Hidden Cost of Non-Compliance: A Rs. 63.9 Lakh Lesson in DIN Reporting

One needs to pay a cost of around Rs. 5000 to apply for a Director Identification Number (DIN); however, those not complying with this requirement can incur a lot more. This indicates how small non-compliances can result in the loss of lakhs and can even lead to major litigations.

One of the frequent questions asked by individuals in governance discussions is what actually happens if a company does not comply with seemingly minor statutory requirements, like having a Director Identification Number (DIN). Numerous individuals think that merely having a DIN is enough; however, the law requires a lot more than that.

Every individual furnishing their return or any other document under the Companies Act, 2013, is compelled to mention their DIN wherever a director’s name appears, according to Section 158 of the said act. Meaning, basically, the Companies Act, 2013, says compliance is not considered completed unless the correct DIN is mentioned in all the relevant filings.

It may appear like a very small and routine procedural step-just adding a number. However, a recent disclosure of the stock exchange highlighted how failure to mention DINs in earlier filings resulted in a penalty amounting to Rs. 63.9 lakh. The stock exchange also mentioned that the penalty was levied even though the mistake was not made intentionally and was later corrected too; it also did not impact the financial operations of the company, yet the financial consequence was significant.

This instance can be a great lesson for all the individuals intentionally involved in non-compliance. The cost of compliance is known and manageable, while the cost of non-compliance is uncertain and can escalate over time due to compounding penalties.

Therefore, all the regulators are advised to pay close attention to even minor statutory details. Sometimes, something as simple as mentioning a DIN can prevent a very costly outcome.