# Punishment for Contravention of Chapter VI (Section 86)

Section 86 has two limbs — a civil-style penalty for general default (sub-section 1) and a much more serious provision for fraudulent suppression or misrepresentation (sub-section 2).

## 1. Section 86(1) — Default in Complying With Chapter VI

If a company defaults in complying with any provision of Chapter VI (Registration of Charges):

Defaulter	Penalty
Company	₹5,00,000
Every officer in default	₹50,000 each

This is a monetary penalty — not imprisonment.

## 2. Section 86(2) — Fraud in Registration Filings

If any person wilfully:

furnishes any false or incorrect information, OR
knowingly suppresses material information required to be registered under Section 77,

then they are liable for action under Section 447 (Punishment for Fraud) of the Companies Act, 2013.

Section 447 is a serious provision carrying both imprisonment and fines, depending on the magnitude of fraud.

## 3. Key Distinction

Aspect	Sec 86(1)	Sec 86(2)
Trigger	Any default in Chapter VI	Wilful false info / suppression u/s 77
Nature	Civil penalty	Fraud (criminal)
Quantum	Fixed amounts	As per Sec 447 (imprisonment + fine)
Intent required	No (strict liability)	Yes (wilful)

Worked example

### Example 1

Example 1 — Routine default: ABC Ltd fails to file CHG-1 for a charge. ABC Ltd is liable to a penalty of ₹5,00,000, and each officer in default is liable to ₹50,000.

### Example 2

Example 2 — Wilful suppression: The CFO knowingly omits a major prior charge while filing CHG-1, to make the asset appear unencumbered to a new lender. This is action under Section 447 — much more serious, attracting imprisonment in addition to fines.

⚠️ Common exam mistakes

Treating Section 86(2) as the same as 86(1) — fraud is a different and much more serious category.
Forgetting that the ₹5 lakh / ₹50,000 amounts under 86(1) are PENALTIES (no mens rea required), not fines for a criminal offence.
Assuming only the company is punished — officers in default are individually liable too.

Bare-Act text Section 86 · Companies Act, 2013 · click to expand

Section 86 – (1) If any company is in default in complying with any of the provisions of this Chapter, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees. (2) If any person wilfully furnishes any false or incorrect information or knowingly suppresses any material information, required to be registered under section 77, he shall be liable for action under section 447.

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