Rules 59 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.
Rule 59 says the Tribunal cannot impose a penalty under the Act without first giving a show-cause notice and a reasonable opportunity to be heard, and fixes the notice at not less than fifteen days. Rule 113 lets the Tribunal award costs for legal expenses, direct a party to bear the other side's cost of litigation, and impose exemplary costs for abuse of process.
Notwithstanding any rule or regulation under the Act, no order or direction imposing a penalty under the Act is made unless the person, company or party has been given a show-cause notice and reasonable opportunity to represent its case (rule 59(1)). Where the Bench decides to issue the notice, the Registrar issues it giving not less than fifteen days to submit a written explanation (rule 59(2)). The Bench then decides on the explanation and any oral hearing (rule 59(3)). Under rule 113 the Tribunal may award costs for the legal expenses of the respondent of a defaulting party, may direct one side to bear the cost of litigation of the other, and in case of abuse of process may impose exemplary costs on the defaulting party. Read as amended up to the National Company Law Tribunal (Amendment) Rules, 2020 (G.S.R. 80(E), 3 February 2020); these rules were not amended. Later amendments should be checked.
Rule 59: procedure for imposition of penalty under the Act
Rule 59(1): no penalty without notice
"Notwithstanding anything to the contrary contained in any rules or regulations framed under the Act", no order or direction imposing a penalty under the Act can be made unless the person, the company or a party to the proceeding has, during proceedings of the Bench, been given a show cause notice and reasonable opportunity to represent his, her or its case before the Bench or any officer authorised in this behalf. The rule overrides other rules or regulations framed under the Act; it is a safeguard that applies whatever the penalty provision. If your company faces a penalty proceeding, our compounding offences service can help you assess the position.
Rule 59(2): the Registrar's notice
If the Bench decides to issue a show-cause notice, the Registrar issues it, giving not less than fifteen days for the explanation in writing within the period stipulated in the notice. Fifteen days is a minimum; the notice may give more.
Rule 59(3): decision after the explanation
The Bench, on receipt of the explanation and after oral hearing if granted, decides the matter of imposition of penalty on the facts and circumstances of the case. Oral hearing is not stated as a right; the words are "if granted".
Contrast. Penalties under the Act that are adjudicated by the Registrar of Companies follow a separate procedure: see the article on the Adjudication of Penalties Rules, 2014. Rule 59 is for penalties the Tribunal itself imposes.
Rule 113: award of costs in the proceedings
Rule 113(1): costs for legal expenses
Whenever the Tribunal deems fit, it may award cost for meeting the legal expenses of the respondent of the defaulting party.
Rule 113(2): cost of litigation and exemplary costs
The Tribunal may in suitable cases direct the appellant or respondent to bear the cost of litigation of the other side, and in case of abuse of process of court, impose exemplary costs on the defaulting party. Costs are discretionary and linked to default or abuse. Rule 149 gives a general power to pass orders imposing costs on a defaulting party; see the article on rules 146 to 152. Rule 113 sits in Part XIII, headed "Fee on Petition or Appeal, Process Fee And Award of Costs", with the fee rule 112 covered in the article on the Schedule of Fees.
Penalty procedure and costs at a glance
| Item | Rule | Who | Key words |
|---|---|---|---|
| Show-cause notice before penalty | 59(1) | Bench or authorised officer | Notice and reasonable opportunity before a penalty |
| Issue of notice | 59(2) | Registrar | Not less than fifteen days; written explanation |
| Decision | 59(3) | Bench | After explanation and any oral hearing |
| Costs of legal expenses | 113(1) | Tribunal | Whenever it deems fit |
| Cost of litigation | 113(2) | Tribunal | Appellant or respondent to bear the other side's cost |
| Exemplary costs | 113(2) | Tribunal | Abuse of process of court |
An example
During a hearing, the Bench is minded to impose a penalty on Orion Metals Limited for a default under the Act. It decides to issue a show-cause notice; the Registrar issues one giving fifteen days to submit an explanation in writing. Orion files its explanation within the period. The Bench considers it, grants an oral hearing, and then decides. At a later stage, if Orion's opponent is found to have misused the process of the court, the Bench could impose exemplary costs under rule 113(2).
What a practitioner checks
- That a show-cause notice has been issued before any penalty is imposed, giving at least fifteen days.
- That the written explanation is filed within the period in the notice, and an oral hearing is asked for.
- That any costs order is tied to default or abuse, and a request for costs is supported by legal-expense details.
- Whether the penalty is one for the Tribunal to impose or one adjudicated by the Registrar of Companies.
Need help with a penalty or costs question?
A penalty cannot be imposed without a show-cause notice, and the explanation you file shapes the outcome. For help with penalty proceedings and compounding, speak to our compounding offences team.
Key takeaways
- No penalty under the Act without a show-cause notice and reasonable opportunity (rule 59(1)).
- The Registrar issues the notice giving not less than fifteen days (rule 59(2)).
- The Bench decides after the explanation and any oral hearing (rule 59(3)).
- Costs may be awarded for legal expenses, for the other side's cost of litigation, and exemplary costs for abuse of process (rule 113).
Read next
- Rules 146 to 152: disposal, costs and pronouncement
- Rule 112 and the Schedule of Fees
- Sections 435 to 441: special courts and compounding
- Compounding application under section 441: format
Disclaimer: Based on the National Company Law Tribunal Rules, 2016 (G.S.R. 716(E)) as amended up to the National Company Law Tribunal (Amendment) Rules, 2020 (G.S.R. 80(E)), consulted on 3 October 2026. Later amendments, fees, forms, NCLT practice directions 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.