NCLT to Reconsider Rs. 92 Lakh Penalty Imposed for Non-Holding of AGMs Due to Directorial Deadlock: NCLAT [Read Order]

The Principal Bench of National Company Law Appellate Tribunal (NCLAT), New Delhi, remanded the matter to NCLT Mumbai to reconsider the ₹92 lakh penalty imposed for non-holding of AGMs from 2016 to 2023 and stated that the default arose due to an unintentional deadlock between directors, preventing statutory compliance. Thus, NCLT has been directed to re-examine the penalty after hearing both parties, with the matter listed on 19.11.2025.

The Appellant, Tanvi Construction Pvt Ltd & Anr, filed the appeal dated 14.10.2025 against an impugned order dated 19.08.2025 passed by the National Company Law Tribunal (NCLT) Mumbai Bench in CP No.65(MB)/2025.

The Appellants were penalized by the Registrar of Companies, Mumbai, for failing to hold Annual General Meetings from 2016 to 2023 in violation of Section 96 of the Companies Act, 2013. The ROC initially imposed a penalty of Rs. 8.89 Crores. The Appellants challenged this before NCLT Mumbai in CP No.65(MB)/2025, wherein order dated 19.08.2025 reduced the penalty to approximately Rs. 92 Lakhs.

The Section 96 of the Companies Act, 2013 explained that: Annual general meeting

“Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next:

Provided that in case of the first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year”

The default occurred due to a deadlock between two directors of Appellant No.1 company arising from disputes. In 2016, Appellant No.2 had filed CP No.20/2016 alleging oppression and mismanagement against another director (his estranged wife) and moved IA No.48/2016 seeking appointment of the Chairman for statutory compliance. Though the Chairman was appointed for six months, his tenure was not extended despite requests, preventing the holding of AGMs.

Still aggrieved by the quantum, stating it was excessive considering the company's financial condition and circumstances of default, the Appellants filed Company Appeal (AT) No.234 of 2025 before NCLAT, New Delhi.

The Counsel for the Appellants, submitted that all pending AGMs for 7 years were subsequently held on 03.09.2024. Despite the penalty reduction by NCLT, Rs. 92 Lakhs remains disproportionately high given the company's annual profit of approximately Rs. 50 Lakhs over the last 7-8 years and the poor financial condition of both Appellants.

The Counsel also relied on Viavi Solutions India P Ltd and Others Vs Registrar of Companies, NCT of Delhi and Haryana (2017) 203 Comp Cas 165, argued that the default was unintentional, caused solely by directorial deadlock.

Further, the Counsel stated that the bona fide intention of Appellant No.2 was evident from seeking appointment of the Chairman in 2016 itself through IA No.48/2016, whose tenure was not extended despite requests. Considering the financial constraints and unintentional nature of default, the penalty should be further reduced or the order set aside.

The Tribunal consisted of Judicial Member, Justice Yogesh Khanna and Technical Member, Ajai Das Mehrotra, heard and reviewed the matter.

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The Tribunal, after considering the material on record, observed that the company's annual profit (Rs. 50 Lakhs) was half the penalty imposed (Rs. 92 Lakhs) for the 7-year default period. Considering this fact, the Tribunal held it appropriate for NCLT to reconsider and decide afresh regarding further reduction of penalty, if any, after hearing both parties.

Thus, the appeal and pending applications were disposed of accordingly and the matter was directed to be listed before NCLT Mumbai on 19.11.2025 for further proceedings.

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