The case at hand involves a penalty imposed by the Ministry of Corporate Affairs on Ambium Finserve Private Limited for violating Section 42(5) of the Companies Act, 2013, related to private placement of securities. The order outlines the appointment of an Adjudicating Officer and provides details about the company, its directors, and relevant provisions of the law. The facts of the case reveal that Ambium Finserve issued debentures on a private placement basis without completing the first allotment, which constitutes a violation of Section 42(5).
Ambium Finserve admitted to the violation and submitted that it was inadvertent and unintentional. They also stated that they offered to refund the investment amount to the debenture holders, who chose to retain their debentures. The company argued for leniency, citing their compliance efforts and lack of external investors in the debentures. They also referenced a previous order in a similar case as a basis for leniency.
The Adjudicating Officer, after considering the submissions, found Ambium Finserve guilty of the violation. However, they acknowledged the company’s efforts to rectify the situation and the absence of aggravating circumstances. The penalty was imposed, taking into account Rule 3(12) of the Companies (Adjudication of Penalties) Rules, 2014, which considers factors such as the size of the company, nature of business, injury to public interest, and repetition of default.
The penalty was set considering the maximum penalty under Section 42(10) of the Companies Act, 2013, as well as Rule 3(12). The company was fined Rs. 10,00,000, while each director was fined Rs. 1,00,000. The order directed the company to pay the penalty through the Ministry of Corporate Affairs portal and provided information about the appeal process. Additionally, it warned of further consequences for non-payment of the penalty.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF 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/148 Dated: 27/05/2024
Order under Section 454 from Violation of Section 42 (5) of the Companies Act, 2013 read with
Companies (Adjudication of Penalties) Rules, 2014
IN THE MATTER OF MIS. AMBIUM FINSERVE PRIVATE LIMITED
CIN: U65999CH2017PTC041442
1. Appointment of Adjudicating Officer
The Ministry of Corporate Affairs vide its gazette notification no 50.831(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
AMBIUM FINSERVE PRIVATE 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 Cabin No.4, 1st Floor, S.C.O 145-146, Sector 8C Madhya Marg, Chandigarh G.P.O., Chandigarh, India, 160017. 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 |
| a) | Paid Up Capital as on 31.03.2023 | Rs. 2,00,00,000 |
| b) | Date of Incorporation | 17/03/2017 |
| c) | Whether Company is small company | No |
| d) | Whether Section 446B is applicable to the company (Lesser penalties for Certain companies) | No |
3. RELEVANT PROVISIONS WHICH ARE APPLICABLE IN THE PRESENT CASE OF THE COMPANIES ACT, 2013
42. Issue of shares on private placement basis. —
(1) A company may, subject to the provisions of this section, make a private placement of securities.
(2) A private placement shall be made only to a select group of persons who have been identified by the Board (herein referred to as identified persons), whose number shall not exceed fifty or such higher number as may be prescribed excluding the qualified institutional buyers and employees of the company being offered securities under a scheme of employees stock option in terms of provisions of clause (b) of sub-section (1) of section 62, in a financial year subject to such conditions as may be prescribed.
(3) A company making private placement shall issue private placement offer and application in such form and manner as may be prescribed to identified persons, whose names and addresses are recorded by the company in such manner as may be prescribed:
Provided that the private placement offer and application shall not carry any right of renunciation.
Explanation I.—”private placement” means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application, which satisfies the conditions specified in this section.
Explanation 11.—”qualified institutional buyer” means the qualified institutional buyer as defined in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time, made under the Securities and Exchange Board of India Act, 1992, (15 of 1992).
Explanation III.—If a company, listed or unlisted, makes an offer to allot or invites subscription, or allots, or enters into an agreement to allot, securities to more than the prescribed number of persons, whether the payment for the securities has been received or not or whether the company intends to list its securities or not on any recognised stock exchange in or outside India, the same shall be deemed to be an offer to the public and shall accordingly be governed by the provisions of Part I of this Chapter.
(4) Every identified person willing to subscribe to the private placement issue shall apply in the private placement and application issued to such person along with subscription money paid either by cheque or demand draft or other banking channel and not by cash:
Provided that a company shall not utilise monies raised through private placement unless allotment is made and the return of allotment is filed with the Registrar in accordance with sub-section (8).
(5) No fresh offer or invitation under this section shall be made unless the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the company:
Provided that, subject to the maximum number of identified persons under sub-section (2), a company may, at any time, make more than one issue of securities to such class of identified persons as may be prescribed.
(6) A company making an offer or invitation under this section shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the expiry of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. Per annum from the expiry of the sixtieth day:
Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than—
(a) for adjustment against allotment of securities; or
(b) for the repayment of monies where the company is unable to allot securities.
(7) No company issuing securities under this section shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an issue.
(8) A company making any allotment of securities under this section, shall file with the Registrar a return of allotment within fifteen days from the date of the allotment in such manner as may be prescribed, including a complete list of all allottees, with their full names, addresses, number of securities allotted and such other relevant information as may be prescribed.
(9) If a company defaults in filing the return of allotment within the period prescribed under subsection (8), the company, its promoters and directors shall be liable to a penalty for each default of one thousand rupees for each day during which such default continues but not exceeding twenty-five lakh rupees.
(10) Subject to sub-section (11), if a company makes an offer or accepts monies in contravention of this section, the company, its promoters and directors shall be liable for a penalty which may extend to the amount raised through the private placement or two crore rupees, whichever is lower, and the company shall also refund all monies with interest as specified in sub-section (6) to subscribers within a period of thirty days of the order imposing the penalty.
(11) Notwithstanding anything contained in sub-section (9) and sub-section (10), any private placement issue not made in compliance of the provisions of sub-section (2) shall be deemed to be a public offer and all the provisions of this Act and the Securities Contracts (Regulation) Act, 1956 (42 of 1955) and the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall be applicable.]
446B. Lesser penalties for certain companies: —
Notwithstanding anything contained in this Act, if penalty is payable for noncompliance 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 maybe, 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 for non-compliance of provisions under section 42(5) of the Companies Act, 2013.
During the Financial Year 2023-24, the shareholders of the company in its Extra Annual General Meeting held on 20.10.2023 have considered and approved issuance of 300 Unlisted, Unrated, Secured, Senior, Transferable, Redeemable, Non-Convertible Debentures (NCDs) having face value of Rs, 1,00,000/- each aggregating to Rs. 3,00,00,000 on private placement basis. Further, the company had filled E-MGT 14 for the said special resolution vide SRN No. AA5962526 dated 23.10. 2023.Further, pursuant to the private placement offer being made, the Board in its meeting held on 25.10.2023 had approved the allotment and PAS-3 filed vide SRN AA5997785 dated 27.10.2023.
As the shareholders in its Extra Annual General Meeting held on 06.10.2023 had approved the issue of 4,81,81,820 equity shares of Rs. 10/- each issued at Rs. 11/-each amounting to Rs. 53,00,00,020/- to its holding company on preferential cum private basis and had filed e-firm MGT 14 ON 20.10.2023 VIDE SRN No. AA5947789. Further, pursuant to the preferential cum private placement offer being made, the Board in its meeting held on 30.10.2023 had approved the allotment of equity shares to its holding company. In respect of such allotment the company duly filed e-form PAS-3 vide SRN AA6038917 dated 31.10.2023 with ROC Chandigarh which was in accordance with the provision of law.
It is further stated that the Company had issued a new offer for private placement without completing the process of allotment of the aforesaid offer which is a noncompliance of Section 42(5) of the Companies Act, 2013 read with Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014.
The details of private placement are mentioned below:
| Sr. No. | Date of allotment of Shares/ NCDs | No. of Shares/ NCDs allotted | Amount raised through Private Placement | SRN of Filing PAS-3 |
| 1. | 30.10.2023 | 4,81,81,820 | Rs. 53,00,00,020 | AA6038917 |
| 2. | 25.10.2023 | 300 | Rs. 3,00,00,000 | AA5997785 |
However, it is stated that the company has filed the PAS-3 in terms of the provisions of the Companies Act, 2013.
5. SUBMISSION BY THE COMPANY
The Applicant Company vide Letters dated 15.02.2024, 06.05.2024 and 24.05.2024 submitted as follows:
(a) That the default under Section 42(5) of the companies Act, 2013 were committed inadvertently and unintentionally.
(b) That the Mr. Pardip Kumar Das (DIN: 06593113) AMD Mr. Srinivasan Vaidyanathaswamy (DIN: 06510677) are independent directors.
(c) That at the time of the occurrence of the error, Mr. Ajinkya Mukund Kulkarni (DIN;06984594) was not a director of the company. He was appointed as on 1 January,2024.
(d) Company vide letter dated 27.01.2024 has intimated to this office they had made an offer to refund the investment amount to all the Debenture holders pursuant to allotment of 300 unlisted, unrated, Secured, Senior, Transferable, Redeemable, Non-Convertible Debentures having face value of INR 1,00,000 and all the Debenture holders have chosen to retain their respective Debentures allotted to them on 25.10.2023.
(e) The NCD for which adjudication is applied has no external investor. Ali shares and debt securities issued are held exclusively by Fourdegreewater Capital Private Limited or its subsidiaries.
(f) The company has made reliance on order No.ROC/D/ADJ/Section 42/ALPUR/1324 to 1329 dated 22.03.2023 in the matter of Alpur Solar Private Limited passed by Registrar of Companies, NCT of Delhi
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.
FINDINGS AND OBSERVATIONS
The company has violated Section 42(5) of the Companies Act, 2013 as stated by the Company in its application whereby the Company without completing the first allotment had issued the second public offer for allotment of equity shares and therefore has committed a default in compliance of Section 42(5).
ADJUDICATION OF PENALTY:
I. The subject company does not get covered under the purview of small company as defined u/s. 2(85) of the Act. However, while imposing penalty in respect of violation of section 42(5) consideration is given to Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 as the amount of penalty is not hardcoded under section 42(10).
II. The submissions of the company clearly indicate that there are no aggravating circumstances on account of which a higher penalty can be levied.
III. Even in the absence of any aggravating factor and the fact that this is a suo-moto application for adjudication, it is thought fit that the amount of penalty should not be less than section 446B which provides penalties in case of small companies, OPCS, producer companies and start-ups.
Now in exercise of the powers conferred on the undersigned vide Notification dated 24th March 2015 and having considered the application submitted by the company dated 18 January,2024 and further submissions made vide letter dated 15.02.2024, 06.05.2024 & 24.05.2024 I hereby impose the penalties on the company, promoters and directors as under:
Penalty for violation of Section 42(5) read with Section 446B of the Act read with Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014:
After considering the submissions made in the application and by the Authorised Representative, and the facts of the case it is proved that the company and its directors have defaulted in complying the provisions under Section 42(5) of the Companies Act, 2013. But, it appears that the default under Section 42(5) of the companies Act, 2013 were committed inadvertently and unintentionally as Company had made an offer to refund the investment amount to all the Debenture holders along with accrued interest pursuant to allotment of 300 unlisted, unrated, Secured, Senior, Transferable, Redeemable, Non-Convertible Debentures having face value of INR 1,00,000 though all the Debenture holders have chosen to retain their respective Debentures allotted to them on 25.10.2023.
However, the company without completing the first allotment had issued the second public offer for allotment of Debentures. It has failed to comply with the provision of Section 42(5) of Companies Act, 2013. Therefore, penalty is levied considering the submissions made by the company on the dates cited above, along with its promoters and directors in terms of the Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 as under:
| Violation | Penalty imposed on company/ promotor(s)/ director (s) |
Period of default |
Maximum Penalty u/s 42(10) of the Companies Act, 2013 | Penalty imposed in terms of the Rule 3 (12) of Companies Adjudication of Penalties) Rules, 2014. |
| Violation of Section 42 (5) of Companies Act | M/s AMBIUM FINSERVE PRIVATE LIMITED | 2023-24 | 2,00,00,000 | Rs. 10,00,000. (Rs. Ten Lakhs Only) |
| MR. SUSHIL SINGAL, Director | 2023-24 | Rs. 1,00,000 (Rs. One Lakh Only) | ||
| MS. RENU SINGAL, Director | 2023- 24 |
Rs. 1,00,000 (Rs. One Lakh Only) | ||
| Mr. ANSHUL GUPTA (Director) | 2023-24 | Rs. 1,00,000 (Rs. One Lakh Only) | ||
| Sh. Srinivasan Vaidyanathas wamy | 2023-
24 |
Rs. 1,00,000 (Rs. One Lakh Only) | ||
| Pradip Kumar Das | 2023-
24 |
Rs. 1,00,000 (Rs. One Lakh Only) |
a) 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.
b) 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 Aal 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.
c) 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.
d) 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 AMBIUM FINSERVE PRIVATE LIMITED
Cabin No.4, 1st Floor, S.C.O 145-146, Sector 8 C
Madhya Marg, Chandigarh G.P.O.,
Chandigarh, India, 160017
b. MR. SUSHIL SINGAL, Director
c. MS. RENU SINGAL, Director
d. MR. ANSHUL GUPTA, Director
e. Mr. Srinivasan Vaidyanathaswamy, Director
f. Mr. Pradip Kumar Das, Director,
g. Regional Director (Northern Region),
Ministry of Corporate Affairs, CGO Complex,
Lodhi Road, New Delhi.
(Kamna Sharma)
Registrar of Companies & Adjudication Officer
Punjab & Chandigarh
