In a recent judgment by the Ministry of Corporate Affairs (MCA), Stanley Lifestyles Limited and its key management personnel received a significant reduction in penalties for failing to file e-form MGT-14 for certain resolutions as mandated by the Companies Act, 2013. Originally faced with a cumulative penalty of Rs. 10,74,700 for oversights related to resolutions on borrowing powers and variations in terms of appointment among others, the appeal has resulted in an 80% reduction, bringing the total penalty down to Rs. 2,14,940.
This case was brought before the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad, under the appeal filed against the order issued by the Registrar of Companies, Karnataka. The company had admitted to missing the filing of e-form MGT-14 for three specific resolutions which were critical under sections 117(1), 179(3)(d), and 117(3)(c) of the Companies Act, 2013. The resolutions in question involved borrowing powers for the board with Kotak Mahindra Bank and HDFC Bank, as well as variation in the terms of appointment for the managing directors.
In the hearing held on 01 February 2024, the appellants, represented by Mr. Had Babu Pothapu, PCS, highlighted the inadvertent delay in filing due to the COVID-19 pandemic, which severely disrupted their business operations and shifted their focus towards maintaining turnover and profits. The challenges of remote work and its limitations were also cited as contributing factors to the oversight.
Acknowledging the unique circumstances presented by the pandemic, the MCA decided to substantially reduce the penalties. The final order issued dictated that the company would pay Rs. 79,140, while the individual penalties for the officers involved were adjusted to Rs. 30,000 for Shubha Sunil, Sunil Suresh, and Akash Shetty each, Rs. 25,800 for Pradeep Kumar, and Rs. 20,000 for Jitesh Bansal, totaling an aggregate of Rs. 2,14,940. The reduced penalties were paid via SRN numbers dated 02 February 2024.
This decision underscores the MCA’s willingness to consider extenuating circumstances surrounding non-compliance, especially when the default is acknowledged and rectified upon realization. It also highlights the importance of timely compliance with statutory filings to avoid penalties, while showing that the regulatory framework can accommodate challenges faced by businesses, particularly during unprecedented times like the COVID-19 pandemic. This case serves as a reminder for companies to maintain diligent compliance practices and seek timely rectification in the event of oversights to mitigate potential penalties.
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F.No:9/11/ADJ/SEC.117 of 2013/KARNATAKA/RD(SER)/2024
BEFORE THE REGIONAL DIRECTOR, SOUTH EAST REGION
MINISTRY OF CORPORATE AFFAIRS, HYDERABAD
IN THE MATTER OF COMPANIES ACT, 2013/6930
IN THE MATTER OF STANLEY LIFESTYLES LIMITED
1. M/s. Stanley Lifestyles Limited
2. Shubha Sunil, Whole time Director
3. Sunil Suresh, Managing Director
4. Akash Shetty, Company Secretary
5. Pradeep Kumar, CFO(KMP)
6. Jitesh Bansal, Company Secretary
Appellants
Date of hearing : 01.02.2024
Present : Mr. Had Babu Pothapu, PCS
ORDER
This is an appeal filed under section 454(5) of the Companies Act, 2013 by the above appellants in e-form ADJ vide SRN F91430918 dated 31.01.2024 against the adjudication order F No. ROC (B)/Adj.Ord.454-117(1)/ Stanley Lifestyles / Co.No.044090 /2023 dated 28.12.2023 under section 454 passed by the Registrar of Companies, Karnataka for violation of provisions of Section 117(1) of the Companies Act, 2013.
2. Registrar of Companies in his order of adjudication has stated that the Company has filed three suo-motu adjudications on 07.09.2023 wherein it was submitted by the company that three resolutions were passed by the company which ought to have been filed in e-form MGT-14 as per the provisions of Section 117(1) of the Act which have been missed out inadvertently.
|
S. No |
Event | Section | Date of Passing resolution |
| 1 | Borrowing power of the Board (Kotak Mahindra Bank) | 179(3)(d) | 20.05.2019 |
| 2 | Variation in terms of appointment i.e. remuneration of a managing director | 117(3)(c) | 16.12.2019 |
| 3 | Borrowing power of the Board (HDFC Bank) | 179(3)(d) | 27.09.2021 |
Hearing was held before Registrar of Companies on 05.12.2023 and after hearing the authorized representative had levied a penalty of Rs. 3,95,700/- on the Company and Rs.1,50,000/- each for 3 officers i.e., Shubha Sunil, Sunil Suresh and Akash Shetty and Rs. 1,29,000/- for Pradeep Kumar and Rs.1,00,000/- for Jitesh Bonsai (total aggregating to Rs.10,74,700/-).
3. An opportunity of being heard was given to the Appellants on 01.02.2024. The authorized representative Mr. Had Babu Pothapu, Practicing Company Secretary appeared on behalf of the appellants and reiterated the submissions made in the appeal and from the appeal filed it is observed that:
(a) The company had failed to file form MGT-14 for the resolution passed for exercising the borrowing monies power of the Board (availing credit card facility for online payments upto Rs.5,00,000/- from Kotak Mahindra Bank) vide resolution dated 20.05.2019 as required under section 117(1) and 117(3)(g) read section 179(3)(d) of the Companies Act, 2013. The form MGT-14 was filed on 13/10/2023 vide SRN A A 5846094.
(b) The company has failed to file form MGT-14 for variation in terms of appointment i.e. remuneration of a managing directors (reduction in remuneration payable to Appellant 2 and Appellant 3) resolution dated 16/12/2019 as required under section 117(1) and 117(3)(c) of the Companies Act, 2013. The form MGT-14 was filed on 13/10/2023 vide SRN AA5839827.
(c) The company has failed to file form MGT-14 for exercising the borrowing monies, power of the Board (for availing auto loan of Rs.75,00,000/- from HDFC Bank) resolution dated 27/09/2021 as required under section 117(1) and 117(3)(g) read section 179(3)(d) of the Companies Act, 2013. The form MGT-14 was filed on 13/10/2023 vide SRN AA5844698.
(d) The company has failed to file the aforementioned form MGT-14 s within due date for the above-mentioned resolutions. However, the company had filed resolution on 13/10/2023 with the additional fee as per the Companies (The Registration Offices and Fees) Rules, 2014.
(e) Due to over sightedness and the disruptions caused by covid-19 pandemic, the Company’s business was affected and the main focus of the Company was to maintain its existing turnover and profits of the Company. Further the staff of the Company were working from home, which had its limitations.
(f) Imposing maximum penalty by the Registrar of Companies, on the Company, its Managing Director, Whole-Time Director, CFO, CSs (including Ex-CS), is harsh, burdensome on the Company.
4. Though there is a default committed, there is a ground in interfering with the impugned adjudication order of Registrar of Companies to the extent of reducing the quantum of penalty due to reasons as stated at para 3 above. Hence, taking into consideration the facts of the appeal and submissions made by the authorized representative. I deem it would meet the end of justice if the penalty imposed by Registrar of Companies is reduced to 20% i.e., for the Company amounting to Rs.79,140/- and for 3 officers i.e., Shubha Sunil, Sunil Suresh and Akash Shetty amounting to Rs.30,000/- each and for Pradeep Kumar amounting to Rs.25,800/- and for Jitesh Bansal amounting to Rs.20,000/- (total aggregating to Rs.2,14,940/-). The appellants are directed to comply with this order and also provisions of Section 454(8) of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014.
5. Accordingly, penalty was paid by the Company amounting to Rs.79,140/- and by 3 officers i.e., Shubha Sunil, Sunil Suresh and Akash Shetty amounting to Rs.30,000/-each and by Pradeep Kumar amounting to Rs.25,800/- and by Jitesh Bansal amounting to Rs.20,000/- (total aggregating to Rs.2,14,940/-) vide SRN’s X66043696, X66043704, X66044074, X66044082, X66044231 and X66043365 dated 02.02.2024 respectively. Accordingly, this order is issued to the Appellants with a copy to Registrar of Companies, Karnataka and Joint Secretary, E-Governance Cell, Ministry of Corporate Affairs, New Delhi for information and necessary action.
Issued under my hand and seal on this the 19th day of February 2024.
(DR. RAJ SINGH)
REGIONAL DIRECTOR (SER)
HYDERABAD
