The Registrar of Companies, Hyderabad, issued an adjudication order dated 22 April 2026 under Section 454 of the Companies Act, 2013 for violation of Section 42(10) of the Act in relation to private placement of securities.
The adjudicating officer was appointed by the Ministry of Corporate Affairs through Gazette notification dated 10 February 2026 to exercise powers under Section 454 read with the Companies (Adjudication of Penalties) Rules, 2014.
The matter arose from an adjudication application filed by the company on 30 December 2025, received by the ROC on 6 January 2026, seeking adjudication for alleged non-compliance with Section 42 of the Act. The company had passed a special resolution on 22 September 2024 for private placement of 2,55,319 equity shares of ₹10 each at a premium of ₹230 per share, aggregating to ₹6,12,76,560, and allotted the shares to seven identified allottees on 25 September 2024. Form PAS-3 was filed on 8 October 2024.
It was noted that the company initially filed Form MGT-14 with an incomplete explanatory statement, which was later rectified through a revised filing with complete disclosures on 11 June 2025. However, the adjudicating authority found that the company did not open a separate bank account as required under Section 42(6) and transferred the share application money to its company account before filing PAS-3, resulting in non-compliance with statutory requirements.
The company contended that it had substantially complied with the provisions and that delays in filing forms were due to procedural limitations. It further submitted that it had designated an existing bank account (other than its regular operational account) as a separate account for receiving share application money and had acted based on professional advice. The company also stated that subsequent professional review confirmed compliance with the provisions of Sections 42 and 62 and argued that a separate bank account does not necessarily mean opening a new account. The company and its officers requested that no penalty be imposed or that a minimal penalty be considered.
An e-show cause notice dated 27 March 2026 was issued, and the company submitted its reply on 8 April 2026. An e-hearing was conducted on 20 April 2026, during which the company reiterated that there was no violation of Section 42(6) read with Section 42(10).
After considering the adjudication application, submissions, and records available on the MCA portal, the adjudicating authority concluded that there was non-compliance with Section 42(6). The explanations provided by the company and its officers were not accepted. Accordingly, penalty under Section 42(10) was imposed.
A penalty of ₹2,00,00,000 was imposed on the company, and ₹2,00,00,000 each on three officers in default, being within the statutory limit of penalty prescribed. No additional per-day penalty was specified.
The company and officers were directed to rectify the default and pay the penalty within 90 days through the MCA e-adjudication portal. Officers were required to pay penalties from their personal sources.
The order also provides for filing an appeal before the Regional Director, Hyderabad within 60 days in Form ADJ along with a certified copy of the order. It further refers to consequences under Section 454(8) for non-payment of penalty within the prescribed time.
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/02039 | 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__________
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 22.09.2024 for private placement of equity shares by the allotment of 2,55,319 equity shares of Rs. 10/- each for a premium of Rs. 230/- per share and total amounting to Rs. 6,12,76,560/- and allotted to Seven (7) identified allottees on 25.09.2024 and filed Form PAS-3 with SRN: AB1453894 on 08.10.2024. The company has filed MGT-14 on 23.09.2024 vide SRN AB0788119 taken on record 08.10.2024 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 AB4512474 with complete disclosures taken on record 11.06.2025. The company has not opened the Separate Bank Account as specified under Section 42(6) of Companies Act, 2013 for the allotment and further the company has transferred the share application money to company account on 28.09.2024 i.e. before filing of PAS-3, 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 IPO 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 first tranche, the company had issued and allotted 2,55,319 equity shares to identify investors 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-IPO 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. Based on the adjudication application, reply from the company and officer in default, submissions during the e-hearing and from the information available in MCA Portal in respect of the company, it is observed that the Company DIGILOG 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 shown 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 22.09.2024 for private placement of equity shares by the allotment of 2,55,319 equity shares of Rs. 10/-each for a premium of Rs. 230/- per share and total amounting to Rs. 6,12,76,560/- and allotted to Seven (7) identified allottees on 25.09.2024 and filed Form PAS-3 with SRN: AB1453894 on 08.10.2024. The company has filed MGT-14 on 23.09.2024 vide SRN AB0788119 taken on record 08.10.2024 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 AB4512474 with complete disclosures taken on record 11.06.2025. The company has not opened the Separate Bank Account as specified under Section 42(6) of Companies Act, 2013 for the allotment and further the company has transferred the share application money to company account on 28.09.2024 i.e. before filing of PAS-3, as stated above there is non-compliance of Section 42(6) of Companies Act, 2013. 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 is not acceded to. 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 into account 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 | 20000000 | 0 | 20000000 | |
| 2 | MADHUSUDHAN VARMA JETTY having DIN as 02247769 | 20000000 | 0 | 20000000 | |
| 3 | RADHIKA VARMA JETTY having DIN as 03370284 | 20000000 | 0 | 20000000 | |
| 4 | JETTY SHASHANK VARMA having DIN as 03370303 | 20000000 | 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
