Introduction: The Ministry of Corporate Affairs (MCA) has imposed a penalty on Mayflower Infra Realty Private Limited for violating Section 161 of the Companies Act, 2013. The order, dated August 31, 2023, highlights the appointment of an Additional Director after the Annual General Meeting (AGM) date and the subsequent penalty imposed.
Detailed Analysis: The violation was detected through an inspection under Section 206(5) of the Companies Act, 2013. The company appointed Kali Lohia Charan as an Additional Director on June 16, 2014. According to Section 161(1), an additional director should hold office only until the next AGM, i.e., September 30, 2015. However, the company’s MCA-21 database showed Kali Lohia Charan’s cessation on December 31, 2015, after the AGM date.
Mayflower Infra Realty claimed Mr. Kali Charan Lohia vacated the office on September 30, 2015, but the resignation letter was dated December 31, 2015. The adjudication officer found discrepancies, concluding that the company and its directors violated Section 161(1) from September 30, 2015, to December 31, 2015.
Mrs. Sanjana Gupta, a non-executive director, attempted to distance herself, but financial statements and other documents revealed her involvement. Action was recommended against her, considering her key managerial role.
The adjudication notice was issued, and a hearing was held on June 7, 2023. The authorized representative, Mr. Arun Kumar Jaiswal, requested leniency, acknowledging the unintentional nature of the violation.
In the order dated August 31, 2023, the adjudicating officer, A. K. Sethi, imposed a penalty of Rs. 1,00,000 on Mayflower Infra Realty and its director-in-default, Mrs. Sanjana Gupta, under Section 172 of the Companies Act, 2013.
Conclusion: The penalty must be paid within 90 days, failing which consequences as per Section 454(8)(i) & (ii) may apply. The affected parties have the option to file an appeal within 60 days from the receipt of the order. The order signifies the importance of adherence to corporate governance norms to avoid legal consequences.
GOVERNMENT OF INDIA
Ministry of Corporate Affairs
Office of the Registrar of Companies (West Bengal)
Nizam Palace, 2nd M. S. 0. Building, 2nd Floor
Acharya Jagadish Chandra Bose Road 234/4,
KOLKATA- 700 020
Order No. ROC/ADJ/167411/454/2023/5624-5629 Dated: 31.08.2023
Order for Penalty for violation of section 161 of the Companies Act, 2013
M/S. MAYFLOWER INFRA REALTY PRIVATE. LIMITED
CIN: U70109W112011PTC167411
Appointment of Adjudicating Officer:-
Ministry of Corporate Affairs vide its Gazette Notification No A-42011/112/2014-Ad.II dated 24.03.2015 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 adjudicating penalties under the provisions of this Act.
2. Company:-
WHEREAS, Company M/S. MAYFLOWER INFRA REALTY PRIVATE LIMITED [herein after known as Company] is a registered company with this office incorporated on 09.09.2011 under the provisions of Companies Act, 1956 having its registered address at 6A, KIRAN SHANKAR ROY ROAD, 2ND FLOOR, ROOM NO. 15, KOLKATA-700001, WEST BENGAL, INDIA. as per MCA website.
3. Facts about the Case: –
1. On the basis of Inspection carried out u/s 206(5) of the Companies Act, 2013 the following violation arc pointed out in the inspection report:
It has been observed that the company has appointed Kali Lohia Charan as an Additional Director on 16.06.2014. Therefore, as per Section 161(1) of the Companies Act, 2013 an additional director should hold office only up to the date of the next annual general meeting of the company i.e. 30.09.2015. However, as per MCA-21 database information it appears that cessation/resignation of Kali Lohia Charan as an Additional Director on 31.12.2015 which is after annual general meeting.
Therefore, the company and directors have violated the provisions of section 161( I) of the Companies Act, 2013 and the company and its officers who in default are liable to be punishable under section 172 of the Companies Act, 2013.
The company in its reply stated that Mr. Kali Charan Lohia has vacated the office of additional director on 30.09.2015, however the resignation letter has been given only in 31.12.2015 But, it is observed from the D1R-12 form submitted by the company via SRN No. C75194605 dated 01.09.2016 that Mr. Kali Charan 1.ohia is not associated with the company with effect from 31.12.2015 and the resolution attached with the form is a solution of Board Meeting held on 31.12.2015 and not the resolution of AGM. The minutes of AGM held on 30.09.2015 has been submitted by the company, but no such resolution for the vacation of the office of additional director has been passed in that AGM. As such it can be concluded the statement made by the company in its reply is false in every aspect. As such the company and directors have violated the provisions of section 161(1) of the Companies Act, 2013 and the company and its officers who in default are liable to he punishable under section 172 of the Companies Act, 2013 for the period from 30.09.2015 to 31.12.2015.
Mrs. Sanjana Gupta, Non-executive Director of the company, is also trying to exclude herself by stating that she being a non-executive director not aware of any proceedings of the company. But it appears from the balance sheets of the company for the financial years 2016-17, 2017-18 and 2018-19 that both Mr. Sandeep Kumar Gupta & Sanjana Gupta have signed the said balance sheets. Moreover, it also appears from the Notes to Financial Statement in Point No. 17 attached to the Financial Statement for the year end 31.03.2017 & 31.03.2018 that both are Key Managerial Person and as per the Directors Report attached with the financial statement both the directors have attended six Board Meetings for each of the financial year 2016-17 & 2017-18 and seven Board Meetings for the financial year 2018-19. As such both are KMP of the company.
Therefore, both Mr. Sandeep Kumar Gupta and Mrs. Sanjana Gupta arc liable for the said violation. As Mr. Sandeep Kumar Gupta is expired action is recommended against Mrs. Sanjana Gupta who is only liable as a director of the company.
2. Section 161: the articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting. as an additional director at any time who shall hold office only up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.
Section 172: If a company is in default in complying with the requirements of this section 161 In, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default.
3. Accordingly, the adjudication officer has issued adjudication notice vide No. LEGAL/ADJ/2023/167411/11707-11709 dated 03.08.2022 (herein after referred as Adjudication Notice) under Section 454(4) read with Section 161 of the Companies Act, 2013 read with Rule 3(2) of Companies (Adjudication of Penalties), 2014 as amended in Amendment Rules, 2019, to the company and its officers in default for the violation of the provisions of the Act as mentioned in pars “I & 2” above giving an opportunity to submit a reply as to why the penalty should not be imposed under the provisions of Section 172 of the Act against the Company and its officers in default for the above stated violations, followed by a hearing fixed on 07.06.2023 vide hearing notice No. ROC/ADJ/2023/ I 67411/1876-1878 dated 23.05.2023.
4. Mr. Arun Kumar Jaiswal, Company Secretary (M. No. 29827), being the Authorised Representative of the Company and all of its Directors and officers, attended the hearing physically on 05.07.2023.
AND WHEREAS, the Authorised Representative stated that the company has submitted reply dated 15.09.2022 which is re-stated below:
In the instant case, Mr. Kali Charan Lohia, appointed as an Additional Director was required to vacate the office by 30.09.2015. However, a resignation was tendered by Mr. Kali Charan Lohia on 31.12.2015. Consequently, the Company might stand in violation of the provisions of sub- section (1) of Section 161. In no way was this a deliberate act to violate any legal requirement. Nevertheless, the Company accepts that it might have contravened the conditions of Section 161(1). The offence was unequivocally unintentional and was caused due to a dearth of knowledge which resulted in delay of the resignation by three months.
The Company is not refuting the charges of violating the provisions of Section 161 of the Companies Act. 2013. Unintentionally mistakes were committed due to incomprehension. misunderstanding, misinterpretation and a status of being uninformed with the relevant legal and statutory compliances
5. Furthermore, in light of the above, the Authorized representative of the applicants requested to take leniency in the adjudication proceedings against the company and its directors in default.
ORDER
1. The applicant company and its officers, who have defaulted the provisions of Section 161 of the Companies Act, 2013 shall be liable under Section 172 of the Companies Act, 2013.
2. In exercise of the powers conferred vide Companies (Amendment) Ordinance. 2019. the undersigned is entrusted to adjudicate penalties under section 172 of the Companies Act, 2013. After taking into account the factors mentioned herein above, I do hereby impose the penalty of Total Rs. 1,00.000/- (Rupees One Lakh only) i.e., Rs. 50,000/- (Rupees Fifty Thousand only) on the Company and Rs. 50,000/- (Rupees Fifty Thousand only) on its Director-in-default pursuant to Rule 3(12) of Companies (Adjudication Of Penalties)
| Name of the Applicant Company/ Director | Period of Default (FY) | Amount of Default (in Rs.) | Total maximum Penalty imposed (in Rs.) |
| MAYFLOWER INFRA REALTY PRIVATE LIMITED | 30.09.2015-31.012.2015 | 50,000 | 50,000 |
| SANJANA GUPTA
DIN: 02588490 |
30.09.20215-31-12-2015 | 50,000 | 50,000 |
3. The notice shall pay the said amount of penalty individually for the company and its directors (out of own pocket) by way of c-payment [available on Ministry website www.mca.gov.in] under “Pay miscellaneous fees” category in MCA fee and payment Services within 90 days of receipt of this order. The Challan/SRN generated after payment of penalty through online mode shall he forwarded to this Office Address.
4. Appeal against this order may be filed in writing with the Regional Director (ER), Ministry of Corporate Affairs, Kolkata located at Nizam Palace, 2nd M. S. 0. Building. 3rd Floor, 234/4, A.J.C. Bose Road, Kolkata-700020, West Bengal within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website www.mca.gov.ini setting forth the grounds of appeal and shall be accompanied by a certified copy of the this order. (Section 454(5) & 454(6) of the Act read with the Companies (Adjudicating of Penalties) Rules, 20141.
5. Your attention is also invited to section 454(8)(i) & (ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order.
6. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment es, 2019, copy of this order is being sent to MAYFLOWER INFRA REALTY PRIVATE ‘TED and the director in default mentioned herein above and also to Office of the Regional Director (Eastern Region) and Ministry of Corporate Affairs at New Delhi.
7. Date of hearing: 05th July, 2023
Date of Pronouncement: 31′ August, 2023
[A. K. Sethi, ICLS]
Adjudicating Officer & Registrar of Companies.
West Bengal
