The residual provision is not a universal Companies Act penalty
Section 172 applies to default under Chapter XI, Appointment and Qualifications of Directors, where no specific penalty or punishment is provided there. The current provision states ₹50,000 plus ₹500 for each day of continuing failure, subject to ₹3 lakh for the company and ₹1 lakh for an officer in default. This guide was checked on 28 October 2026 and concerns a conditional exposure working, not an automatic adjudication order. Companies Act, 2013: current section 172 and amendment note.
Identify the breached duty before doing arithmetic
Record the actual Chapter XI provision, obligation, facts and any specific penalty or punishment. If a specific provision governs, do not simply add section 172 because it produces a familiar spreadsheet amount. Conversely, do not use section 450 mechanically for a default that belongs to this chapter's applicable residual provision. The six models expressly assume section 172 has been legally established as the relevant provision. Companies Act, 2013: current section 172 and amendment note.
Identify each officer and each period separately
Liability is not asserted against every person whose name appears on a board list. Establish the officer-in-default basis and applicable period from the actual evidence. A company-level continuing period and an individual officer's attributable period need not be identical. Keep appointment, responsibility and rectification evidence with the calculation rather than assigning the longest period to everyone. Companies Act, 2013: current section 172 and amendment note.
Apply the starting amount and the relevant cap
For the stated ordinary case, model ₹50,000 plus ₹500 multiplied by the additional days legally treated as continuing failure, then apply the corresponding company or officer cap. The model's input days are already established; it does not decide whether the first or last calendar day is chargeable in a disputed case. The cap constrains the total for the stated liability, not merely the daily increment. Companies Act, 2013: current section 172 and amendment note.
Do not ignore relief or the adjudication framework
Determine any applicable lesser-penalty provision, exemption, modification, procedural safeguard and actual adjudication outcome before treating a model as payable. The examples expressly assume no applicable lesser-penalty treatment or other modification and one established default unless stated otherwise. They do not infer an imposed penalty from a portal error, an overdue task label or a director's mere association with the company. Companies Act, 2013: current section 172 and amendment note.
Reconcile rectification, exposure and the actual order
Rectifying the underlying failure and dealing with penalty proceedings are separate actions. Preserve the legally supported end date, calculation, representations and issued order, and reconcile any amount actually payable or paid to that order. Do not present an arithmetical cap as permission to leave a default uncorrected. Multiple independent defaults also require their own legal classification; these simple cases do not prescribe automatic aggregation across them. Companies Act, 2013: current section 172 and amendment note.
Applicable primary references
Companies Act, 2013: current section 172 and amendment note
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Established default without additional continuing days
Assume one section 172 default and zero additional chargeable continuing days in the model, with no applicable reduction or modification. The starting model amount is ₹50,000 for each legally established liable person; it is not multiplied by a guessed period.
Illustrative example 2: Ten continuing days
With ten established additional continuing days, ₹50,000 + ₹500 × 10 = ₹55,000. This is below both the company cap and the officer cap on the stated ordinary-case assumptions.
Illustrative example 3: Officer reaches the cap
With one hundred established additional days, raw amount is ₹1,00,000. The officer's ₹1,00,000 cap is reached. The same raw amount remains below the company's ₹3,00,000 cap.
Illustrative example 4: Different caps at two hundred days
With two hundred established additional days, raw amount is ₹1,50,000. Company model amount is ₹1,50,000, while one officer's model amount is capped at ₹1,00,000. The officer cap is not applied to reduce the company's separate amount.
Illustrative example 5: Company reaches its cap
With five hundred established additional days, raw amount is ₹3,00,000 and the company cap is reached. One officer's amount remains capped at ₹1,00,000, assuming the same legally established period and ordinary-case conditions.
Illustrative example 6: Different attributable periods
Assume the company's established additional period is 650 days, officer A's ten days and officer B's two hundred days. Company raw amount ₹3,75,000 is capped at ₹3,00,000; A's model is ₹55,000; B's is capped at ₹1,00,000. Combined model is ₹4,55,000, subject to the actual legal and adjudication conclusions for each.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the breached duty | Actual Chapter XI obligation and evidence |
| 2 | Check a specific penalty | No automatic use of the residual provision |
| 3 | Establish the legal default | Facts, applicability and any exemption |
| 4 | Identify liable persons | Officer-in-default evidence, not a board-list shortcut |
| 5 | Determine attributable periods | Start, cure and separate company/officer facts |
| 6 | Check lesser-penalty treatment | Applicable relief or modification before quantification |
| 7 | Calculate the ordinary raw amount | ₹50,000 plus ₹500 per established additional day |
| 8 | Apply the correct cap | Company ₹3 lakh versus officer ₹1 lakh in the stated model |
| 9 | Reconcile the actual proceedings | Representations and issued adjudication order |
| 10 | Retain correction and payment evidence | Underlying cure, payable amount and receipts |
Sixteen practitioner FAQs
1. Does section 172 govern every Companies Act default?
No. It is tied to the specified Chapter XI residual scope.
2. What must be checked before using it?
Whether a specific penalty or punishment is provided for the actual chapter default.
3. What is the ordinary starting amount in the current text?
₹50,000.
4. What is the continuing-failure rate?
₹500 per day on the statutory and established facts.
5. What is the company cap discussed here?
₹3 lakh in the stated ordinary case.
6. What is the officer cap discussed here?
₹1 lakh in the stated ordinary case.
7. Does the cap limit only the daily increment?
The models apply the cap to the total amount for the stated liability.
8. Can every director automatically be treated as an officer in default?
No. Establish the actual legal basis for each person.
9. Must all attributable periods be identical?
No. Determine the evidence and responsibility periods separately.
10. Do these examples decide contested start or end dates?
No. Additional chargeable days are explicit established inputs.
11. Is the model automatically the amount imposed?
No. Reconcile the applicable law and actual adjudication outcome.
12. Are lesser-penalty provisions irrelevant?
No. Check applicable relief before relying on the ordinary-case figures.
13. Do the examples assume such relief applies?
They expressly assume no applicable reduction or modification.
14. Does reaching the cap permit a company to leave a default unresolved?
No. Rectification remains a separate compliance duty.
15. Can multiple independent defaults be automatically pooled?
Each requires its own legal classification; no automatic rule is invented here.
16. What supports a reviewable exposure estimate?
Breach classification, liable persons, attributable days, applicable relief, cap and order evidence.
Conclusion
Test whether section 172 applies before modelling the ₹50,000 starting penalty, continuing-failure amount and distinct company and officer caps.