MCA Imposes Penalty on EMTEX International Limited for Violation of Section 137(1) – Non-filing of Financial Statements
In a recent development, the Ministry of Corporate Affairs (MCA) has taken stringent action against EMTEX International Limited, a company registered in Kerala under the Companies Act, 2013. The Registrar of Companies, Kerala and Lakshadweep, has issued an Adjudication Order under Section 454 of the Act, read with Rule 3(2) of Companies (Adjudication of Penalties) Rules, 2014. The order pertains to the company’s failure to comply with Section 137(1) of the Companies Act, 2013, regarding the filing of financial statements.
Background
EMTEX International Limited, with its registered office in Ernakulam, Kerala, has been found in violation of Section 137(1) of the Companies Act, 2013. This section mandates that a copy of the financial statements, including consolidated financial statements, along with necessary documents, must be filed with the Registrar within 30 days of the Annual General Meeting.
Appointment of Adjudicating Officer
The Adjudication Order, dated 24.11.2023, mentions the appointment of an Adjudicating Officer by the Ministry of Corporate Affairs in accordance with Section 454(1) of the Companies Act, 2013. The Officer is entrusted with the power to adjudicate penalties, particularly under Section 137 of the Act.
Facts of the Case
The order outlines the specific facts of the case:
- EMTEX International Limited failed to file financial statements for the financial year ending 31.03.2021 within the prescribed timeframe.
- A Show Cause Notice was issued to the company and its Managing Director, Dr. Varghese Mundackal, on 11.10.2023. However, the letter sent to the company was returned as ‘No such Addressee.’
Legal Provisions and Penalties
The order cites relevant sections of the Companies Act, 2013, to emphasize the consequences of non-compliance. Section 137(3) specifies penalties for failure to file financial statements, with a maximum penalty of two lakh rupees for the company and its officers. Additionally, Section 446B provides a framework for penalties applicable to specific types of companies.
Adjudication and Penalties Imposed
Considering the facts and circumstances, the Adjudicating Officer imposes the maximum penalty as per the table provided:
- EMTEX International Limited: Rs. 85,500
- Dr. Varghese Mundackal (Managing Director): Rs. 50,000
The penalty has been calculated based on the number of days of default, from the due date of filing (30.10.2021) until the date of the order (23.11.2023).
Payment and Appeal Process
The order directs the addressees to pay the penalties individually within 90 days via e-payment on the Ministry’s website. The companies and individuals are further advised to file an appeal within 60 days if aggrieved.
Conclusion
This Adjudication Order by the Registrar of Companies in Kerala sends a strong message about the importance of compliance with statutory requirements. It underscores the need for companies to adhere to timelines for filing financial statements, failing which they may face substantial penalties. EMTEX International Limited and its Managing Director have been given a clear directive to pay the imposed penalties promptly or risk further legal consequences.
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Ministry of Corporate Affairs
Registrar of Companies, Kerala & Lakshadweep
First Floor, Corporate Bhawan, B.M.C. Road, ‘Thrikkakara,
Kochi — 682 021, Kerala.
Order No. roc-K/Adjudication/137(1)/5231/2023/ Dated. 24.11.2023
To,
5231. 1. EMTEX INTERNATIONAL LIMITED
39/2418DIWANS ROAD, ERNAKULAM,
Idukki, Kerala,682016,India.
5232. 2. Dr. Varghese Mundackal (Managing Director)
Mundackal House Karingazha Chelad P.O
Kothamangalam, Ernakulam
Kerala 686691
BEFORE THE ADJUDICATING OFFICER REGISTRAR OF COMPANIES KERALA AND LAKSHADWEEP
Adjudication Order under Section 454 of Companies Act, 2013 (herein after referred to as the Act) read with Rule 3(2) of Companies (Adjudication of Penalties) Rules, 2014 for default under section 137(1) of the Act — In the matter of M/s. EMTEX INTERNATIONAL LIMITED.
1. Appointment of Adjudicating Officer
Ministry of Corporate Affairs vide its Gazette Notification No. A42011/112/2014-Ad.11, dated 24.03.2015 (see SO 831(E), dated 24.03.2015) appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (herein after known as Act) r/w Rule 3(1) of Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act. The undersigned vide Companies (Amendment) Act, 2019 is entrusted to adjudicate penalties under section 137 of the Companies ACT, 2013.
2. Company
M/s. EMTEX INTERNATIONAL LIMITED (U52321KL1986PLC005933) (herein after referred as Company) is a registered company with this office under the provisions of section 7 of the Companies Act, 2013 having its registered office as per MCA21 Registry at address 39/2418 Diwans Road, Ernakulam, Idukki, Kerala,682016, India.
3. Facts of the Case:
1. Whereas, as per Section 137(1) of the Act, 2013 read with Rule 12 of Companies (Accounts) Rules, 2014 a copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the Annual General Meeting of the company, shall be filed with the Registrar within 30 days of date of Annual General Meeting in such manner, with such fees or additional fees as may be prescribed.
2. Whereas the subject company has not filed Financial Statements for the financial year ending 31.03.2021 with Registrar of Companies, Kerala and the same is dealt with in this order.
3. In view of the above, a Show Cause Notice was sent to the company and its Managing Director vide letter dated 11.10.2023. The letter sent to the company was returned by the postal authorities as ‘No such Addressee’. The letter sent to the Managing Director was acknowledged and the acknowledgement card is received in this office vide postal endorsement dated 26.10.2023.
4. Relevant provisions of the Companies Act, 2013
As per Section 137(3) of the Act:
If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified therein, the company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees and the Managing Director and the Chief Financial Officer of the company, if any, and, in the absence of the Managing Director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the Directors of the company, shall be shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum offifiy thousand rupees.
Further Section 446B of the Act provides that:
‘if penalty is payable for non-compliance of any of the provisions of this Act by a One Person Company, small company, start-up company or Producer Company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be’.
As per clause 85 of section 2 of the Companies Act, 2013, small company means a company whose paid up capital and turnover shall not exceed rupees four crore and rupees forty crore respectively. Since the company has not filed its financial statements for the immediately preceding financial year, hence, the Paidup Capital and the turnover of the company cannot be ascertained and therefore, the benefits of small company cannot be extended to this company while adjudicating penalty.
5. ORDER.
(a) Having considered the facts and circumstances of the case and after taking into account the above factors, I hereby impose the maximum penalty as per the Table below under section 137(3) of the Act.
| Name of person on whom penalty imposed | No. of days of default * | Penalty for default | Penalty for continuing default (Rupees 100 for each day) | Total Penalty | Final Penalty Imposed |
| On the Company | 755 | Rs.10,000 | Rs.75,500 | Rs. 85,500 | Rs. 85500 |
| Dr. Varghese Mundackal (Managing Director) | 755 | Rs 10,000 | Rs.75,500 | Rs. 85,500 | Rs. 50,000
(Being the maximum Penalty that can be imposed u/s 92(5) of the Act) |
[*No of days have been calculated from 30.10.2021 (due date of filing Audited Financial Statements with ROC) till 23.11.2023 ]
(b) The addressees shall pay the amount of penalty individually for the company and its Managing Directors (out of own pocket) by way of e-payment (available on Ministry website mca.gov.in) under “Pay miscellaneous fees” category in MCA fee and payment Services within 90 (ninety) days of this order. The Challan/SRN generated after payment of penalty through online mode shall be forwarded to this office.
(c) Appeal against this order, if aggrieved and if so advised, may be filed in writing with the Regional Director (SR), Ministry of Corporate Affairs, Chennai 600 006, within a period of 60 (sixty) days from the date of receipt of this order, in Form ADJ (available on Ministry website www.mca.gov.in) setting forth the grounds of appeal and shall be accompanied by a certified copy of this order {Section 454(5) & (6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014).
(d) Your attention is also invited to section 454(8) of the Act in the event of non-compliance with this order.
(M. JAYAKUMAR)
REGISTRAR OP COMPANIES
KERALA
5233. Copy to for kind information: –
The Regional Director (Southern Region),
Ministry of Corporate Affairs,
No 26, Haddows Road,
Nungambakkam Chennai 600 006,
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