The Ministry of Corporate Affairs (MCA) plays a crucial role in regulating corporate activities in India. One of the key functions involves penalizing companies for violations under the Companies Act, 2013. In this article, we delve into a specific case where the company, Tridib Industries Limited, faced penalties for non-compliance with Section 39(1) of the Companies Act, 2013.
Background: Tridib Industries Limited, a registered company with the Registrar of Companies (ROC) in Punjab and Chandigarh, found itself in the regulatory spotlight due to a violation of Section 39(1) of the Companies Act, 2013. The violation pertained to the allotment of securities without receiving the share subscription money.
Appointment of Adjudicating Officer: In response to the violation, the Ministry of Corporate Affairs appointed an Adjudicating Officer (AO) through a gazette notification dated 24.3.2015. The AO is vested with the authority to adjudicate penalties under the provisions of the Companies Act, 2013.
Company Details: Tridib Industries Limited, a small company, had a paid-up capital of Rs. 1,00,000 and was incorporated on 18.07.2020. The company, not registered under Section 8 or any other special act, fell within the ambit of Section 446B, which stipulates lesser penalties for certain types of companies.
Relevant Provisions of Companies Act, 2013: The case involved a violation of Section 39 of the Companies Act, 2013, which deals with the allotment of securities by a company. The key points of Section 39(1) are as follows:
- Allotment of securities to the public requires the minimum subscribed amount mentioned in the prospectus to be paid.
- The amount payable on application for each security should not be less than five percent of the nominal amount, or as specified by the Securities and Exchange Board.
- If the minimum amount is not subscribed within the specified period, the company must return the amount received.
- A return of allotment must be filed with the Registrar.
- Non-compliance with sub-sections (3) or (4) leads to penalties for the company and its defaulting officers.
Facts of the Case: Tridib Industries Limited, during the Financial Year 2023-24, approved the issuance of 41,52,500 equity shares through a Right Issue. The shares were allotted against an outstanding loan, and a balance cheque was received. However, the cheque was not encashed based on the investor’s request, leading to non-compliance with Section 39(1).
Company’s Submission: The company, during a personal hearing, argued that the defaults were technical and unintentional. Emphasizing its status as a small company, Tridib Industries Limited sought leniency in penalties. The company invoked Section 446B, which provides for reduced penalties for certain categories of companies.
Findings and Observations: The Adjudicating Officer found that the company had indeed violated Section 39(1) by allotting shares without receiving the share subscription money.
Adjudication of Penalty: The Adjudicating Officer, considering the company’s small size and the provisions of Section 446B, imposed penalties as follows:
- Tridib Industries Limited: Rs. 12,000
- Sh. Gaisu Bhasin Goel (Director): Rs. 12,000
- Mr. Davinder Bhasin (Director): Rs. 12,000
These penalties were calculated based on a per-day penalty for the default period.
Conclusion and Appeal: The order directed the company to pay the imposed penalties through the Ministry of Corporate Affairs portal. The company had the right to appeal the order within sixty days to the Regional Director, Ministry of Corporate Affairs, New Delhi, using Form ADJ.
Non-payment of penalties could result in fines for the company and imprisonment for the officers in default, as per the provisions of Section 454(8)(i) and 454(8)(ii) of the Companies Act, 2013.
This case serves as a reminder of the importance of strict compliance with regulatory provisions, even for small companies, to avoid financial and legal consequences. Companies should exercise diligence in their corporate actions and seek expert advice to navigate the complex regulatory landscape.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE QF THE REGISTRAR OF COMPANIES,
PUNJAB AND CHANDIGARH,
CORPORATE BHAWAN,
PLOT NO.4-B, SECTOR 27B, CHANDIGARH
PHONE NO.172-2639415,2639416
Order No. ROC-CHD/2023-24/10A/051420/1007 Dated: 30/01/2024
Order under Section 454 from Violation of Section 39 of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014
IN THE MATTER OF MIS. TRIDIB INDUSTRIES LIMITED
CIN: U29309PB202OPTC051420
1. Appointment of Adjudicating Officer
The Ministry of Corporate Affairs vide its gazette notification no S0.831(E) dated 24.3.2015, has appointed the undersigned as Adjudicating Officer (AO) in exercise of the powers conferred by section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Company
TRIDIB INDUSTRIES LIMITED (herein after referred to as “the company”) is a company registered with this office under the Provisions of the Companies Act, 2013 (or previous Acts in force, as applicable) having its registered office situated at Munish Forge Limited, Village Gobindgarh, Adj. Phase VII and Focal Point Ludhiana, Punjab — 141. 010. The financial and other details of the subject company for immediately preceding financial year as available on MCA-21 Portal is as under: –
|
S No. |
Particulars | Details |
| 1. | Paid Up Capital as per latest Audited Financial Statement | Rs. 1,00,000 |
| 2. | Date of Incorporation | 18.07.2020 |
| 3. | Turnover as per latest Audited Financial Statement | Rs. 13,40,47,000 |
| 4. | Holding Company | NA |
| 5. | Subsidiary Company | NA |
| 6.
|
Whether company registered under section 8 of the Act | No
|
| 7. | Whether company registered under any other special Act? | No |
| 8. | Whether Company is small company | Yes |
| 9. | Whether Section 446B is applicable to the company (Lesser penalties for Certain companies) | Yes |
3. RELEVANT PROVISIONS WHICH ARE APPLICABLE IN THE PRESENT CASE OF THE COMPANIES ACT, 2013
Section 39: Allotment of Securities by Company:
(1) No allotment of any securities of a company offered to the public for subscription shall be made unless the amount stated in the prospects as the minimum amount has been subscribed and the sums payable on application for the amount so stated have been paid to and received by the company by cheque or other instrument.
(2) The amount payable on application on every security shall not be less than five per cent of the nominal amount of the security or such other percentage or amount, as may be specified by the Securities and Exchange Board by making regulations in this behalf.
(3) If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, or such other period as may be specified by the Securities and Exchange Board, the amount received under sub-section (1) shall be returned within such time and manner as may be prescribed.
(4) Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed.
(5) In case of any default under sub-section (3) or sub-section (4), the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.
Section 450: Punishment where no specific penalty or punishment is provided:
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 continue, 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].
446B. Lesser penalties for certain companies:—
Notwithstanding anything contained in this Act, 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.
4. FACTS ABOUT THE CASE
Whereas the company and its director(s) have Suo-moto filed the present application under section 454 vide e-form GNL-1 vide SRN F90635160 for Adjudication of noncompliance (technical-default) of provisions under the Companies Act, 2013.
Further, during the Financial Year 2023-24, the Board of Directors of the company in its Board Meeting held on 26.08.2023 approved issuance of 41,52,500 equity shares with face value of Rs, 10/- each amounting to Rs. 4,15,25,000 on Right Issue basis.
Subsequently, the Board of Directors allotted the 41,52,500 equity shares to Investor on 01.09.2023 against the conversion of outstanding loan of Rs. 2,88,40,000 and also received a balance cheque amounting to Rs. 1,26,85,000 against the total consideration of Rs. 4,15,25,000.
In respect of such allotment, the company duly filed e-form PAS-3 vide SRN AA4898389 dated 14.09.2023 with ROC Chandigarh which was in accordance with the provision of law.
However, it is stated that the Investor requested the Company not to present the cheque of Rs. 1,26,85,000.00 for encashment and requested the Company to accept the amount through RTGS. On the request of the Investor, the cheque was not presented for the encashment and the same was returned to the Investor after the Investor had paid the amount of Rs. 1,26,85,000.00 through RTGS till 14.09.2023, which was after the allotment of the Equity Shares and the same is non-compliance of Section 39(1) of the Companies Act, 2013.
5. SUBMISSION BY THE COMPANY
The personal hearing was granted to the Applicant Company on 25.01.2024, the Applicant Company submitted that the default committed were technical defaults and were committed inadvertently and unintentionally and are simply procedural laps and thus a lenient view may be taken for the same.
I. The Applicant Company has submitted that under the provisions of Companies Act, 2013, the Adjudicating Officer has power to levy a penalty based on the facts and circumstances of the present case. It is submitted that the provisions of the Companies Act, 2013 inter-alia provides only for the upper limit up-to which penalty can be imposed but it does not provide the minimum amount of penalty which can be imposed and therefore, Sh. Ravi Shanker on behalf of the Applicant Company submitted the Adjudicating Officer that Applicant Company is a small company in terms of the definition provided under Section 2(85) of the Companies Act, 2013 as per the latest Financial Statement of the Applicant Company and company is at its very nascent stage of developing business and in case if such heavy penalties are imposed upon the same would amount to disrupting the entire business.
II. It was further submitted that the company is a small company therefore the provisions of section 446B of the act stands attracted in view of which in case if any penalty is payable for non-compliance of any of the provisions of this act by a one person company, small company, startup company or producer company, or by any officers 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 penalty which shall be not more than one half of the penalty specified in such provisions subject to a maximum of two lakh rupee in case of company and one lakh rupee in case of an officer who is in default. Or any other person, as the case, may be.
III. Mr. Shanker has further emphasised upon the provision of Rule 3(12) and Rule 3(13) of Companies (Adjudication of Penalties) Rules, 2014 which reads as under:
Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014
While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely.-
a) size of the company
b) nature of business carried on by the company,
c) injury to public interest,
d) nature of the default,’
e) repetition of the default,’
f) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the deflate: and
g) (the amount of loss caused to an investor or group of investors or creditors as a result of the default.
Provided that, in no case, the penalty imposed shall be less than the minimum penalty prescribed, if any, under the relevant section of the Act.
Rule 3 (13) of Companies (Adjudication of Penalties) Rules, 2014 which read as under:
In case a fixed sum of penalty is provided for default of a provision, the adjudicating officer shall impose that fixed sum, in case of any default therein.
IV Mr. Shanker submitted that the Company is a small company in terms of the definition provided under Section 2(85) of the Companies Act, 2013 as per the latest Financial Statement of the Applicant Company and is at its very nascent stage of developing business and in case if such heavy penalties are imposed upon the same would amount to disrupting the entire business of Applicant Company.
V The aforesaid defaults made are neither prejudicial to the interest of the public at large nor to any investor/stakeholder. It may be further noted that all the aforesaid investors of Applicant Company have also rendered/issued their unconditional, unequivocal declaration stating that they do not wish to take their subscription amount back with interest and have supported the company to this effect.
VI That the company has not repeated such default till date.
VII He further submitted that since the the company satisfies all the aforesaid ingredients set out in Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 and the penalty prescribed under Section 4468 of the Act is neither fixed nor minimum. Hence aforesaid factors may be taken into consideration while adjudging the quantum of penalty under Section 44613 of the Act.
6. FINDINGS AND OBSERVATIONS
The Company has further allotted the shares without receiving the share subscription money therefore the same is a non-compliance of Section 39(1) of the Companies, Act,2013.
7. ADJUDICATION OF PENALTY:
1. Therefore, having considered the facts and circumstances of the case and after hearing the submissions made by the company through its Authorized Representative namely Sh. Ravi Shankar, I am of the considered view that the aforesaid violations have been committed by the company inadvertently and because the company is a small company in terms of the definition provided under Section 2(85) of the Companies Act, 2013 therefore, penalty is being levied on the company along with its promoters and directors in terms of Section 446B of the Companies Act, 2013 read with Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014.
2. Now in exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and having considered the reply submitted by the subject company and hearing in the matter held on 25.01.2024 hereby impose the penalties on the company, promoters and directors as under.
Penalty imposed under Section 450 read with Section 446B of the Act read with Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 for the violation of Section 39(1J of Companies Act, 2013:
As the company has allotted the shares against the outstanding loan and Cheque as per section 39 (1), it has failed to comply with the provision of Section 39(1) of Companies Act, 2013. Therefore, penalty is levied under Section 450 of the Companies Act,2013 read with section 446(B) the Act on the company, promoters and directors who were in default of the offence committed in a manner as tabulated herein:
Violation of Section |
Penalty imposed on company/ promotor(s) / director (s) |
No. of days of default (01.09. 2023 to 14.09.2 023) |
Per day penalty for default |
Total default amount |
Maximum
|
Penalty levied as per section 446B |
Section 39 (1) of the Companies Act, 2013 |
Tridib Industries Limited |
14 |
10000+1000/Day |
24,000 |
Rs.2,00,000 (Rs. Two Lacs Only) |
Rs. 12,000 |
Sh. Gaisu Bhasin Goel (Director) |
14 |
10000+1000/Day |
24,000 |
Rs. 50,00 (Rs. Fifty Thousand Only) |
Rs. 12,000 |
|
Mr. Davinder Bhasin Director) |
14 |
10000+1000/Day |
24,000 |
Rs. 50,00 (Rs. Fifty Thousand Only) |
Rs. 12,000 |
3. It is further directed that penalty imposed shall be paid through the Ministry of Corporate Affairs portal only as mentioned under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 under intimation to this office.
4. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodhi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form ADJ setting forth 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].
5. Your attention is also invited to Section 454(8)(i) and 454(8)(ii) of the Companies Act,2013, which state that in case of non-payment of penalty amount ,the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees and officer in default shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty five thousand rupees but which may extend to one lakh rupees or with both.
6. In terms of the provisions of sub-rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, copy of the order is being sent to the following as under:
a. M/s TRIDIB INDUSTRIES LIMITED at Munish Forge Limited, Village Gobindgarh, Adj. Phase VII and Focal Point Ludhiana, Punjab — 141 010
b. Gaisu Bhasin Goel, Director,
c. Davinder Bhasin, Director,
d. Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodhi Road, New Delhi and will also be uploaded on website of Ministry of Corporate Affairs.
(Kamna Sharma)
Registrar of Companies & Adjudication Officer
Punjab & Chandigarh
