Chapter XI - Appointment and Qualifications of Directors
Section 172
Section 172: residual penalty for Chapter XI defaults
Section 172 is the residual penalty for Chapter XI (appointment and qualifications of directors). It applies where a company defaults on a provision of that Chapter for which no specific penalty or punishment is provided.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
If a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees, and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default.
Introduction
The company and every officer in default are each liable to a penalty of fifty thousand rupees and, for a continuing failure, a further five hundred rupees for each day the failure continues, up to three lakh rupees for the company and one lakh rupees for an officer in default.
The current text was substituted by section 35 of the Companies (Amendment) Act, 2020, in force from 21 December 2020 under S.O. 4646(E), replacing a fine with a civil penalty. Section 172 originally commenced on 1 April 2014 under S.O. 902(E).
Key takeaways
Residual only
Applies only where Chapter XI has no specific penalty or punishment for the default.
Fixed base penalty
Fifty thousand rupees on the company and on every officer in default.
Daily penalty with caps
Five hundred rupees per day of continuing failure, capped at three lakh rupees (company) and one lakh rupees (officer).
Decriminalised
The 2020 Amendment Act replaced the fine with a penalty from 21 December 2020.
When section 172 applies
The section applies if a company is in default in complying with any provision of Chapter XI for which no specific penalty or punishment is provided in that Chapter. Where a provision such as section 159 or section 165 carries its own penalty, that provision governs instead.
- India Code — consolidated Companies Act, 2013, section 172
- eGazette — Companies (Amendment) Act, 2020 (No. 29 of 2020)
- eGazette — MCA notification S.O. 4646(E) (2020 Amendment Act provisions in force 21 December 2020)
- eGazette — MCA notification S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
Amount of penalty
The company and every officer of the company who is in default are liable to a penalty of fifty thousand rupees. In case of continuing failure, a further penalty of five hundred rupees applies for each day during which the failure continues, subject to a maximum of three lakh rupees for a company and one lakh rupees for an officer who is in default.
Penalties under the Act are imposed by an adjudicating officer under section 454.
Amendment history
Section 35 of the Companies (Amendment) Act, 2020 substituted the section. S.O. 4646(E) brought it into force on 21 December 2020. The earlier text made the contravention punishable with fine. (India Code’s footnote describes the substitution as made "for section 35"; the 2020 Act substitutes section 172.)
Practical preparation
Map each Chapter XI obligation (director appointments, registers, intimations, returns) and note whether it carries its own penalty; for those that do not, treat section 172 as the exposure; fix defaults quickly to stop the daily penalty; record the date of rectification.
Practical checklist
Do
- Check first whether the specific Chapter XI provision has its own penalty clause.
- Keep evidence of the date a default was rectified.
Avoid
- Do not assume the cap removes the incentive to rectify; the daily penalty accrues until the cap is reached.
Illustrative example
Hypothetical: unpenalised Chapter XI lapse
A company fails to comply with a Chapter XI requirement that has no penalty clause of its own and the failure continues for several months.
Base penalty
The company and the officer in default each face fifty thousand rupees.
Daily penalty
Five hundred rupees accrues for each day the failure continues.
Caps
The total is limited to three lakh rupees for the company and one lakh rupees for the officer.
Outcome
- Rectifying early keeps the amount close to the base penalty.
Glossary
- Officer who is in default
- The officer defined in section 2(60) as liable for a company’s default.
- Residual penalty
- A penalty that applies only where no specific penalty is provided elsewhere.
Frequently asked questions
Does section 172 apply to every Chapter XI default?
No. It applies only to defaults under Chapter XI for which no specific penalty or punishment is provided in that Chapter.
What is the most a company can be penalised under section 172?
Three lakh rupees for the company and one lakh rupees for each officer in default, including the daily component.
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Contact BizeneedLast updated 11 October 2026