ROC Adjudication on Delayed PAS-3 Filing: Startup Penalised for Violation of Section 42(8)
Background of the Adjudication Proceedings
The Registrar of Companies, Bangalore, initiated adjudication proceedings under Section 454 of the Companies Act, 2013 in connection with a delay in filing Form PAS-3 (return of allotment) by TACTILE EDUCATION SERVICES PRIVATE LIMITED. The company had made a private placement of equity shares but did not submit the statutory return of allotment within the time limit prescribed under Section 42(8).
The matter culminated in an adjudication order dated 11/06/2026, wherein penalties were imposed both on the company and on its directors for violation of Section 42(8) read with Section 42(9) of the Companies Act, 2013. However, as the entity qualified as a DPIIT-recognised Start-up with turnover below ₹100 crore, the adjudicating authority applied the beneficial provisions of Section 446B, resulting in a reduced quantum of penalty.
Appointment of the Adjudicating Officer
The Ministry of Corporate Affairs, acting through Gazette notification number S.O. 698(E) dated 10/02/2026, appointed the concerned officer as Adjudicating Officer in terms of Section 454 of the Companies Act, 2013. This appointment was made read with the Companies (Adjudication of Penalties) Rules, 2014, authorising the officer to levy penalties for non-compliance with specified provisions of the Act.
Accordingly, the present adjudication proceeding was taken up against:
- TACTILE EDUCATION SERVICES PRIVATE LIMITED, CIN: U80904KA2017PTC102889, having its registered office at P22, GROUND FLOOR, UTTARA KANNADA JILLA SAMSKRUTIK SANGHA, GANGE ROAD, KUVEMPUNA GAR NA MYSORE, MYSORE, KARNATAKA, INDIA 570023; and
- Its directors:
- RAVI RANGAN SRINIVASA
- ARAGUDIGE PRABHAKARA RAGHU
- RAJANI RANGAN
Statutory Framework: Sections 42(8), 42(9) and 446B
Requirement under Section 42(8)
Section 42(8) of the Companies Act, 2013 mandates that where a company makes a private placement of securities, it must file a return of allotment with the Registrar in Form PAS-3 within 15 days from the date of allotment of such securities.
This statutory requirement ensures transparency and timely updating of share capital details in the records of the Registrar of Companies.
Consequence of Default – Section 42(9)
Under Section 42(9), if a company does not submit the return of allotment within the period prescribed in Section 42(8), the following are liable for penalty:
- The company itself
- Its promoters
- Its directors
The penalty prescribed is:
- ₹1,000 per day during which the default continues, and
- Capped at a maximum of ₹25,00,000 for each person in default.
Benefit of Lesser Penalty – Section 446B
Section 446B provides relief in the form of lesser penalties in the case of specified categories of entities, including eligible Start-up companies, provided they meet the prescribed conditions (such as turnover thresholds and recognition status).
In this case, the company placed reliance on:
- Certificate of Recognition as a Start-up issued by DPIIT on 16.03.2018; and
- Turnover details from Form MGT-7 for financial years 2019-20 to 2024-25, showing turnover not exceeding Rs. 100 Crores.
On this basis, the Adjudicating Officer accepted that Section 446B applied and proceeded to compute penalties at reduced levels.
Chronology of Events and Nature of Default
Allotment of Shares and Filing Obligation
- The Board of Directors of TACTILE EDUCATION SERVICES PRIVATE LIMITED passed a resolution on 21.03.2020, thereby allotting equity shares through private placement.
- Under
Section 42(8), the assessee-company was required to file Form PAS-3 (return of allotment) within 15 days of the date of allotment.