What Is the Residual Penalty Under Section 450?

The residual penalty in section 450 of the Companies Act, 2013 is the provision that applies when a contravention has no consequence of its own. It sits near the end of the Act, and it is what an adjudication order reaches for when the section that was breached is silent about what happens next. It is a residual provision by design, and the design is stated in the section itself.

What triggers the residual penalty under section 450?

Section 450 has two trigger limbs and one condition, and the condition is what makes it residual.

The first limb is a contravention of any of the provisions of this Act or the rules made thereunder. The second is wider: a contravention of any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted. A company that obtained an approval and then failed to observe a condition attached to it is inside the section even though it broke no provision of the Act directly.

The condition on both limbs is that no penalty or punishment is provided elsewhere in this Act. That is the whole design. Section 450 does not compete with a specific provision; it fills the space a specific provision leaves. Where the breached section carries its own penalty, section 450 is simply not engaged.

Three classes of person are named as liable: the company, every officer of the company who is in default, and such other person. The third is doing real work, because the first limb also catches "any other person" who contravenes a provision, and a good deal of the Act binds people who are neither the company nor its officers.

How much is the penalty, and what caps it?

The printed structure is a fixed amount, a daily amount, and two different caps depending on who is liable.

One point of textual precision. The India Code consolidation prints the daily figure as "a further penalty of on thousand rupees for each day after the first", which is a typographical error for one thousand rupees. The word is quoted here as printed rather than silently corrected, because a page that quietly repairs a printed text is a page whose other quotations cannot be checked against it.

What did the 2020 amendment change?

The punishment limb of section 450 was substituted by Act 29 of 2020, section 63, with effect from 21 December 2020. The footnote records the substitution as being made "for certain words" and does not reproduce what stood there before, so this page says nothing about the earlier text.

What the current text says is enough for the point that matters. It imposes a penalty, not a fine, and a penalty under this Act is imposed by an adjudicating officer under section 454, with an appeal to the Regional Director, rather than by a court on conviction. That is why section 450 is a provision you meet in adjudication orders rather than in judgments.

A note on the footnote apparatus, because it does not line up

Printed page 245 of the India Code consolidation carries three in-text markers, numbered 1, 2 and 3, and a footnote block whose three entries print their leading numbers as 4, 1, 2. The numbering is out of order in the source itself, not in any extraction of it, and the same page read directly from the PDF shows the same thing.

Matched by content the alignment is not in doubt. Marker 1 wraps a substitution of the punishment limb of section 450, and the only entry describing a substitution of that kind is "Subs. by Act 29 of 2020, s. 63, for certain words (w.e.f. 21-12-2020)". Marker 2 wraps an inserted proviso to section 452(2), matching "Ins. by Act 29 of 2020, s. 64". Marker 3 wraps a substituted sub-section (3) of section 454, matching "Subs. by Act 22 of 2019, s. 42, for sub-section (3)", which is a different amending Act from the first two.

There is a second reason to read it this way, and it is worth stating carefully because it is easy to overstate. Act 29 of 2020 amends the sections of this run in numerical order: its section 63 falls on section 450 and its section 64 on section 452, both entries on this page, and its section 65 falls on section 454, in the footnote block of the following page. That ordering fits the content match for markers 1 and 2 exactly, and it is consistent with marker 3 belonging to the other amending Act rather than to Act 29 of 2020.

Where section 450 sits against the other general provisions

Chapter XXIX of the Act holds several provisions that apply across the whole statute, and they are easy to confuse.

• Section 447, fraud is an offence with its own definition and its own two-tier punishment. Section 450 is not an offence and requires no intent.
• Section 451, repeated default doubles the fine for an offence committed again within three years. It operates on offences punishable with fine or imprisonment, so it does not reach a section 450 penalty.
• Section 454A is the penalty-side twin of section 451 and doubles a penalty on a repeat within three years of the order. That one can reach section 450.
• Section 164, director disqualification is a status consequence rather than a money one, and runs on its own triggers.

Section 450 also fills gaps inside particular chapters. The director identification number provisions, for instance, leave some contraventions without a penalty of their own, and section 450 is what covers them.

Reading a section 450 order

An adjudication order that applies section 450 should show four things, and a reader can check each one: the provision or condition contravened, a statement that no penalty is provided elsewhere for it, the period over which the contravention continued, and the arithmetic that lands inside the applicable cap. Where the order names a section that does carry its own penalty, the residual penalty in section 450 is the wrong provision and the arithmetic will not be the point in dispute.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.