Regional Director for the Western Region of the Ministry of Corporate Affairs, Mumbai, has confirmed a penalty of Rs. 9.75 lakh against Khed Developers Limited and its directors for non-compliance with the Companies Act, 2013. This decision, detailed in Order No. Khed Developers/149(4)/P91648378/2023-24/4735 dated June 11, 2024, follows an appeal challenging the earlier adjudication order from the Registrar of Companies (ROC), Pune. The penalty was imposed due to the company’s failure to maintain the required number of independent directors from December 21, 2020, to December 12, 2022, in violation of Section 149(4) of the Act.
Khed Developers and its key personnel, including directors and the CEO, were found liable for the default. The penalty amounts include Rs. 4,10,500 for the company and varying amounts for individual directors based on their periods of non-compliance. The company’s appeal highlighted several factors: the impact of the COVID-19 pandemic, financial constraints due to a lack of revenue, and difficulties in appointing suitable candidates. The appellants requested a waiver of the penalty, citing the financial strain on the company and its directors, some of whom are senior citizens or retired individuals.
The Regional Director reviewed the appeal and the adjudication order. The findings affirmed that the ROC’s penalty was correctly applied under Section 172 of the Companies Act, 2013, which prescribes penalties for failure to comply with statutory requirements. The appeal did not present any substantial grounds for overturning the ROC’s decision. Therefore, the Regional Director directed that the penalty be paid within 90 days from the order’s date. Failure to comply would lead to prosecution under Section 454(8) of the Companies Act, 2013.
This case underscores the importance of adhering to corporate governance standards and the stringent enforcement of penalties for non-compliance. The decision reaffirms the legal obligations for maintaining independent directors and the consequences for failing to meet these requirements.
BEFORE THE REGIONAL DIRECTOR, WESTERN REGION
MINISTRY OF CORPORATE AFFAIRS, MUMBAI
Order No. Khed Developers /149(4)/ P91648378 /2023-24/4735 Dated: 11 JUN 2024
APPEAL UNDER 454(5) OF COMPANIES ACT, 2013 AGAINST ORDER PASSED FOR OFFENCES COMMITTED UNDER SECTION 149(4) OF THE COMPANIES ACT, 2013 READ WITH RULE 4 OF THE COMPANIES (APPOINTMENT OF DIRECTORS) RULES, 2014.
In the matter of KHED DEVELOPERS LIMITED & ORS
| 1. | Khed Developers Limited. | Company |
| 2. | Praful Pramod Chepe | CEO |
| 3. | Rajeev Gopinath Shende | Director |
| 4. | Chandrakant Sonaba Bhalekar | Director |
| 5. | Santosh Kaluram Shinde | Director |
| 6. | Venkata Krishna Mogalapalli | Director |
| 7. | Shyam Bhaskar Deshpande | Director |
| 8. | Mahesh Dnyanoba Morampalle | Company Secretary |
… Appellants
Through: Vishal N. Salunke, Practicing Company Secretary.
HON’BLE REGIONAL DIRECTOR (WESTERN REGION)
ORDER
Appeal under sub-Section (5) of Section 454 of the Companies Act, 2013 (Act) r/w the Companies (Adjudication of Penalties) Rules, 2014 (Rules) has been filed by Khed Developers Limited (Company) having CIN U70102PN2008PLC131478 and, its Officers, against Order No. RoCP/ ADJ/149/23-24/ KNED/ B/ 6/2264 dated 19/12/2023 (ROC Order) of Registrar of Companies, Pune for violating provisions of sub-Section (4) of Section 149 of the Act.
2. The appeal lies within the jurisdiction of the Regional Director, Western Region, Ministry of Corporate Affairs, Government of India.
3. The Registrar of Companies, Pune (RoC Pune) vide Adjudication Order dated 19/12/2023 held the Company and every Officer of the company, who have defaulted, liable for penalty under Section 172 of the Act from 21/12/2020 to 12/12/2022 for not having the required number of Independent Directors as under:
| Penalty imposed on Company / Director (s) | Date of Appointment and Cessation | No. of days of default | Period of Default | Calculation of Penalty Amount (In Rs.) | Maximum penalty imposed u/s.172 (In Rs.) |
| Khed Developers Limited. | 721 | 21/12/2020 to 12/12/2022 | 4,10,500 | 3,00,000 | |
| Praful Pramod Chepe, CEO (KMP) | 29/09/2018 to 15/06/2022 | 541 | 21/12/2020 to 15/06/2022 | 3,20,500 | 1,00,000 |
| Rajeev Gopinath Shende, Director | 31/12/2021 to till date | 179 | 16/06/2022 to 12/12/2022 | 1,39,500 | 1,00,000 |
| Chandrakant Sonaba Bhalekar, Director | 24/06/2011 to 16/ 03/ 2023 | 179 | 16/06/2022 to 12/12/2022 | 1,39,500 | 1,00,000 |
| Santosh Kaluram Shinde, Director | 31/12/2021 to till date | 179 | 16/06/2022 to 12/3.2/2022 | 1,39,500 | 1,00,000 |
| Venkata Krishna Mogalapalli, Director | 31/12/2021 to 30/08/2022 | 75 | 16/06/2022 to 30/08/2022 | 87,500 | 87,500 |
| Shyam Bhaskar Deshpande, Director | 31/12/2021 to 30/08/2022 | 75 | 16/06/2022 to 30/08/2022 | 87,500 | 87,500 |
| Mahesh Dnyanoba Morampalle, CS | 17/08/2020 to till date | 721 | 21/12/2020 to 12/12/2022 | 4,10,500 | 1,00,000 |
| TOTAL | 9,75,000 | ||||
Period of Default from 21/12/2020 to 12/12/2022.
4. Appellants have filed Form-ADJ vide SRN F91648378 dt. 03/02/2024. As per provisions of sub-Section (6) of Section 454, every appeal under sub-section (5) shall be filed within sixty (60) days from the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person. On examination of the application/appeal, it is seen that the said application/appeal has been filed within 60 days from the date of passing of the adjudication order.
5. Grounds of Appeal & Relief sought:
a) COVID Pandemic created restrictions on movements of the company personnel which created the delay.
b) 900 farmers are involved, and company is not have any revenue.
c) The default is not continuing as on the date of this Appeal and the Appellants have adhered to the provisions of Section 149 (4) of the Act.
d) The company was not able to find the appropriate candidate due to reasons beyond the control of the company.
e) The shareholders being the farmer, mobilizing any financial assistance is not possible to meet this kind of penalty.
f) Some of the Officers are senior citizens / retired from the services having no financial resources to meet any kind of penalty.
g) That the order passed by Adjudicating Officer may set aside.
h) Waive of the penalty imposed on the company and its directors.
6. The matter was posted for hearing as per Section 454(5) r/w Section 454(7) of the Act on 05/06/2024. Vishal N. Salunke, Practicing Company Secretary appeared on behalf of Appellants as their authorized representative. The authorized representative reiterated the submission made by the applicants in their application and have admitted the contravention of Section 149(4) of the Companies Act, 2013. The Authorized Representative further stated that he did not find any defect in ROC Adjudication Order dt. 19/12/2023.
7. Facts of the Case:
a) Public companies having paid up share capital of ten crore rupees or more shall have atleast two directors as independent directors. Further, as per records, there is only one director in the category of Independent Director. Thus, the company is not having the required number of Independent Directors from 01/04/2014 to 12/12/2022. The company has therefore violated provisions of Section 149(4) of the Act.
b) However, the said offence is ad judicable w.e.f. 21/12/2020.
8. That the punishment for contravention of section 149(4) is prescribed under section 172 of the Companies Act, 2013 which states that “If a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to 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 latch rupees in case of a company and one latch rupees in case of an officer who is in default.”.
9. RoC, Pune had also joined the proceedings virtually. He stated that no plea for Independent Directors not responsible in present circumstances has been raised in Adjudication proceedings. During the period in which the company has no MD/WTD, then all directors are responsible u/s.2(60) of the Act. The said defence is also not taken in the appeal except reduction of amount of penalty on financial ground. Hence, no need of further supplementary application in the matter. ROC Pune further stated that with regard to the default period from 21/12/2020 to 15/06/2022 benefit of having CEO, KMP Shri Praful Pramod Chepe is given whereas, other directors were made responsible for the period from 16/06/2022 to 12/12/2022 when the company was not having MD/WTD/CFO as per Section 2(60)(iii) r.w. Section 149 and Section 454 of the Act. As such, the order of ROC Pune dt.19/12/ 2023 is in accordance with the provision qua the appellants. The ROC has given his statement in presence of PCS and Company Secretary of the company.
10. Taking into consideration the Adjudication Order of the Registrar of Companies, Pune, submissions made by the Appellants in their application and, oral submissions of the authorized representative and RoC during the hearing, it is observed that:
a) There is no inherent defect in the Adjudication Order dt. 19/12/2023.
b) ROC, Pune has imposed penalty as per Section 172 of Companies Act, 2013.
11. In view of above, RoC’s Adjudication Order dt. 19/12/2023 is confirmed with directions to the appellants to pay the penalty imposed by the RoC within 90 days, failing which, Registrar of Companies, Pune, is directed to file prosecution under Section 454(8) of the Companies Act, 2013 against the company and every director and Key Managerial Personnel in default.
A copy of this order shall be published on the website of the Ministry of Corporate Affairs as per Rules.
Signed and sealed on 11th day of June 2024.
(SANTOSH KUMAR)
REGIONAL DIRECTOR
WESTERN REGION, MUMBAI
