The Ministry of Corporate Affairs (MCA) recently imposed a penalty on East Alpha Alliance Technology Private Limited for violating Section 152 of the Companies Act, 2013. This order, issued by the Registrar of Companies, Uttar Pradesh, Kanpur, highlights significant non-compliance issues regarding the holding of general meetings.
East Alpha Alliance Technology Pvt. Ltd., incorporated in 2017, failed to conduct a general meeting necessary for appointing Mr. Lun Tian as a director, a requirement under Section 152 of the Companies Act, 2013. Despite directives from regulatory bodies and ample opportunities to respond, the company and its officers did not provide satisfactory explanations or attend hearings. This non-compliance, confirmed through an inquiry and subsequent reports, led to penal actions as outlined in the Companies Act.
Section 152 of the Companies Act mandates that directors be appointed in general meetings, ensuring transparency and accountability within corporate governance. The Act stipulates penalties for such defaults, which increase with prolonged non-compliance, reflecting the seriousness of regulatory adherence in corporate operations.
The penalty imposed on East Alpha Alliance Technology Pvt. Ltd. underscores the importance of adhering to statutory requirements outlined in the Companies Act, 2013. Such measures are crucial for maintaining corporate integrity and protecting stakeholders’ interests. Companies must ensure timely compliance with regulatory frameworks to avoid legal repercussions and uphold corporate governance standards.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF
COMPANIES,
UTTAR PRADESH,
37/17, Westcott Building, The Mall,
Kanpur — 208001 (U.P.)
Phone : 0512 — 2310323/2310443
NO. 07/01/ADJ-152/ EAST ALPHA /909 to 912 DATED…/05/2024
ORDER FOR VIOLATION OF SECTION 152 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 & COMPANIES (AMENDMENT ACT 2020)
IN THE MATTER OF “EAST ALPHA ALLIANCE TECHNOLOGY PRIVATE LIMITED”
Appointment of Adjudicating Officer: –
1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-AD 11 dated 24.03.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules,2014 under the provisions of this Act.
2. Whereas the Company “East Alpha Alliance Technology Private Limited “has been registered under the provisions of Companies Act on 18.05.2017 and is having its registered office situated at F-304, Ground Floor, Sector-63, Noida, Gautam Buddha Nagar, Uttar Pradesh,201301. The authorized capital of the company is Rs. 30,00,000/-
3. Whereas Ministry vide letter No.F.No.3/211/2020-CL-II(NR) dated 28.10.2020 gave instructions to conduct the Inquiry to Registrar of Companies, NCT of Delhi & Haryana but the same has been transferred to ROC, Kanpur vide letter No. ROC/Secret Reference/Inquiry/4852 dated 05.08.2022 as per direction of the Ministry. During the course of inquiry, it is observed that Mr. Lun Tian on 14.01.2020 as director of the company without holding of general meeting. Hence, it is non-compliance of Section 152 of the Companies Act, 2013. Accordingly, the Inquiry officer has reported the said violation in the Inquiry Report dated 11.11.2022. The Regional Director vide letter Inq/206(4)/East Alpha/RD(NR)/2022/890 dated 04.05.2023 has accorded the penal action for said non-compliance. Thus, it is evident that the company and its Directors have failed to comply with the provisions of section 152 of the Companies Act, 2013..The Company and its Directors are officers in default, as per section 2(60), of the Companies Act, 2013. And are thus liable for penal provisions.
4. Provisions of the Act: –
Section 152 of the Companies Act, 2013 provides that: –
(1) Where no provision is made in the articles of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first Directors of the company until the Directors are duly appointed and in case of a One Person Company an individual being member shall be deemed to be its first director until the director or Directors are duly appointed by the member in accordance with the provisions of this section.
(2) Save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting.
(3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154 7[or any other number as may be prescribed under section 153.] .
(4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number 7[or such other number as may be prescribed under section 153] and a declaration that he is not disqualified to become a director under this Act.
2&5[(5) A person appointed as a director shall not act as a director unless he gives his consent to hold the office as director and such consent has been filed with the Registrar within thirty days of his appointment in such manner as may be prescribed:]
1 [Provided that in the case of appointment of an independent director in the general meeting, an explanatory statement for such appointment, annexed to the notice for the general meeting, shall include a statement that in the opinion of the Board, he fulfils the conditions specified in this Act for such an appointment.]
3,4&6[(6) (a) Unless the articles provide for the retirement of all Directors at every annual general meeting, not less than two-thirds of the total number of Directors of a public company shall—
(i) be persons whose period of office is liable to determination by retirement of Directors by rotation; and
(ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.
(b) The remaining Directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting.
(c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first Directors are appointed in accordance with clauses (a) and (b) and at every subsequent annual general meeting, one-third of such of the Directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.
(d) The Directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became Directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto.
Explanation.—For the purposes of this sub-section, “total number of Directors” shall not include independent Directors, whether appointed under this Act or any other law for the time being in force, on the Board of a company.
4&6[(7) (a) If the vacancy of the retiring director is not so filled-up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a national holiday, till the next succeeding day which is not a holiday, at the same time and place.
(b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting, unless—
(i) at that meeting or at the previous meeting a resolution for the re-appointment of such director has been put to the meeting and lost;
(ii) the retiring director has, by a notice in writing addressed to the company or its Board of Directors, expressed his unwillingness to be so re-appointed;
(iii) he is not qualified or is disqualified for appointment;
(iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment by virtue of any provisions of this Act; or
(v) section 162 is applicable to the case.]
Explanation.—For the purposes of this section and section 160, the expression “retiring director” means a director retiring by rotation.]
Section 152 read with 172 of the Companies Act, 2013 provides that —
“The company and every officer of the company who is in default shall be liable to be 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.”
5. Accordingly, a Show Cause Notice No. 07/01/Adj-152// EAST ALPHA/7744-7748 dated 15.03.2024 were issued to the company and its officers in default under section under Section 152 of the Companies Act, 2013, read with Companies (Adjudication of Penalties) Rules, 2014 by this office. This office has not received the said letter undelivered also.
6.. The company and its officers in default have not furnished any reply to the said Show Cause Notices which was not found satisfactory as no compliance was made for the default till date, hence no hearing was fixed for this matter.
7. Further, neither any representative of the company nor its directors have either furnished proper reply or have appeared before the undersigned which has further strengthened the apprehension that the company and its Directors have failed to comply with the provisions of section 152 of the Companies Act, 2013 for non-holing of general meeting for appointment of as Mr. Lun Tian who was appointed on 14.01.2020 as director of the company.
8. The date of default in the matter has been taken as 30.09.2020 for Mr. Lun Tian who was appointed on 14.01.2020 as Directors of the company. The default has been continuing since then.
9. As per provisions of section 446B of the Companies Act, 2013 provides that “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 persons, as the case maybe 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 one lakh rupees in case of an officer who is in default or any other person, as the case may be”.
10. Order:
Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose penalty as prescribed under section 152 read with 172 of the Act. The default of the penalty imposed on the company (Being Small Company as per section 2(85) of the Act) and officers in default are shown in the table below:
Nature of
|
Relev ant sectio n under the C.A.2 013 (2) |
Name of persons on whom penalty imposed. (3) |
Initial Penalty as per Section 172 (Rs.) (4) |
No. of
|
Per day penalty for default (Rs.) (6) |
Total
|
Maximum Penalty (Rs.) (8) |
Final Penalty Imposed as per Sec.446B (Rs.) (9) |
non-holing of general meeting on 30.09.20 for appointment of Mr. Lun Tian |
152 read with 172 |
Company |
50000 |
1306 |
500 |
653000+500 00=703000 |
300000 |
50000 |
Directors (3) |
50000 |
1306 |
500 |
(653000×3) +50000×3)= 2109000 |
100000 |
50000×3= 150000 |
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the notice(s).
11. The Noticee shall pay the amount of penalty so imposed through MCA21 portal only as per rule 3(14) of Companies (Adjudication of Penalties) 2014. within 90 days receipt of this order. The company needs to file InC-28 as per the provisions of the act, attaching the copy of adjudication order alongwith payment challans.
12. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi 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].
13. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of noncompliance of this order. In Case appeal is made 0/o Registrar of Companies, U.P. maybe informed alongwith the penalty imposed & the payments made.
(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur
NO.07/01/ADJ-152/ EAST ALPHA/ 909 to 912
DATED.08/05/2024.
