The Registrar of Companies, Hyderabad, adjudicated penalties under Section 454 of the Companies Act, 2013 for violation of Section 42(6) read with Section 42(10) relating to private placement compliance. The company raised ₹73,44,000 through private placement but failed to maintain a separate bank account as mandated, constituting non-compliance. Although the company argued that it had designated an existing account and substantially complied with the law, the adjudicating authority rejected this contention, holding that the statutory requirement of maintaining a separate bank account was not fulfilled. It also noted procedural lapses, including incomplete disclosures in filings. While the show cause notice initially considered a higher penalty of ₹2 crore, the authority correctly restricted the penalty to the amount raised, i.e., ₹73,44,000. Consequently, identical penalties were imposed on the company and each defaulting officer, with directions to rectify the default and pay within 90 days.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
ROC Hyderabad
2nd Floor Corporate Bhawan, GSI Post, Tattiannaram, Bandlaguda, Nagole, Hyderabad, Telangana, India, 500068
Phone: 040-29805427/29804327
E-mail: roc.hyderabad@mca.gov.in
Order ID: PO/ADJ/04-2026/HD/02037 | Dated: 22/04/2026
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. 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 DIGILOGIC SYSTEMS LIMITED [herein after known as Company] bearing CIN U62099TG2011PLC077933, is a company registered with this office under the Provisions of the Companies Act, 2013/1956 having its registered office situated at #102, 1ST FLOOR, DSL ABACUS TECH PARK UPPAL KALSA VILLAGE, UPPAL MANDAL NA RANGAREDDY RANGAREDDI TELANGANA INDIA 500039
Individual details:
In the matter relating to MADHUSUDHAN VARMA JETTY ………….
In the matter relating to RADHIKA VARMA JETTY ………….
In the matter relating to JETTY SHASHANK VARMA…………..
In the matter relating to HITESH VARMA JETTY ………………
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 – The Company M/s Digilogic Systems Limited has submitted an Adjudication application dated 30.12.2025 with Office of ROC, Hyderabad on 06.01.2026 under Section 454 for adjudicating the offence under Section 42 of the Companies Act, 2013. As per Section 42(6) ?A company making an offer or invitation under this section shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the expiry of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. Per annum from the expiry of the sixtieth day. Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than – (a) for adjustment against allotment of securities, or (b) for the repayment of monies where the company is unable to allot securities?. Section 42(10) ?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?. As per the Adjudication application, the company has passed special resolution dated 12.02.2025 for private placement of equity shares by the allotment of 25,000 equity shares of Rs. 10/- each for a premium of Rs. 283.76/- per share and total amounting to Rs. 73,44,000/- and allotted to One (1) identified allottees on 14.02.2025. PAS-3 with SRN: AB2773353 filed on 21.02.2025. The company has filed MGT-14 dated 14.02.2025 vide SRN AB2715690 taken on record 19.02.2025 with incomplete explanatory statement as per Rule 13 Companies (Share Capital and Debenture) Rules, 2014 & Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014, subsequently the company has filed revised MGT-14 vide SRN AB4513078 with complete disclosures taken on record 11.06.2025. The company circulated PAS-4 dated 12.02.2025 before filing of Form MGT-14. The company has not opened the Separate Bank Account as specified under Section 42(6) of Companies Act, 2013 for the allotment. As stated above there is non-compliance of Section 42(6) of Companies Act, 2013.
2. One of the officers in default, Sri. MADHUSUDHAN VARMA JETTY has opted for e-hearing and the same has been conducted on 20.04.2026.
E. Order:
1. Pursuant to the fact about the case, an e-SCN dated 27.03.2026 was issued to the company and its officer of the company who is in default, and the reply dated 08.04.2026 in the matter was submitted. Further an e-hearing in the matter also has been conducted on 20.04.2026. The company has submitted in the reply dated 08.04.2026 that the company was in a phase of public issue went into pre I PO due diligence of the compliance, during the process of due diligence the professional has highlighted certain procedural lapses in allotment of shares through private placement in three (3) tranches, in the third tranche, the company had issued and allotted 25,000 equity shares to identify investor by way of preferential allotment/private placement pursuant to the provision of section 62(1)(c) read with section 42 of the Companies Act, 2013 for the purpose of business operation, working capital, and expansion. However the professional reported certain delay in filing of forms with MCA which were arises due to limitation in attachments to the form, which cost minor delay, company had reviewed the documents, records and found that comply with all provisions of the Act. The company has designated one of its bank accounts (which is not a regular bank account) exclusively meant for receipt of share application money for allotment through private placement. Except for minor delay in filing required forms, the company has complied with all applicable provision of the Act. Subsequently, the company filed an application for adjudication. The company obtained an expert opinion from professional, who observed that the documents examined during the pre-I PO due diligence where insufficient. However, upon re-examining the documents, forms and detailed explanation provided by the company, the professional found them satisfactory and confirmed compliance with the provisions of section 42 and 62 of the Companies Act, 2013 read with applicable rules. The company was misguided by some professionals who stated that the Board Resolutions and EGM resolutions were not as per provisions of the Act and rules made thereunder and that separate bank account means a new bank account. However after filing of GNL-2 and GNL-1 forms on receipt of show cause notices, company approached the PCS to obtain opinion, who clarify that the allotment made by the company were in compliance with the provisions of section 42 of the Companies Act, 2013 read with rules made thereunder, further stated that merely separate bank account does not meant a new bank account. The company designated one of its existing bank accounts (other than its regular operational/cash credit account) as a designated bank account for the purpose of receiving share application money in its board meeting dated 14.09.2024 before open of offer, and intimated the same to Axis Bank, accordingly the company received the share application money through such designated current account for the private placement. After the allotment of shares in the aforesaid private placement, the company transferred the share application money from the designated bank account to its regular cash credit account. The company and the officer in default have prayed that no penalty be levied and in case adjudicating authority is of a differing view, then minimum penalty may be levied. In the e-hearing dated 20.04.2026 the company and officers in default represented by Sri. MADHUSUDHAN VARMA JETTY, being one of the officers in default, has submitted that the company has complied with the provisions of section 42(6) of the Companies Act, 2013 and has not committed violations under section 42(6) read with 42(10) of the Companies Act, 2013. Hence the said representative has pleaded that no penalty be levied. Subsequent to the e- hearing, the company has submitted a letter dated 20.04.2026 pointing out that as per provisions of section 42(1) of the Companies Act, 2013, the company, its, promoters, andi rs shall be liable for a penalty which may extend to the amount raised through private placement or two crore rupees, whichever is lower. However, the E-SCN dated 27.03.2026 was issued for an amount of Rs.2,00,00,000/- instead of Rs.73,44,000/- being the amount raised through private placement which lower than Rs.2,00,00,000/-, hence the applicant has requested to consider the said facts also while adjudicating the matter. Based on the adjudication application, reply from the company and officer in default, submissions ‘ the e- hearing and from the information available in MCA Portal in respect of the company, it is observed that the C f DIGILOGIC SYSTEMS LIMITED has submitted an Adjudication application dated 30.12.2025 with ROC on 06.01.2026 under Section 454 for adjudicating the offence under Section 42 of the Companies Act, 2013. As per Section 42(6) A company making an offer or invitation under this section shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the expiry of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. Per annum from the expiry of the sixtieth day. Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than – (a) for adjustment against allotment of securities, or (b) for the repayment of monies where the company is unable to allot securities. Section 42(10) 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. As per the Adjudication application, the company has passed special resolution dated 12.02.2025 for private placement of equity shares by the allotment of 25,000 equity shares of Rs. 10/- each for a premium of Rs. 283.76/- per share and total amounting to Rs. 73,44,000/- and allotted to One (1) identified allottees on 14.02.2025. PAS-3 with SRN:AB2773353 filed on 21.02.2025. The company has filed MGT-14 dated 14.02.2025 vide SRN AB2715690 taken on record 19.02.2025 with incomplete explanatory statement as per Rule 13 Companies (Share Capital and Debenture) Rules, 2014 & Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014, subsequently the company has filed revised MGT-14 vide SRN AB4513078 with complete disclosures taken on record 11.06.2025. The company circulated PAS-4 dated 12.02.2025 before filing of Form MGT-14. The company has not opened the Separate Bank Account as specified under Section 42(6) of Companies Act, 2013 for the allotment. As stated above there is non-compliance of Section 42(6) of Companies Act, 2013. From the facts disclosed in the original adjudication application the contentions raised by the company and officers in default in reply and during e-hearing to the effect that the company has not committed contravention of provisions of section 42(10) of the Companies Act, 2013 is not acceded to. It is observed that in the instant case, the company has raised Rs. 73,44,000/- through private placement and as per provisions of section 42(10), the penalty liable for the contravention of section 42(6) of the Companies Act, 2013 may extend to the amount raised through the private placement or two crore rupees, whichever is lower. However, the e-adjudication show cadent as been generated through e-Adjudication module in MCA portal with the maximum penalty amount of Rs.2,00,00,000/- instead of the lower amount raised through the private placement, which is amount to Rs. 73,44,000/-. Hence as per provisions of section 42(10), the amount of penalty in the instant case to be levied is Rs. 73,44,000/-. The adjudicating authority based on the adjudication application and the information available in MCA Portal in respect of the above named company and after taking on record the submissions from the applicants, do hereby impose the penalty as per the provisions of section 42(10) of the Companies Act, 2013.
2. The details of penalty imposed on the company, officers in default and others are shown in the table below:
| (A) | Name of person on whom penalty imposed (B) | Rectification of Default required
(C) |
Penalty Amount
(D) |
Additional Penalty (E) (*Per day of continuing default i.e. date of rectification of default less order issue date) | Maximum limit for Penalty (F) |
| 1 | DIGILOGIC SYSTEMS LIMITED having CIN as U62099TG2011P LC077933 | 7344000 | 0 | 20000000 | |
| 2 | MADHUSUDHAN VARMA JETTY having DIN as 02247769 | 7344000 | 0 | 20000000 | |
| 3 | RADHIKA VARMA JETTY having DIN as 03370284 | 7344000 | 0 | 20000000 | |
| 4 | JETTY SHASHANK VARMA having DIN as 03370303 | 7344000 | 0 | 20000000 | |
| 5 | HITESH VARMA JETTY having DIN as 10648537 | 7344000 | 0 | 20000000 |
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 Hyderabad 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.
Satya Singh,
Registrar of Companies
ROC Hyderabad
