Issuance of Private placement offer cum Application letter before filing special Resolution with Registrar in Violation of Rule 14(8): MCA levied penalty
Introduction: The Ministry of Corporate Affairs (MCA) recently imposed penalties on Motisons Jewellers Ltd and its officers for violating Rule 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The company issued a private placement offer before filing the requisite special resolution, leading to regulatory non-compliance and subsequent penalties. This article examines the details of the case and the implications of the penalties imposed.
Regulatory Violation: Motisons Jewellers Ltd, based in Jaipur, Rajasthan, failed to comply with Rule 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The rule mandates that a company must file the relevant special resolution with the Registrar before issuing a private placement offer cum application letter.
Penalties Imposed: The adjudicating officer, in accordance with Section 454 of the Companies Act, 2013, imposed penalties on the company and its officers for the regulatory breach. Each respondent, including the company itself and its managing director, CFO, and ex-company secretary, faced individual penalties.
Mitigating Factors: During the hearing, the company’s authorized representative presented mitigating factors, highlighting that the special resolution had been filed subsequently with the Registrar. However, the violation occurred due to the premature issuance of the private placement offer.
Penalty Assessment: The adjudicating officer considered the circumstances and imposed penalties commensurate with the offense. While acknowledging the rectification of the violation, penalties were still levied to uphold regulatory integrity and deter future non-compliance.
Appeal Process: The adjudication order allows for an appeal process within sixty days from the receipt of the order. Companies and individuals subject to penalties have the opportunity to appeal to the Regional Director, Ministry of Corporate Affairs, Ahmedabad, providing grounds for appeal along with a certified copy of the order.
Conclusion: The penalty imposed on Motisons Jewellers Ltd serves as a reminder of the importance of regulatory compliance in corporate transactions. Companies must adhere to statutory provisions to maintain transparency and accountability. While penalties may be mitigated by corrective actions, the consequences of non-compliance underscore the need for diligence in corporate governance. This case underscores the MCA’s commitment to enforcing regulatory standards and upholding corporate integrity within the Indian business landscape.
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Government of India
Ministry of Corporate Affairs
Office of Registrar of Companies cum Official Liquidator,
Attached to Rajasthan High Court, Jaipur Bench at Jaipur
Corporate Bhawan, G/6-7, Residency Area, Civil Lines, Jaipur— 302001
Order for Penalty under Section 454 of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014 and Companies (Adjudication of Penalties Amendment) Rules, 2015 for the violation of Rule 14(8) of the Companies (Prospectus and Allotment of Securities) 2014: –
01. Motisons Jewellers Limited, Company, 270, 271, 272 & 276, Johri Bazar, Jaipur, Rajasthan- 302003.
02. Sanjay Chhabra, Managing Director
03. Kaustubh Chhabra, CFO (KMP)
04. Naresh Kumar Sharma, ex-Company Secretary
….. Respondents
Date of hearing – 14.03.20211
Present: –
01. Shri Ruvit Kumar, ROC-Cum-OL, Rajasthan, Jaipur
02. Shri Raunak Agrawal, AROC-cum-AOL, Rajasthan, Jaipur
03.Shri Akshit Kumar Jangid, Practicing Company Secretary and authorized representative of the Respondents.
ADJUDICATION ORDER
1. Appointment of Adjudicating Officer: –
WHEREAS the Ministry of Corporate Affairs vide its Gazette Notification No. SO 831 (E) dated 24.03.2015 appointed the Registrar of Companies/undersigned as Adjudicating Officer in exercise of the Power conferred by Section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules, 2014. The Registrar of Companies vide the Companies (Amendment) Act, 2019 is entrusted with power to adjudicate penalty as provided under Section 450 of the Companies Act, 2013.
2.Respondent Company:
WHEREAS Motisons Jewellers Limited (CIN U36911RJ2011PLC035122) is registered with this office under the provisions of Companies Act, 1956 and having registered office at 270, 271, 272 & 276, Johri Bazar, Jaipur, Rajasthan- 302003.
3. Relevant provisions of the Companies Act, 2013: –
WHEREAS as per the provision of section 14 (8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 “a company shall issue private placement offer cum application letter only after the relevant special resolution or board resolution has been filed in Registry:
Provided that private companies shall file with the Registry copy of the Board resolution or special resolution with respect to approval under clause (c) of subsection (3) of section 179.1
WHEREAS as per provision of section 450 of the Companies Act, 2013 “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 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 continues, 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.”
4. Facts of the Case:
> That the Respondent Company has filed suo-moto application dated 12.03.2024 for adjudication of penalty under section 454 of the Companies Act, 2013 for the offence committed of Rule 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
> That the Respondent Company in its application has stated that the Respondent Company has passed a Special Resolution dated 11.09.2023 for issuance of equity shares on private placement basis under section 42 of the Companies Act, 2013. However, the Respondent Company has failed to file the same with Registrar before issuance of private placement offer cum application letter. Therefore, the Respondents have violated the provision of Rule 14(8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The details of the particulars are as under: –
| SI. No. | SRN of e-Form MGT-14 | Date of Special Resolution Passed | Date of issuance of private placement cum application letter |
| 01 | AA5841276 dated 10.10.2023 | 11.09.2023 | 28.09.2023 |
> That at the time of hearing on 14.03.2024, Shri Akshit Kumar Jangid, Practicing Company Secretary & authorized representative of the Respondents has appeared in the matter and submitted that the default has already been made good as the Respondent Company has filed the said Special Resolution with Registrar vide e-Form MGT-14 vide SRN AA5841276 dated 10.10.2023 and requested Competent Authority to impose a minimum penalty in the matter as the actual default was only with regard to the circulation of the private placement offer cum application letter before filing the special resolution with Registrar.
5. In view of the above facts, the undersigned has reasonable cause to believe that the provision of Rule 14 (8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 has not been complied with by the Respondents and therefore liable for penal action under section 450 of the Companies Act, 2013. Accordingly, in exercise of the power of 454 (3) of the Companies Act, 2013, I inclined to impose a penalty on the Respondents, as under-.
| Nature of default | Violation s under companies Act, 2013 | Name of persons on whom penalty imposed | Penalty as per section 450 of the Companies Act, 2013 (In Rs.) | Maximum Penalty (In Rs.) | Final Penalty Imposed (In Rs.) |
| Issuance of private placement offer cum application letter before filing of Special Resolution with Registrar |
Rule 14 (8) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 | Motisons Jewellers Limited |
10,000/- | 2,00,000/- | 10,000/- |
| Sanjay Chhabra | 10,000/- | 50,000/- | 10,000/- | ||
| Kaustubh Chhabra | 10,000/- | 50,000/- | 10,000/- | ||
| Naresh Kumar Sharma | 10,000/- | 50,000/- | 10,000/- | ||
| Grand Total | 40,000/- | ||||
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the Respondents and penalty so imposed upon the Officers-in-default shall be paid from their personal sources/ income. 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.
6. Appeal against this order may be filed in writing with the Regional Director (NWR), Ministry of Corporate Affairs, Ahmedabad within a period of sixty days from the date of receipt of this order, in e-Form ADJ (available on Ministry website mca.gov.in setting forth the grounds of appeal and shall be accompanied by a certified copy of this order (section 454(5) & 454(6) of the Companies Act, 2013 read with Companies (Adjudicating of Penalties) Rules, 2014).
7. 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 both.
8. 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: –
(I) Motisons Jewellers Limited at 270, 271, 272 & 276, Johri Bazar, Jaipur, Rajasthan- 302003,
(II) Sanjay Chha bra at ______.
(III) Kaustubh Chhabra at ______.
(IV) Naresh Kumar Sharma at ______.
(V) Regional Director, NWR, Ministry of Corporate Affairs, Ahmedabad at ROC Bhavan, Opp. Rupal Park Society, Behind Ankur Bus Stop, Naranpura, Ahmedabad, Gujarat-380 013.
The Adjudication Notice is disposed off with this order.
(RUVIT KUMAR)
ROC-cum-OL & Adjudicating officer,
Rajasthan, Jaipur
Signed on this 14th day of March 2024.
Place: Jaipur, Rajasthan.
File No. ROCJP/ADJ/Rule 14(8)/2023-24/533
Date: 15/03/2024
