Penalty imposed for Using Private Placement Funds Before Filing Return of Allotment

Summary: The Registrar of Companies, Bangalore, passed an adjudication order imposing penalties under Section 450 of the Companies Act, 2013 for violation of Section 42(4) relating to private placement of Non-Convertible Debentures (NCDs). The company raised ₹3.34 crore through private placement between 13.08.2024 and 06.09.2024 but utilized the subscription funds from 17.08.2024 onwards before filing the return of allotment (Form PAS-3) on 08.10.2024. This premature utilization, prior to allotment and statutory filing, constituted a contravention for 52 days. Although the company admitted the violation and qualified as a startup eligible for reduced penalties under Section 446B, penalties were imposed. The company was fined ₹30,500, while three officers were penalized ₹25,000 each. A non-executive director was excluded from liability due to lack of responsibility for compliance. The authority directed payment within 90 days and allowed appeal within 60 days.

SEO-Friendly Titles with Descriptions

Penalty for Using Private Placement Funds Before Filing Return of Allotment
The authority penalized premature utilization of funds raised through private placement in violation of Section 42(4). The ruling highlights that funds cannot be used before allotment and filing compliance requirements.

Startup Penalized for Early Withdrawal of NCD Subscription Funds
Despite startup status and eligibility for reduced penalties, the company was fined for using subscription money before filing PAS-3. The case reinforces strict compliance with private placement provisions.

Violation of Section 42(4) Leads to Penalty for Premature Fund Utilisation
The company’s use of funds before completing allotment formalities resulted in penalties. The order clarifies that timing of fund usage is strictly regulated under the Companies Act.

Private Placement Breach: Funds Used Before Allotment Filing Attract Penalty
Utilizing funds prior to filing return of allotment was held to be a clear violation. The authority imposed penalties while recognizing reduced liability for startups.

Penalty Imposed Despite Admission of Default in NCD Private Placement Case
Even though the company voluntarily admitted the violation, penalties were still levied. The decision shows that admission does not eliminate statutory consequences.

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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
ROC Bangalore
Registrar Of Companies, ‘E’ Wing, 2nd Floor, Kendriya Sadana, Kormangala, Bangalore, Karnataka, India, 560034
Phone: 080-25633105,080-25537449
E-mail: roc.bangalore@mca.gov.in

Order ID: PO/ADJ/04-2026/BL/01945 | Dated: 16/04/2026

ORDER FOR ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 (‘THE ACT’) FOR VIOLATION OF SECTION 450 OF THE COMPANIES ACT, 2013.

A. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its  Gazette notification number S.O. 698(E) dated 10/02/2026 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 TECHFINO CAPITAL PRIVATE LIMITED [herein after known as Company] bearing CIN U65999KA2018PTC114532, is a company registered with this office under the Provisions of the Companies Act, 2013/1956 having its registered office situated at DSR TECHNO CUBE BBMP KATHA NO.639/645/1, SURVEY NO.68, VILLAGE, VARTHUR ROAD, NEXT TO SKR KALYAN MANTAPA, THUBARAHALLI KUNDALAHALLI BANGALORE NORTH BANGALORE KARNATAKA INDIA 560037

Individual details:

In the matter relating to JAYAPRAKASH PATRA ._______________________________________

In the matter relating to RATIKANTA SATAPATHY _______________________________________

In the matter relating to RAJESH KUMAR PANDA _______________________________________

In the matter relating to SHARAD AGGARWAL_______________________________________

C. Provisions of the Act:

If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be 1[liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person]

D. Facts about the case:

1. Default committed by the officers in default/noticee – The company filed an application on 17.09.2025 admitting violation of proviso of Section 42(4) of the Companies Act, 2013 (the Act).

As per facts stated in this application, the company made an offer for NCDs on 10.08.2024 by way of private placement under Section 42 of the Act read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The offer was approved by way of a special resolution passed by the members at an extra ordinary general meeting held on 09.08.2024. The offer for private placement opened on 10.08.2024 and closed on 06.09.2024. The NCDs were allotted upon receipt of subscription amount at the Board Meeting held on 07.09.2024.

As per the proviso to Section 42(4) of the Act, the company shall not utilize monies raised through private placement before allotment is made and the return of allotment is filed with the Registrar.

As per Application, the Company received the subscription amount totaling to Rs. 3,34,00,000/- under different tranches between 13.08.2024 to 06.09.2024. And the Company made withdrawal of the subscription amount under different tranches between 17.08.2024 to 16.09.2024.

The Return of Allotment was filed in Form PAS-3 vide SRN AB1386342 dated 08.10.2024.

In view of the above, since the Company withdrawn the funds received towards subscription of NCDs to be allotted on Private Placement basis starting from 17.08.2024 and the Return of Allotment was filed on 08.10.2024,this resulted into violation of provision of Section 42(4) of the Act and the company and its officers in default have violated this provision of the Act for duration from 17.08.2024 till 08.10.2024 i.e. 52 days rendering them liable for penalty under Section 450 of the Act. The company has furnished the Certificate of Recognition issued by DPIIT recognizing the company as startup on 01.01.2019. The certificate is valid till 10 years from date of incorporation which is 05.07.2018 and turnover as seen from MGT-7 filed by the company did not exceed Rs. 100 Crores. Hence, the provision of imposing lesser penalty as per the section 446B of the Act shall be applicable in the case.

2. The company and officers in default have not asked for a hearing and same was not provided. The order is issued based on the application, notice for adjudication and replies received.

E.Order:

1. The company filed an application admitting violation of proviso of Section 42(4) of the Companies Act, 2013 (the Act).

As per facts stated in this application, the company made an offer for NCDs on 10.08.2024 by way of private placement under Section 42 of the Act read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The offer was approved by way of a special resolution passed by the members at an extra ordinary general meeting held on 09.08.2024. The offer for private placement opened on 10.08.2024 and closed on 06.09.2024. The NCDs were allotted upon receipt of subscription amount at the Board Meeting held on 07.09.2024.

As per the proviso to Section 42(4) of the Act, the company shall not utilize monies raised through private placement before allotment is made and the return of allotment is filed with the Registrar.

As per Application, the Company received the subscription amount totaling to Rs. 3,34,00,000/- under different tranches between 13.08.2024 to 06.09.2024. And the Company made withdrawal of the subscription amount under different tranches between 17.08.2024 to 16.09.2024.

The Return of Allotment was filed in Form PAS-3 vide SRN AB1386342 dated 08.10.2024.

In view of the above, since the Company withdrawn the funds received towards subscription of NCDs to be allotted on Private Placement basis starting from 17.08.2024 and the Return of Allotment was filed on 08.10.2024,this resulted into violation of provision of Section 42(4) of the Act and the company and its officers in default have violated this provision of the Act for duration from 17.08.2024 till 08.10.2024 i.e. 52 days rendering them liable for penalty under Section 450 of the Act.

The company has furnished the Certificate of Recognition issued by DPIIT recognizing the company as startup on 01.01.2019. The certificate is valid till 10 years from date of incorporation which is 05.07.2018 and turnover as seen from MGT-7 filed by the company did not exceed Rs. 100 Crores. Hence, the provision of imposing lesser penalty as per section 446B of the Act shall be applicable in the case.

Pursuant to the adjudication application filed by the company, show cause notice dated 27.03.2026 was issued to the company and its officers in default through e-Adjudication module and through speed post on 30.03.2026. The Company and Officer in default have submitted reply on the e-Adjudication portal on 11.04.2026 stating, inter alia, that ? as per SCN, penalty imposed upon Mr. Sharad Aggarwal and treating him as an officer in default. It is submitted that Mr. Sharad Aggarwal had been appointed as Additional Non-Executive director of the company on 21.08.2024 and he is not responsible for the compliance pertaining to the transaction.

Further, as per MCA records, the company has filed DIR 12 vide SRN AB0470464 dated 16.09.2024, the Mr. Sharad Aggarwal appointed as Additional Non-Executive Director on 21.08.2024. Hence, he is Non-Executive Director, penalty has not been imposed to Mr. Sharad Aggarwal.

Further, the company and its officers in default have opted for no hearing in the matter and hence, the same has not been provided. This order is issued based on the application, notice for adjudication, and the replies received.

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 Bangalore 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.

Manoj Bang,
Registrar of Companies
ROC Bangalore