₹14.46 Lakh Penalty Imposed for Substantive Section 42 Private Placement Violations

The Registrar of Companies, Mumbai adjudicated penalties under Section 454 of the Companies Act, 2013 for violations of private placement provisions under Section 42 read with Rules 14(1) and 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The company issued a private placement offer before filing the requisite resolutions, failed to attach the explanatory statement with the filed resolution, and allotted shares prior to receipt of application money. Rejecting the contention that these were mere procedural lapses punishable under the general penalty provision in Section 450, the adjudicating officer held that Section 42 is a self-contained code and that rules prescribed thereunder are integral to the section itself. Consequently, violations of Rule 14 constitute substantive contraventions of Section 42, attracting penalties under Section 42(10). A collective penalty of ₹14.46 lakh was imposed and proportionately apportioned between the company and directors in default, while directors not holding office during the default period were exempted.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
ROC Mumbai
Registrar Of Companies, 100, Everest, Marine Drive, Mumbai, Maharashtra, India, 400002
Phone: 022-22812627,022-22812645
E-mail: roc.mumbai@mca.gov.in

Order ID: PO/ADJ/12-2025/MB/01282 Dated: 24/12/2025

ORDER FOR ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 (‘THE ACT’) FOR VIOLATION OF SECTION 42(10) OF THE COMPANIES ACT, 2013.

A. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its Gazette notification number S.O. 831(E) dated 24/03/2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 [herein after known as Act] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

B. Company details:

In the matter relating to CAPCHEM ELECTRICALS LIMITED [herein after known as Company] bearing CIN U42202MH2010PLC206771, is a company registered with this office under the Provisions of the Companies Act, 2013/1956 having its registered office situated at UNIT NO 1401 & 1402, 14TH FLOOR, ORIANA BUSINESS PARK, ROAD NO. 22, WAGLE I.E. THANE THANE MAHARASHTRA INDIA 400604

Individual details:

In the matter relating to RAMCHANDRA VITTHAL SATRE ——

In the matter relating to RAJAN PRATAPSINGH THAKUR ——

In the matter relating to ANKUSH SHESHRAO CHAVAN ——–

In the matter relating to SHRIKISHAN CHUNNILAL SHRIRANGAM ——-

In the matter relating to NISHA VISHWAS GUJAR ——–

In the matter relating to AMEYA ANAND GALGALI —–

C. Provisions of the Act:

Subject to sub-section (11), if a company makes an offer or accepts monies in contravention of this section, the company, its promoters and directors shall be liable for a penalty which may extend to the amount raised through the private placement or two crore rupees, whichever is lower, and the company shall also refund all monies with interest as specified in sub-section (6) to subscribers within a period of thirty days of the order imposing the penalty.

D. Facts about the case:

1. Default committed by the officers in default/noticee – Whereas the Registrar of Companies, Mumbai (hereinafter referred to as the ROC) received a suo-motu Adjudication Application dated 22.09.2025 filed by the Company, Mr. SHRIKISHAN CHUNNILAL SHRIRANGAM Director (DIN: 09625673), Mr. RAJAN PRATAPSINGH THAKUR, Director (DIN: 07158192), Mr. RAMCHANDRA VITTHAL SATRE, Director (DIN: 00634991) and Mrs. NISHA VISHWAS GUJAR , Director (DIN: 09820146) (hereinafter referred to as the Applicants) under section 454 of the Act for default under Rule 14(1), 14(6) and 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 (hereinafter referred to as the Rules).

In this regard, certain clarification were sought from the Applicants vide letter dated 12.11.2025 and reply to which was received vide letter dated 03.12.2025. After examination of the reply, it has been found that the default committed each under Section 42 of the Act read with Rule 14(1) and 14(8) of the Rules and punishable under Section 42(10) of the Act. Whereas Rule 14(1) and 14(8) of the Rules read as follows:

(1) For the purposes of sub-section (2) and sub-section (3) of section 42, a company shall not make an offer or invitation to subscribe to securities through private placement unless the proposal has been previously approved by the shareholders of the company, by a special resolution for each of the offers or invitations:

Provided that in the explanatory statement annexed to the notice for shareholders’ approval, the following disclosure shall be made:-

(a) particulars of the offer including date of passing of Board resolution;

(b) kinds of securities offered and the price at which security is being offered:

(c) basis or justification for the price (including premium, if any) at which the offer or invitation is being made;

(d) name and address of valuer who performed valuation;

(e) amount which the company intends to raise by way of such securities;

(f) material terms of raising such securities, proposed time schedule, purposes or objects of offer, contribution being made by the promoters or directors either as part of the offer or separately in furtherance of objects; principle terms of assets charged as securities:

Provided further that this sub-rule shall not apply in case of offer or invitation for. non-convertible debentures, where the proposed amount to be raised through such offer or invitation does not exceed the limit as specified in clause (c) of sub section (1) of section 180 and in such cases relevant Board resolution under clause (c) of subsection (3) of section 179 would be adequate:

Provided also that in case of offer or invitation for non-convertible debentures, where the proposed amount to be raised through such offer or invitation exceeds the limit as specified in clause (c) of sub-section (1) of section 180, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitations for such debentures during the year.

Provided also that in case of offer or invitation of any securities to qualified institutional buyers, it shall be sufficient if the company passes a previous special resolution only in a year for all the allotments to such buyers during the year.

Provided also that no offer or invitation of any securities under this rule shall be made to a body corporate incorporated in, or a national of, a country which shares a land border with India, unless such body corporate or the national, as the case may be, have obtained Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and attached the same with the private placement offer cum application letter.

XXX(8) A company shall issue private placement offer cum application letter only after the relevant special resolution or Board resolution has been filed in the Registry:

Provided that private companies shall file with the Registry copy of the Board resolution or special resolution with respect to approval under clause (c) of subsection (3) of sec 179Whereas as per the filings available on MCA portal and as per submission made by the Applicants in the suo motu Adjudication Application it is observed that:

i. Board of Directors during board meeting and Shareholders during Extra Ordinary General meeting held on 01.12.2023 approved the issue and offer of 1,00,000/- Equity Shares of Rs. 10/- each at premium of Rs. 26.15/- aggregating to Rs.36,15,000/-. The Applicant Company filed E-form MGT-14 vide SRN AA6285936 on 02.12.2023 along with a certified copy of resolution passed in Meeting of members to be held on 01.12.2023. However, it is observed that the Company has not attached notice of the meeting and explanatory statement with the same in contravention of Rule 14(1) of the Rules;

ii. The Applicant Company issued Private Placement Offer cum Application Letter in PAS-4 on 01.12.2023 and E-form MGT-14 was filed vide SRN AA6285936 on 02.12.2023. Thus, the Applicant Company circulated Private Placement Offer letter before filing relevant resolution with the Registrar in contravention of Rule 14(8) of the Rules.

iii. The Applicant Company made allotment of Equity shares on 01.12.2023. However, the Company received allotment money 02.12.2023. Thus, the Applicant Company has allotted shares prior to receipt of the Application money in contravention of Section 42 of the Act.

Whereas the prescription of Rule 14 of the Rules is under Section 42 of the Companies Act, 2013. Accordingly, noticees are liable for default under Section 42 read with Rule 14 punishable under Section 42(10) of the Act.

2. The Noticees requested for an E- hearing. Acceding to the request, an opportunity of being heard was granted to them by the Adjudicating Officer under the provisions of Section 454(4) of the Act on 24.12.2025 at 11:41 AM (IST). In this regard, a notice bearing ID: EH/ADJ/12-2025/MB/00990 dated 20.12.2025 was issued.

E. Order:

1. A. A Show Cause notice bearing ID: SCN/ADJ/12-2025/MB/03017 dated 04.12.2025 was issued to the Company, Mr. RAMCHANDRA VITTHAL SATRE (Director), Mr. RAJAN PRATAPSINGH THAKUR (Director), Mr. ANKUSH SHESHRAO CHAVAN (Director), Mr. SHRIKISHAN CHUNNILAL SHRIRANGAM(Director), Mr. NISHA VISHWAS GUJAR(Director) and Mr. AMEYA ANAND GALGALI (Director) (hereinafter referred to as the noticees) under section 454 read with Section 42(10) of the Act for defaults committed under Section 42 of the Act and Rule 14(1) and Rule 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014.

B. The reply received from the noticees on the E-adjudication portal on 04.12.2025 and submitted as under:

i. The lapse pertains solely to adequacy of disclosures in the explanatory statement and not to absence of shareholder approval or absence of resolution. Further, this contravention pertains to and is already admitted to inadequate inclusion in explanatory statement, which are over and above requirements of Section 101, which too was addressed in our erstwhile clarification; and Issuing of PAS 4, prior to filing of MGT 14, which comes from Rule 14 (8) of aforesaid Rules only. The sequence error was temporal and not substantive, as shareholder approval pre-existed issuance of PAS 4.

ii. Receipt of application on 02.12.2023 from Mr. Ashok Chavan and allotment was made on 01.12.2023, thus, an inadvertent timing mismatch between the Board approval of allotment and actual credit of funds, rather than any contravention in the manner of making the offer or accepting under Section 42 of the Companies Act, 2013. default does not fall under Section 42(10) of the Act.

iii. The Applicants respectfully submit that the aforesaid instance also emanates from the same allotment and no utilisation of funds prior to allotment or PAS-3 filing was undertaken, thereby causing no investor prejudice.

iv. There was no mala fide intention or mens rea, in not complying and that the violation happened which was pure procedural and circumstantial and inadvertent, and triggered on account of mis – communication and complex framework of private placement, which a small company like us failed to adhere, due to lack of requisite infrastructure and professional guidance.

v. The matter be adjudicated u/s 450, with the benefit of Rule 3(12), considering that legislative mischief is wholly absent.

C. The Noticees have also submitted a reply vide physical letter dated 16.12.2025. However, the same is not taken on record in pursuance to Rule 3A (1) of the Companies (Adjudication of Penalties) Rules, 2014.

D. The Noticees requested for an E- hearing. Acceding to the request, an opportunity of being heard was granted to them by the Adjudicating Officer under the provisions of Section 454(4) of the Act on 24.12.2025 at 11:41 AM (IST). In this regard, a notice bearing ID: EH/ADJ/12-2025/MB/00990 dated 20.12.2025 was issued. E.Ms. Ashita Kaul, Practicing Company Secretary attended the scheduled E-Hearing and admitted the defaults on behalf of the Noticees. She adverted to her written reply and reiterated her submissions. In addition to her written reply, she submitted that:

i. The Company has raised the amount of Rs. 36,15,000/- during the private placement offer.

ii. During the relevant period of default Mr. Ameya Galgali and Mr. Ankush Sheshrao Chavan were not a director as Mr. Ameya Galgali has resigned from directorship on 17.04.2023 and Mr Ankush Sheshrao Chavan was appointed as a director with effect from 30.01.2024.iii.The Company was not a start-up nor a small Company and it was converted to public limited Company in the year 2022, thus the Company does not fall under the definition of Small Company.

F. On perusal of the Suo motu adjudication application and submission made, it is observed that the Board of Directors and members of the Company approved issuance of 1,00,000/- Equity Shares of Rs. 10/- each at premium of Rs. 26.15/- aggregating to Rs.36,15,000/- on 01.12. 23. G.As mentioned at Para D of this order,

i. The Company has not attached notice of the meeting and explanatory statement with the E-form MGT-14 filed vide SRN AA6285936 on 02.12.2023 in contravention of Rule 14(1) of the Rules.

ii. The Applicant Company issued Private Placement Offer cum Application Letter in PAS-4 on 01.12.2023 before filing special resolution with the Registrar in contravention of Rule 14(8) of the Rules.

iii. The Applicant Company made allotment of Equity Shares on 01.12.2023. However, the Company received allotment money on 02.12.2023. thus, the Applicant Company has allotted shares prior to receipt of the Application money in contravention of Section 42 of the Act.

H. The arguments of the Applicants that the defaults committed by them fall under Rule 14 of the Rules and does not relate to substantive condition and mechanism prescribed under Section 42 of the Act, and therefore, the default is punishable under Section 450 of the Companies Act, 2013 is completely fallacious and misreading of provisions of section 42 of the Act.

It is emphasized that Section 42 of the Act is a self-contained Section and Section itself explicitly provides that company making Private placement shall issue Private Placement Offer in application in such form and manner as may be prescribed. Thus, what is given in prescription is nothing but the description of what has already been provided in relevant provisions of Section 42 of the Act. Prescriptions (rules) are integral part of provisions of Section 42 of the Act, and they cannot be read in isolation and independent of Section 42 of the Act. Disclosure requirements are basic and fundamental requirements of the law which have been provided in Section 42 of the Act and prescriptions are mere description and elaboration of the same. Attention is also drawn to Section 469 of the Act. Sub-section (2) of the Section 469 provides:

(2) Without prejudice to the generality of the provisions of sub-section (1), the Central Government may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provision is to be or may be made by rules. So, the rules made under Sub-section (2) of Section 469 read with any of the provisions of the Companies Act, 2013. The law does not envisage imperative penal provisions for the violation of such rules. If the rules are made under prescription of Section 42, violations of provisions of Section 42 and the rules made thereunder shall be deemed as violation of section 42 and shall be punishable with the relevant penal provisions provided under the said section. Accordingly, the defaults of the Applicants/noticees are under Section 42 of the Act read with Rule 14(1) and 14(8) of the Rules and they are punishable under Section 42(10) of the Act.

I. Section 42(10) of the Act stipulates that: Subject to sub-section (11), if a company makes an offer or accepts monies in contravention of this section, the company, its promoters and directors shall be liable for a penalty which may extend to the amount raised through the private placement or two crore rupees, whichever is lower, and the company shall also refund all monies with interest as specified in sub-section (6) to subscribers within a period of thirty days of the order imposing the penalty.

J. Unlike the other penal provisions such as Section 92(5) and 137(3) of the Act, penalty under Section 42(10) of the Act is not fastened on each Director/officer in default but on the Company, its Directors and Promoters collectively. However, the E-adjudication portal is designed in such a manner that it does not allow collective imposition of penalty. Since the penalty amount has to be imposed collectively on the Company, its Promoters and Directors, for sake of clarity, the amount to be imposed shall be proportionally apportioned between the Company, its Promoters and Directors, so that personal liability of Directors become determinable, an irector(s) pay from their own funds. Accordingly, the Company, its Directors and Promoters have been held liable.

K. As per the signatories of the Company available on the MCA21 portal, Mr. Ameya Galgali (Director) and Mr. Ankush Sheshrao Chavan (Director) was not a director during the default period as he has resigned on 17.04.2023. Mr. Ankush Sheshrao Chavan was appointed as a director with effect from 30.01.2024. The Company has also filed E-form DIR-12 vide SRN AA2008061 and AA7012168 on 19.04.2023 and 09.03.2024 respectively with the MCA. Thus, no penalty shall be imposed on Mr. Ameya Galgali (Director) and Mr. Ankush Sheshrao Chavan (Director).

L. Default under Section 42 of the Act is with respect to offer and acceptance of money through Private Placement. Accordingly, the period of offer for the Private Placement and period of acceptance thereof is the period of default. In the instant case, the default commenced on 01.12.2023 and in absence of any remedial rectification, it continued till 02.12.2023 that is date of filing E-form MGT-14. On the date of commencement of the default, the Applicant Company was not a small company nor a start-up Company, therefore, Section 446B of the Act is not applicable in the instant case.

M. I have carefully examined the facts of the case, applicable laws thereon and thought through the mitigating circumstances adverting to Rule 3(12) of the Companies Adjudication of Penalties Rules, 2014 for levying the penalty for the aforesaid default. Factoring in the mitigating circumstances and Rule 3(12) the Companies Adjudication of Penalties Rules, 2014, I am of the view that a collective penalty amount of Rs. 14,46,000 /- (Rupees Fourteen Lakhs Forty-Six Thousand only) shall be commensurate to the nature of default. The collective penalty amount of Rs. 14,46,000 /- (Rupees Fourteen Lakhs Forty-Six Thousand only) has been equally apportioned between the Company, its Promoters and Directors. Thus, the Company and its Promoters and Directors are liable for penalty of Rs. 2,89,200/- (Rupees Two Lakhs Eighty-Nine Thousand Two Hundred only) each.

N. Now, in exercise of the powers conferred on the Adjudicating Officer vide Notification dated 24th March 2015, having considered the facts and circumstances of the case, I hereby impose penalty of Rs. 2,89,200/- (Rupees Two Lakhs Eighty-Nine Thousand Two Hundred only) each on the Company and its Promoters and Directors namely Mr. RAMCHANDRA VITTHAL SATRE (Director), Mr. RAJAN PRATAPSINGH THAKUR (Director), Mr. SHRIKISHAN CHUNNILAL SHRIRANGAM (Director), and Ms NISHA VISHWAS GUJAR (Director) penalty under Section 42(10) for defaults committed under Section 42 of the Act and Rule 14(1) and Rule 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014.

2. The details of penalty imposed on the company, officers in default and others are shown in the table below:

3. The notified officers in default/noticee shall rectify the default mentioned above and pay the penalty, so applicable within 90 days of receipt of the order.

4. The notified officers in default/noticee shall pay the penalty amount via ‘e-Adjudication’ facility which can be accessed through the respective login IDs on the website of Ministry of Corporate Affairs and upload the copy of paid challan / SRN of e-filing (if applicable) on the ‘e-Adjudication’ portal itself. It is also directed that the penalty so imposed upon the officers in default shall be paid from their personal sources/income.

5. Appeal against this order may be filed in writing with the Regional Director, RD Mumbai within a period of sixty days from the date of receipt of this order, in Form ADJ setting for the grounds of appeal and shall be accompanied by a certified copy of this order [Section 454 (5) & 454 (6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014].

6. For penal consequences of non-payment of penalty within the prescribed time limit, please refer Section 454(8) of the Companies Act, 2013.

Chandan Kumar,
Registrar of Companies
ROC Mumbai