Companies Act Section 378ZM

Companies Act, Section 378ZM: Penalties for Contraventions Relating to Producer Companies

Section 378ZM of the Companies Act, 2013, prescribes penal consequences for various types of contraventions connected with Producer Companies. The objective of this section is to ensure strict compliance with the legal framework governing Producer Companies and to hold individuals accountable for any misuse of the term “Producer Company Limited” or for failing in their duties as officers or directors of such companies.

This section is structured into three broad sub-sections, each dealing with a distinct category of offences and their corresponding penalties. Below is a detailed explanation of the provisions:

1. Misuse of the Name "Producer Company Limited" by Unauthorised Persons

Sub-section (1) addresses the unauthorised use of the term “Producer Company Limited” by persons or entities who are not registered as Producer Companies under the applicable Chapter of the Companies Act.

If any person or entity other than a Producer Company properly registered under Chapter XXIA uses a business name that includes the words “Producer Company Limited”, then:
That person shall be liable for a fine. The fine may extend up to ?10,000 for every day during which such name is used in contravention of the law.
2. Wilful Failure to Furnish Information by Directors or Officers

Sub-section (2) deals with situations where a director or officer of a Producer Company wilfully refuses to furnish information related to the company’s affairs, which has been:

Requested by a Member, or requested by a person duly authorised to seek such information
If such a willful failure occurs, the director or officer concerned shall be subject to both imprisonment and fine, as follows:

Imprisonment: May extend up to six months
Fine: Amounting to five percent (5%) of the company's turnover during the preceding financial year
3. Failure to Discharge Duties by Directors or Officers

Sub-section (3) covers additional offences committed by directors or officers of a Producer Company, specifically in relation to failure of duty. It sets out two scenarios:

(a) Failure to Hand Over Custody of Records or Property:

If a director or officer fails to hand over custody of:
Books of accounts, other documents, and company property which were in his possession during the course of his official duties, such person shall be punishable.
(b) Failure to Convene Meetings:

If a director or officer fails to convene the Annual General Meeting (AGM) or other required general meetings of the company, he shall be similarly liable. For either of the above failures, the punishment includes:

Fine: May extend up to ?1,00,000. 

Additional Fine for Continuing Default: In case the default continues beyond the initial violation, there will be an additional fine of up to ?10,000 per day for each day that the failure or default persists