### Section 39(5) of the Companies Act entails discretionary, not mandatory minimum or fixed penalties.

The Petitioners (a company and its directors) challenged an order dated October 11, 2023, passed by an Adjudicating Officer under the Companies Act, 2013.

The Officer imposed a total penalty of Rs. 64 lakhs for sixteen instances of failing to separately certify the list of allottees (annexures) attached to the returns of allotment (Form PAS-3) filed between 2019 and 2021.

The Petitioners argued the breach was technical as the form itself contained an affirmation clause.

The Respondents contended that the penalty was a mandatory statutory minimum under Section 39(5), leaving no room for judicial discretion, and was applicable individually to each director as "officers in default".

Section 39(4) and 39(5) of the Companies Act, 2013, regarding the filing of returns of allotment and the associated per-day penalty.

Rule 12 of the Allotment Rules, which requires dual certification of the list of allottees.

The Supreme Court’s interpretation of Section 15-A of the SEBI Act in SEBI v. Bhavesh Pabari, which established that the expression "whichever is less" does not create a mandatory fixed/minimum penalty and requires consideration of aggravating/mitigating factors.

Section 2(60) regarding "officers in default".

Rule 3(12) of the Companies (Adjudication of Penalties) Rules, 2014, which prescribes specific factors like size of the company and nature of default for adjudging quantum.

The Court rejected the Respondents' argument that the penalty of Rs. 1,000 per day was a "mandatory minimum".

Drawing a direct parallel between the Companies Act and the SEBI Act, the Court held that interpreting Section 39(5) as a mechanical computational exercise without discretion would render it unconstitutional and arbitrary.

The Court observed that the Adjudicating Officer failed to apply the factors under Rule 3(12) of the Penalty Rules, such as the lack of injury to public interest or disproportionate gain.

While the Court held that the affirmation clause in Form PAS-3 did not excuse the failure to comply with the "dual iteration" requirement of certification under Rule 12(2), it classified the breach as a "technical/non-serious default".

The Court found the multiplication of the maximum penalty by the number of directors to be "perverse" and "absurd," noting that the Adjudicating Officer failed to establish the specific awareness or connivance of "every director" as required under Section 2(60)(vi).

The Court ruled that while a default occurred, the penalty imposed was disproportionate and lacked application of mind.

The Court modified the Impugned Order, reducing the penalty to a flat Rs. 1 lakh per violation, payable jointly and severally by the Company and its directors, rather than a multiplied individual liability.

The Petition was disposed of with directions to pay the re-computed penalty within three weeks.