Penal Provisions and Central Government Exemption under Section 129
# Penal Provisions under Section 129 & Central Government Exemption Power
## Penalty Framework for Contravention of Section 129
When a company contravenes the provisions of Section 129 (relating to financial statements), the penalty falls on specific officers depending on their presence in the company.
### Step 1: Identify the Officers in Default
First check whether the following 'Mentioned Officers' are present in the company:
Managing Director (MD)
Whole-Time Director (WTD) in charge of Finance
Chief Financial Officer (CFO)
Any other person charged by the Board with the duty of compliance
### Step 2: Apply the Penalty
Scenario
Liable Persons
Mentioned Officers are present
Only the Mentioned Officers (MD/WTD-Finance/CFO/any other person charged)
Mentioned Officers are absent
All directors of the company
### Punishment
The liable persons shall be punishable with:
Imprisonment: up to 1 year; OR
Fine: from `50,000 to `5,00,000; OR
Both
## Central Government Exemption [Section 129(6)]
The Central Government has discretionary power to grant exemptions:
Who can apply? A class or classes of companies (or CG may act on its own).
Form? By notification.
Test? Considered necessary to grant such exemption in the public interest.
Nature? May be granted unconditionally OR subject to conditions specified in the notification.
### Specific Exemption to Government Companies
Section 129 shall not apply to Government Companies engaged in defence production, to the extent of application of the relevant Accounting Standard on segment reporting.
Pre-condition for exemption: This relaxation applies ONLY to Government Companies which have NOT committed a default in filing:
Financial statements under Section 137; OR
Annual return under Section 92
with the Registrar.
## Section 129A — Periodical Financial Results for Unlisted Companies
The Central Government may require such class or classes of unlisted companies, as may be prescribed, to:
(a) Prepare the financial results of the company on such periodical basis and in such form as may be prescribed;
(b) Obtain approval of the Board of Directors AND complete audit or limited review of such periodical financial results in such manner as may be prescribed; and
(c) File a copy with the Registrar within a period of 30 days of completion of the relevant period with prescribed fees.
Worked example
### Example 1
Example 1: A company contravenes Section 129. The company has a CFO but no MD or WTD in charge of finance. Who is liable?
Answer: Since a CFO (a Mentioned Officer) is present, the penalty falls on the CFO alone. The other directors are NOT liable because at least one Mentioned Officer exists. The CFO is punishable with imprisonment up to 1 year, fine of `50,000–`5,00,000, or both.
### Example 2
Example 2: A small company has no MD, WTD-Finance, CFO, and the Board has not specifically charged anyone with the duty of compliance. The company contravenes Section 129. Who is liable?
Answer: Since none of the Mentioned Officers are present, all directors of the company are liable for the punishment under Section 129.
### Example 3
Example 3: A Government Company engaged in defence production has not filed its annual return for FY 2023-24 with the Registrar. Can it claim exemption from segment reporting in FY 2024-25?
Answer: No. The exemption from Section 129 (for segment reporting AS) is available ONLY if the Government Company has not defaulted in filing under Section 92 (annual return) or Section 137 (financial statements). The default disqualifies it from claiming the exemption.
⚠️ Common exam mistakes
Imposing penalty on ALL directors when an MD/CFO/WTD-Finance is present — the liability falls first on Mentioned Officers.
Forgetting that 'any other person charged by the Board' is also a Mentioned Officer.
Treating the punishment as cumulative (imprisonment AND fine) — it is alternative or combined ('OR Both'), at the discretion of the court.
Assuming defence Government Companies have blanket exemption from Section 129 — the exemption is limited to segment reporting AS and is contingent on no filing default.
Confusing Section 129A (periodical results for unlisted companies) with quarterly financial results under SEBI LODR (which applies to listed entities).
Forgetting the 30-day filing deadline under Section 129A(c).
Bare-Act text Section 129(6) and Section 129A · The Companies Act, 2013 · click to expand
Company contravenes the provisions of section 129. Where Mentioned Officers (MD, WTD in charge of Finance, CFO, Any other person) are present, they are liable; in their absence, all directors. Punishment: Imprisonment (upto 1yr), Fine (50,000 to 5 lacs), Or Both. Subsection 6: The Central Government may, on its own or on an application by a class or classes of companies, by notification, exempt any class or classes of companies from complying with any of the requirements of this section or the rules made thereunder, if it is considered necessary to grant such exemption in the public interest and any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification. Section 129 shall not apply to the Government Companies engaged in defence production to the extent of application of relevant Accounting Standard on segment reporting. Section 129A: The Central Government may, require such class or classes of unlisted companies, as may be prescribed, (a) to prepare the financial results of the company on such periodical basis and in such form as may be prescribed; (b) to obtain approval of the Board of Directors and complete audit or limited review of such periodical financial results in such manner as may be prescribed; and (c) file a copy with the Registrar within a period of thirty days of completion of the relevant period with such fees as may be prescribed.