# Company's Failure to Comply with Provisions of this Chapter [Sections 392 and 393]

## Punishment for Contravention

### On the Foreign Company

Fine: ₹ 1 lakh, extendable up to ₹ 3 lakhs
For continuing offence: Additional fine up to ₹ 50,000 per day after the first day during which the contravention continues.

### On Officer in Default

Fine: ₹ 25,000, extendable up to ₹ 5 lakhs.

## Effect of Contravention

### Validity of Contracts

Contravention does not affect the validity of any contract, dealing or transaction entered into by the company.
The company's liability to be sued continues.

### Disability to Initiate Proceedings

The non-compliant foreign company cannot:

Bring a suit
Claim set-off
Make a counter-claim
Institute legal proceedings

…for any contract, dealing, or transaction, until it complies with the applicable provisions.

## Investigation if Not Registered

If a person carries on business as a foreign company without getting registered as a foreign company, he shall be liable for investigation under Section 210 and consequent action.

## Practical Implication

Non-compliance creates a one-way disability — the foreign company can still be sued but cannot itself sue. This is a strong commercial incentive to comply.

Worked example

### Example 1

Example 1: A foreign company failed to file its FS for two years. A buyer in India defaulted on payment. The foreign company cannot file a recovery suit in Indian courts until it complies with the Chapter XXII requirements. However, if the buyer sues the foreign company, the court will entertain such suit against the company.

### Example 2

Example 2: A Japanese trading firm carried on business in Mumbai for 3 years without registering as a foreign company. It is liable to investigation under Section 210 of the Companies Act, 2013.

⚠️ Common exam mistakes

Believing non-compliance voids all transactions — it does not affect contract validity.
Assuming the disability is mutual — the foreign company cannot sue, but it can be sued.
Confusing the daily continuing fine (₹50,000/day) with a one-time penalty.

Reference: Sections 392 and 393 — Companies Act, 2013

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Failure to Comply (Sections 392 and 393)

Worked example

⚠️ Common exam mistakes