Failure to convey Board Meetings: MCA imposes ₹28.5 Lakh Penalty

The Ministry of Corporate Affairs issued an adjudication order under Section 454 of the Companies Act, 2013, penalizing Water and Sanitation for Urban Poor (India) for failing to comply with board meeting requirements from 2011 to 2019. The company, a non-profit registered in Karnataka, admitted to not convening board meetings due to the absence of office bearers and uncertainty about its activities. Section 173(1) mandates that companies hold at least four board meetings annually, with no more than 120 days between meetings. Despite an exemption allowing one meeting every six months for Section 8 companies, this requirement was not met. The hearing was attended by a company director who submitted that some listed directors denied their involvement with the company. The penalty imposed totals Rs. 16,00,000 for the company, and individual penalties ranging from Rs. 50,000 to Rs. 4,00,000 for directors involved during the default period. Total Penalty amounted to Rs. 28.50 Lakh. The order mandates payment within 90 days and outlines the appeal process, emphasizing that non-compliance could lead to further penal actions under the Companies Act, 2013. The company must also serve the order to all defaulting directors as per legal provisions.

Government of India
Ministry of Corporate Affairs
Registrar of Companies, Karnataka
Kendriya Sedan, 2^nd Floor, ‘E’ Wing,
Koramangala, Bengaluru – 560 034
rand: 080-25537449/25633105
E-mail ID : roc.bangaloregmca.gov.in

File No. ROC(B)/Adj. Ord. 454-173(11/Water & Sanitation/Co.N0.039701/2024 Date: 09.07.2024

ORDER Of ADJUDICATION OF PENALTY UNDER SECTION 454 OF COMPANIFS ACT 2011 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENIUJTFSI RUI FS 7014 FOR VIOLATION OF PROVISIONS OF SECTION 173(110F THE COMPANIES ACT. 2013 READ WITH RULES (AS AMENDED FROM TIME TO TIMEI FRAMED THEREIN BY WATER AND SANITATION FOR URBAN POOR (INDIA)

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II dated 24.03.2015 has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 (hereinafter referred to as Act) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of Companies Act, 2013.

2. The company, Water and Sanitation for Urban Poor (India) (hereinafter referred to as Company) having CIN: U90009KA2006NPL039701 was incorporated on 13.06.2006 as a non­profit organisation and is presently registered under the jurisdiction of Registrar of Companies, Karnataka and the registered office of the company is situated at No. 220, 2″² Phase, Domlur, 2″ Stage. Bangalore – 560038. Kamataka

3. The company has filed a suo-motu adjudication / compounding application on 19.03.2024 for violation of section 285 of the Companies Act, 1956 and section 173(1) of the Act wherein it was submitted that the company has failed to convene board meetings for the financial years 2011-12 till 2018-19. It submits that the defaults were incurred due to the absence of office bearers in India and uncertainty on the future of the business activities of the company.

4. As per provisions of section 285 of the Companies Act, 1956, in the case of every company, a meeting of its Board of directors shall be held at least once in every three months and at least four such meetings shall be held in every year. As per the provisions of section 173(1) of the Act. every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board. As per Notification No. GSR 466(E). dated 05.06.2015, as amended by Notification No. GSR 584(E). dated 13.062017, exemption has been granted to section 8 companies under provisions of section 173(1) of the Act, shall apply only to the extent that the board of directors. of such companies shall hold at least one meeting within every six calendar months.

5. Pursuant to the adjudication application filed by the company, Notice of hearing was sent on 03.052024 and physical hearing was scheduled on 22.05.2024 It was attended by Mr. Nandu R Kumar. Director of the company and he appeared before the adjudicating officer on behalf of the company and other directors, viz.. Thomas Palakudiyil Scaria. Wiliam Day and Alicia Lucie Walters. He made his submissions as mentioned in the adjudication application. None appeared on behalf of Samuel George Chistupher Parker, Premanand Narayan Chandyarkar, Ravi Narayanan, directors of the company. On the contrary, this office received letters dated 20.05.2024 from Premanand Narayan Chandyarkar and Ravi Narayanan stating that they have been directors of the company at any point of time and have no connection with the company. The authorised representative was asked to provide clarification on this issue and also provide Minutes of the meetings held to crystalise the duration of default. Since ample time was provided and no reply in this matter has been received by this office, the adjudicating authority hereby proceeds to adjudicate the matter based on the application and the records available with this office.

6. As per MCA records. Mr. Premanand Narayan Chandavarkar was appointed as director of the company and Form 32 vide SRN A66016577 dated 27.02.2009 was filed for the same. Further, Mr. Ravi Narayanan was appointed as director of the company and Form 32 vide SRN A25815192 dated 12.11.2007 was filed for this purpose. It is seen that Mr. Premanand Narayan Chandavarkar was appointed as a non-executive director, and hence penalty is not being levied on him.

7. The company has defaulted in complying with the provisions of section 285 of the Companies Act. 1956 and section 173(1) of the Act for a duration of 2011-12 till 2018-19 i.e. 8 years, rendering the company and its directors liable for penalty under section 450 of the Act It is seen from the records that Premanand Narayan Chandyarkar and Raw Narayanan were the directors of the company from 13.07,2009 to 27.02.2012 and from 29.10.2007 to 27.02.2012 respectively and are hence liable for penal action.

8. As per the provisions of section 450 of the Act, 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.

9. It is seen that the company is a subsidiary company and does not fall under the definition of a small company as per the provisions of section 2(85) of the Companies Act, 2013. Therefore, the provisions of imposing lesser penalty as per the section 4468 of the Act shall not be applicable in this case.

10. Therefore. having considered the facts and circumstances of the case and the submissions made by the company / director / key managerial personnel through their authorized representative. in view of the above said violation under the provnions of section 173(1) of the Companies Act 2013 read with section 285 of the Companies Act 1956, in exercise of the powers vested under Section 454(3) of the Companies Act 2013, I do hereby impose penalty in the following manner on the company and the directors/ officers who were in default of the offence committed:

11. The company and its directors / key managerial personnel are hereby directed to pay the penalty amount as tabulated above within 90 days from the date of receipt of this Order and file Form INC-28 attaching a copy of the Order and payment challans. In case of directors, such penalty amount is required to be paid out of their own funds. The noble shall pay the said amount of penalty online by using the website wwwmca.gov.in (Miscellaneous head) specifying the details of this Order and the noticee who is paying the penalty.

12. Appeal, if any, against this Order may be filed with the Regional Director (South East Region), Hyderabad within a period of 60 days from the date of receipt of this Order in Form AD) setting forth the grounds of appeal and shall be accompanies by a certified copy of this Order.

13. Your attention is also invited to section 454(8) of the Companies Act 2013 in case of non-compliance of this Order wherein necessary penal action will be initiated under 454(8)(1) and Cu) of the Companies Act, 2013 against the company and directors / key managerial personnel without further notice in the matter

14. The company is required to serve a copy of this Order on the director(s)/ officer(s)-in-default mentioned above in terms of provisions of section 20 of the Companies Act 2013.

(Sanjay Sood)
Registrar of Companies. Karnataka
and Adjudicating Officer