Microlesson · 5-min read

Penalty for Default in Filing Return / Refund of Minimum Subscription [Section 39(5)]

## Penalty for Default under Section 39(5)

### The two defaults covered

Section 39(5) penalises a company that fails to:

1. File the return of allotment under Section 39(4) within the prescribed 30-day window, OR

2. Refund application money in time where the minimum subscription was not received within 30 days of issue.

### Penalty

Defaulter	Penalty
Company AND every officer in default	₹ 1,000 per day during which the default continues, OR ₹ 1 lakh — whichever is less — per default

### Reading the cap correctly

The penalty is per default — separate defaults attract separate penalties.
The 'lower of' clause effectively caps the total at ₹ 1 lakh per default (since 1,000 × 100 days = ₹ 1 lakh).
Both the company and the officer in default are independently liable.

Worked example

### Example 1

Example: Epsilon Ltd makes an allotment on 1 April but files PAS-3 only on 150 days later (i.e., 120 days late). Daily penalty would be ₹ 1,000 × 120 = ₹ 1,20,000 — but capped at ₹ 1 lakh. So the company pays ₹ 1 lakh and each officer in default pays ₹ 1 lakh as well.

⚠️ Common exam mistakes

Computing the penalty as a continuing daily fine without applying the ₹ 1 lakh cap.
Charging the penalty only on the company and forgetting the officer in default is independently liable.
Treating filing default and refund default as a single default — they are separate, each attracting its own cap.

Bare-Act text Section 39(5) · Companies Act, 2013 · click to expand

In case of any default under sub-section (3) or sub-section (4), the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.

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