Rules explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 1, 2, 3 and 3A of the Companies (Adjudication of Penalties) Rules, 2014 set out how a penalty under the Companies Act, 2013 is decided by an adjudicating officer: a written show-cause notice, a reply, a hearing where needed, a reasoned order, and payment through the Ministry's portal. The set is stated as amended up to G.S.R. 630(E) dated 9 October 2024 per the MCA e-book; later amendments should be checked.
An adjudicating officer, not below the rank of Registrar, must issue a written show-cause notice giving not less than fifteen days and not more than thirty days to reply. The reply is filed electronically. If a hearing is needed, notice goes out within ten working days of the reply. The order is due within thirty days of the end of the reply period (no hearing) or within ninety days of the notice (hearing held). Penalty is paid only through the MCA portal, and proceedings now run on the e-adjudication platform under rule 3A.
What the Rules do
Section 454 of the Act provides for adjudication of penalties; see Section 454 of the Companies Act, 2013: adjudication and our guide Section 454: adjudication of penalties. These Rules give the procedure. Appeals against the adjudicating officer's order are in Rules 4–6, on appeal to the Regional Director. Adjudication is different from compounding; for the contrast, see compounding vs adjudication of offences.
A company or director who has received a notice should not let the reply period run out. Our compounding offences service helps companies weigh the route available to them, and our team can help prepare the reply.
Rules 1 and 2: title, commencement and definitions
Rule 1. The rules are the Companies (Adjudication of Penalties) Rules, 2014, made under section 454 read with section 469 and in force from 1 April 2014. Rule 2 defines "Act", "Annexure", "Fees" (fees prescribed in the Companies (Registration Offices and Fees) Rules, 2014), "Form" or "e-Form", "Regional Director" and "section". Words not defined take their meaning from the Act or the Companies (Specification of Definitions Details) Rules, 2014. For fee levels, see the sister articles on filing fees under the Registration Offices and Fees Rules.
Rule 3: adjudication of penalties
Appointment (3(1)). The Central Government may appoint any of its officers not below the rank of Registrar as adjudicating officers.
Show-cause notice (3(2) and 3(3)). Before adjudging a penalty, the officer issues a written notice, in the specified manner, to the company, the officer in default or any other person, to show cause why the penalty should not be imposed. The period for reply is stated in the notice and may not be less than fifteen days nor more than thirty days from the date of service. The notice must clearly state the nature of the non-compliance alleged, draw attention to the relevant penal provisions of the Act, and state the maximum penalty that can be imposed on the company and on each officer in default or other person.
Reply (3(4)). The reply is filed in electronic mode only, within the period in the notice. The officer may, for reasons recorded in writing, extend that period by a further period not exceeding fifteen days if the person shows sufficient cause, or if the officer believes the person received a shorter notice and lacked reasonable time.
Physical appearance (3(5)). If, after considering the reply, the officer thinks a physical appearance is required, he issues a notice within ten working days of receiving the reply, fixing a date. A person who wants to make an oral representation and said so in the electronic reply must be allowed to do so after a date is fixed.
Hearing (3(6)). On the hearing date, after a reasonable opportunity of being heard, the officer may, for reasons recorded in writing, pass any order he thinks fit, including adjournment. After the hearing he may ask the person to give a written reply on other issues relevant to determining the default.
Time for the order (3(7)). The order is passed:
- within thirty days of the end of the reply period in sub-rule (2) (or the extended period) where no physical appearance was required; or
- within ninety days of the date of the notice under sub-rule (2) where the person appeared under sub-rule (5).
If the order is passed later, the reasons for the delay are recorded, and no order is invalid merely because it came after the thirty or ninety days.
The order (3(8) and 3(9)). Every order is dated and signed and clearly states the reasons for requiring physical appearance. The officer sends a copy to the company, the officer in default or other person, and to the Central Government, and a copy is uploaded on the website.
Powers (3(10)). The officer may summon and enforce attendance of any person acquainted with the facts, after recording reasons, and may order evidence or documents relevant to the subject matter.
Non-response (3(11)). If a person fails to reply, or neglects or refuses to appear under sub-rule (5) or (10), the officer may pass an order imposing the penalty in his absence, after recording reasons.
Factors (3(12)). In fixing the quantum of penalty the officer has due regard to: size of the company; nature of its business; injury to public interest; nature of the default; repetition of the default; the amount of disproportionate gain or unfair advantage, wherever quantifiable; and the amount of loss caused to an investor or group of investors or creditors. In no case may the penalty be less than the minimum prescribed, if any, under the relevant section.
Fixed penalties (3(13)). Where the Act provides a fixed sum for a default, the officer imposes that fixed sum.
Payment and credit (3(14) and 3(15)). Penalty is paid through the Ministry of Corporate Affairs portal only. All sums realised as penalties under the Act are credited to the Consolidated Fund of India.
Explanations. "Specified manner" means service of documents under section 20 of the Act and the rules made under it, and the address, including e-mail ID, in the KYC documents field in the registry is used for communication. Electronic replies became mandatory after the creation of the e-adjudication platform.
The rule was substituted in 2019 and later amended; the current text is as above.
Rule 3A: the adjudication platform
3A(1). After the commencement of the Companies (Adjudication of Penalties) Amendment Rules, 2024, all proceedings of the adjudicating officer and the Regional Director under these rules, including issue of notices, filing of replies or documents, evidence, hearings, attendance of witnesses, passing of orders and payment of penalty, take place in electronic mode only through the e-adjudication platform developed by the Central Government. A proviso says proceedings pending on that date continue as per the rules as they stood before it.
3A(2). If the e-mail address of a person to be served is not available, the officer sends the notice by post at the last intimated address or the address in the records, and preserves a copy in the electronic record on the platform. If no address is available, the notice is placed on the platform.
Example. A notice reaches Orchid Foods Ltd on 1 of a month, giving twenty days to reply. The company's director files a reply on the platform on day eighteen and asks to make an oral representation. The officer fixes a date and, after the hearing, passes an order. The order must be passed within ninety days of the notice, but if it is a few days late, it is not invalid for that reason alone, provided the reasons for the delay are recorded.
Timelines as printed
| Step | Rule | Who | Period as printed |
|---|---|---|---|
| Reply to show-cause notice | 3(2) | Company, officer or person | Not less than fifteen and not more than thirty days from service |
| Extension | 3(4) proviso | Adjudicating officer | Further period not exceeding fifteen days |
| Notice for physical appearance | 3(5) | Adjudicating officer | Within ten working days of receiving the reply |
| Order, no appearance | 3(7)(a) | Adjudicating officer | Within thirty days of the expiry of the reply period |
| Order, appearance held | 3(7)(b) | Adjudicating officer | Within ninety days of the notice |
| Payment | 3(14) | Person penalised | Through the MCA portal only |
Need help replying to an adjudication notice?
The notice states the alleged default, the penal provisions and the maximum penalty, and the reply must be filed electronically within the stated period. Our team can help you review the notice and draft the reply; see also our compounding offences service where that route is relevant.
Key takeaways
- Adjudicating officers are officers not below the rank of Registrar.
- The show-cause notice must give at least fifteen and at most thirty days to reply, and must state the maximum penalty.
- Replies are electronic; one extension of up to fifteen days is possible for sufficient cause.
- The order is due within thirty days (no hearing) or ninety days (hearing), but a late order is not invalid for that reason alone.
- Penalty is paid only through the MCA portal and credited to the Consolidated Fund of India.
Read next
- Rules 4–6 of the Adjudication of Penalties Rules: appeal to the Regional Director
- Rules 1–6 of the Inspection, Investigation and Inquiry Rules
- Reply to an adjudication notice for not holding the AGM: a draft
- Compounding vs adjudication of offences
Disclaimer: Based on the Companies Act, 2013 rules named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.