The Ministry of Corporate Affairs (MCA) recently imposed a significant penalty on CMB India Nidhi Limited for the non-filing of the mandatory e-form MGT-14 for the approval of accounts from the financial years 2015-16 to 2019-20. This order, issued by the Registrar of Companies (ROC) in Uttar Pradesh, highlights the stringent compliance requirements under the Companies Act, 2013, and the repercussions of failing to adhere to them.
Background
CMB India Nidhi Limited, registered on November 24, 2015, with its office in Allahabad, Uttar Pradesh, was scrutinized following a surge in the number of Nidhi companies in specific regions. The scrutiny, initiated by the ROC, Kanpur, revealed that the company had not filed the required e-form MGT-14 for the approval of its accounts for multiple financial years.
Legal Provisions
Under Section 117 of the Companies Act, 2013, companies are required to file a copy of every resolution or any agreement with the Registrar within thirty days of the passing or making thereof. This includes resolutions related to the approval of accounts. Section 117(2) stipulates penalties for non-compliance, which includes a base penalty of ten thousand rupees and an additional penalty of one hundred rupees per day of continued default, subject to a maximum cap.
The Case Against CMB India Nidhi Limited
The inquiry officer’s report, dated November 2, 2022, highlighted the company’s failure to file e-form MGT-14 for the financial years ending on March 31 from 2016 to 2020. The regional director, via a letter dated May 4, 2023, authorized penal action for this non-compliance. The company and its directors were found liable for not submitting the required resolutions and agreements, thus violating Section 117 of the Companies Act, 2013.
Show Cause Notice and Hearings
Show cause notices were issued to the company and its officers in January 2024. The company responded in February 2024, admitting the non-compliance due to a lack of knowledge. Despite this, no representative appeared at the subsequent hearing in March 2024, leading to the conclusion that the company and its directors failed to meet their legal obligations.
Penalties Imposed
Given the continuous nature of the default, starting from September 28, 2016, penalties were calculated based on the duration of non-compliance for each financial year. For instance, the penalty for non-filing MGT-14 for the financial year ending March 31, 2016, amounted to Rs. 139,350 for the company and Rs. 200,000 collectively for its directors.
The penalties for each year were as follows:
- FY 2015-16: Rs. 139,350 for the company, Rs. 200,000 for directors.
- FY 2016-17: Rs. 121,100 for the company, Rs. 200,000 for directors.
- FY 2017-18: Rs. 102,850 for the company, Rs. 200,000 for directors.
- FY 2018-19: Rs. 84,600 for the company, Rs. 200,000 for directors.
- FY 2019-20: Rs. 66,350 for the company, Rs. 200,000 for directors.
The total penalties were adjusted as per Section 446B of the Companies Act, 2013, considering the company’s status as a small company.
Compliance and Appeals
The order requires the penalties to be paid through the MCA21 portal within 90 days, and the company must file INC-28 with the adjudication order and payment challans attached. The company has the right to appeal this decision to the Regional Director (Northern Region) within sixty days.
Conclusion
The imposition of penalties on CMB India Nidhi Limited underscores the importance of adhering to compliance requirements under the Companies Act, 2013. Companies must ensure timely filing of necessary forms and resolutions to avoid legal repercussions and financial penalties. This case serves as a cautionary tale for other companies to maintain diligent compliance with statutory obligations.
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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
Order No. 07/01/ADJ-117/ CMB INDIA /1324 to 1328 DATED 31/05/2024
ORDER FOR VIOLATION OF SECTION 117 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 & COMPANIES (AMENDMENT) ACT, 2020
IN THE MATTER OF “CMB INDIA NIDHI LIMITED”
Appointment of Adjudicating Officer: –
1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-AD 11 dated 24.012015, 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 “CMB INDIA NIDHI LIMITED “has been registered under the provisions of Companies Act on 24.11.2015 and is having its registered office situated at 14-C, CHAK DAUD NAGAR, NAIN1, Allahabad, Uttar Pradesh,21 1008. The authorized capital of the company is Rs. 25,00,000/-
Facts of the Case:-
3. Whereas one of the meetings where Regional Directors were directed to conduct an in-depth examination and submit a report on the surge of Nidhi Companies in Kanpur, Jaipur and Patna by the Secretary of Corporate Affairs vide minutes dated 10.04.2020. This being one of the Nidhi Company identified by ROC, Kanpur on suo-moto basis consequent upon the discussions in the ROC Review workshops with reference to Nidhi Companies. The Inquiry Officer (10) has observed that the Company has not filed e-form MGT-14 for approval of accounts for the financial year ending on 31.03.2016 to 31.03.2020 as mandated under section 117(1) of the Companies Act, 2013. Accordingly, the Inquiry officer has reported the said violation in the Inquiry Report dated 02.11.2022. The Regional Director vide letter Inq/206(4)/CMB India/RD(NR)/2022/889 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 117 of the Companies Act, 2013, in filing the copy resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed. And are thus liable for penal provisions.
4. Section 117(1) of the Companies Act, 2013 provides that: –
“A copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed within the time specified under section 403: Provided that the copy of every resolution which has the effect of altering the articles and the copy of every agreement referred to in sub-section (3) shall be embodied in or annexed to every copy of the articles issued after passing of the resolution or making of the agreement.”
Section 117(2) of the Companies Act, 2013 provides that —
“If a company fails to file the copy resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees., and every Officer of the company who is in default including liquidator of the company, if any, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of fifty thousand rupees.”
5. Accordingly, a Show Cause Notices No. 07/01/Adj-117/CMB India/6699 to 6703 dated 01.2024 were issued to the company and its officers in default under section under Section 117 of the Companies Act, 2013, read with Companies (Adjudication of Penalties) Rules, 2014 by this office.
6. The Company furnished a reply received in this office on 12.02.2024 to the said Show Cause Notice, hence a hearing was fixed in this matter on 14.03.2024. The hearing in the matter was concluded on 14.03.2024 in presence of authorized representative of the company Shri Shivansh Tiwari, Practicing Company Secretary. The authorized representative did not carry the original copy of the authorization and relevant documents in support of the submission. Accordingly next hearing date was fixed on 10.04.2024. Further, neither any representative of the company nor its directors have appeared before the undersigned on the date of hearing, the reply furnished by company itself admitted that due to lack of knowledge it had not filed the resolutions in eform MGT-14, which has further strengthened the apprehension that the company and its Directors have failed to comply with the provisions of section 117 of the Companies Act, 2013, in filing of copy of resolution, in prescribed e-form MGT-14 for the year ending on 31.03.2016 to 03.2020 for approval of accounts as mandated under section 117(1) read with 179 (3)(g) of the Companies Act,20I3 with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed within the time specified under section.
7. The date of default in the matter has been taken as 28.09.2016, 28.09.2017, 28.09.18, 28.09.19 and 28.09.2020 upto which copy of resolution, in prescribed e-form MGT-14 for the year ending on 31.03.2018, 31.03.2019 and 31.03.2020, i.e. the date upto a copy of resolution in prescribed e-forrn MGT-14 for approval of accounts as mandated under section I 17(1) read with 179 (3)(g) of the Companies Act,2013 with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed within the time specified under section. The default has been continuing since then.
8. 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 ropes 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”.
9. 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 117(2) 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 default Section (1) | (penalty provision) C.A. 20I3 (2) | Name of persons on whom penalty imposed
(3) |
Initial Penalty as per Section 172 (Rs.)
(4) |
No. of days of default (5) | Per day penal ty for defau It (Rs.)
(6) |
Total default amount (Rs.)
(5×6)+4= (7) |
Maximum Penalty (Rs.)
(8) |
Final Penalty Impose d as per Sec.446
B (Rs.) (9) |
| Non filing MGT-14 Fly-31.3.16 | 117 | Company | 10000 | 2687 | 100 | 268700+1 000= 278700 | 200000 | 139350 |
| Directors (4) | 10000×4 | 2687 | 100 | 268700+1 0000 –=278700x
4 |
50000 | 50000×4= 200000 | ||
| Non filing MGT-14 F/y‑ 31.3.17 | 117 | Company | 10000 | 2322 | 100 | 232200+1 0000= 242200 | 200000 | 121100 |
| Directors (4) | I0000x4 | 2322 | 100 | 232200+1 0000= 242200×4 | 50000 | 50000×4= 200000 | ||
| Non filing MGT-14 F/y‑ 31.3.18 | 117 | Company | 10000 | 1957 | 100 | 195700+1 0000= 205700 | 200000 | 102850 |
| Directors (4) | 10000×4 | 1957 | 100 | 195700+1 0000= 205700×4 | 50000 | 50000×4= 200000 | ||
| Non filing MGT-14 F/y‑ 31.3.19 | 117 | Company | 10000 | 1592 | 100 | 159200+1 0000= 169200 | 200000 | 84600 |
| Directors (4) | 10000×4 | 1592 | 100 | 159200+1 0000= 169200×4 | 50000 | 50000×4= 200000 | ||
| Non filing MGT- 14 Fly-31.3.20 | 117 | Company | 10000 | 1227 | 100 | 122700+1 0000= 132700 | 200000 | 66350 |
| Directors (4) | 10000×4 | 1227 | 100 | 122700+1 0000= 132700×4 | 50000 | 50000×4= 200000 |
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the notice(s).
10. 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 a copy of adjudication order alongwith payment challans.
11. 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, 20141.
12. 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 Co, panics, 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-117/CMB INDIA/ )1324 to 1328
DATE 31./05/2024.
