statutory body).

### Example 2

Q. In M/s A & B (an audit firm), Partner A colluded with directors of P Ltd. to falsify accounts. Partner B was unaware. Who bears the liability?

A. For refund and damages (civil): Partner A and the firm are jointly and severally liable. For criminal liability other than fine: only Partner A. The firm is also liable under Section 447. Partner B, being unaware, is not personally criminally liable.

⚠️ Common exam mistakes

Forgetting that the ₹5 lakhs / ₹25 lakhs ceiling is the LOWER of the absolute amount or the remuneration multiple.
Confusing ordinary contravention (no imprisonment) with aggravated (imprisonment upto 1 year).
Believing the entire audit firm is criminally liable — only concerned partners bear criminal liability beyond fine.
Missing that civil liability (refund + damages) extends to the whole firm jointly and severally.
Forgetting the additional liability under Section 447 in fraud cases.

Bare-Act text Section 147(2) & (3) · Companies Act, 2013 · click to expand

If an auditor of a company contravenes any of the provisions of section 139, 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 or four times the remuneration of the auditor, whichever is less: Provided that if an auditor has contravened such provisions knowingly or wilfully 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 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.

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Punishment for Contravention [Section 147]

Worked example

⚠️ Common exam mistakes