Company Act 89 Violation: Penalty Reduced from ₹15 Lakh to ₹3 Lakh

The Regional Director, South East Region, Ministry of Corporate Affairs, addressed an appeal filed by Credii Technologies Private Limited and five of its directors concerning a violation of Section 89 of the Companies Act, 2013. The company had failed to file Form MGT-6, which pertains to the declaration of beneficial interest in shares, within the stipulated timeframe. The Registrar of Companies (ROC), Karnataka, had previously adjudicated this non-compliance after the company itself applied for adjudication. The ROC’s order, dated May 28, 2024, imposed a penalty of Rs. 5,00,000 on Credii Technologies Private Limited and Rs. 2,00,000 each on the five directors, accumulating to a total penalty of Rs. 15,00,000.

Aggrieved by this penalty, the appellants filed an appeal, arguing that the non-compliance was unintentional, stemming from a “lack of guidance and expertise,” and that there was no intent to deceive or cause any unlawful gain or loss. They contended that the imposed penalty was disproportionately high and would cause significant financial strain. After considering the appeal and the submissions made by the appellants’ representative, the Regional Director, in an order dated May 28, 2025, decided to reduce the penalty. The revised penalty was set at Rs. 1,00,000 for the company and Rs. 40,000 each for the five directors, bringing the total reduced penalty to Rs. 3,00,000. The appellants subsequently paid the reduced penalty amounts by October 25, 2024, leading to the disposal of the appeal.

F. No:9/34/ADJ/SEC.89 of CA, of 2013/KARNATAKA/RD(SER)/2024 / 1084
BEFORE THE REGIONAL DIRECTOR, SOUTH EAST REGION
MINISTRY OF CORPORATE AFFAIRS, HYDERABAD
IN THE MATTER OF COMPANIES ACT, 2013

IN THE MATTER OF CREDII TECHNOLOGIES PRIVATE LIMITED

1. M/s. Credii Technologies Private Limited

2. Mr. Vamshi Krishna Mokshagundam, Director

3. Mr. Praveen Nune, Director

4. Mr. Balachandar Ganesh, Director

5. Mr. Timothy William Handorf, Director

6. Mr. Benjamin Alan Yax, Director

….. Appellants

Date of hearing: 08.10.2024

Present: Mr. Biswajit Ghosh, PCS, on behalf of the Appellants

ORDER

This is an appeal filed under section 454(5) of the Companies Act, 2013 (hereafter referred as the Act) by the above appellants in e-form ADJ vide SRN F96920210 dated 22.07.2024 against the adjudication order passed by the Registrar of Companies, Karnataka in F No. ROC(B)/Adj.Ord.454-89/Credii Technologies/ Co.No.059191/2024/ dated 28.05.2024 under section 454 of the Act, for default in compliance with the requirements of Section 89 of the Companies Act, 2013.

2. The Registrar of Companies in his order of adjudication has stated that the company has filed an application on 15.11.2023 to adjudicate the violation of the provisions of section 89 of the Act, stating that due to inadvertent failed to file Form MGT-6 within the prescribed time limit which resulted in contravention of the provisions of section 89(6) of the Act. The hearing was held before Registrar of Companies on 06.02.2024 and after hearing the authorized representative had levied a penalty of Rs.5.00 Lakhs on the Company and Rs.2,00,000/- each on 5 directors i.e., Mr. Vamshi Krishna Mokshagundam, Mr. Praveen Nune, Mr. Balachandar Ganesh, Mr. Timothy William Handorf and Mr. Benjamin Alan Yax (total aggregating to Rs.15,00,000/-).

3.1 Aggrieved by the adjudication order, the appellants had filed the above appeal. A report from the ROC called, and he has filed the same vide his report dated 27.08.2024. An opportunity of being heard was given to the Appellants on 08.10.2024.

3.2 The authorized representative Mr. Biswajit Ghosh, Practicing Company Secretary, appeared on behalf of the appellants and reiterated the submissions made in the appeal and also stated that one Mr. Vamshi is a shareholder of the company and holds 1 share of Rs.10/- as a registered shareholder, wherein the beneficial interest in the said share is held by Siftery India Development Center Private Limited. Though Mr. Vamshi submitted the Form MGT-4 within the period of 30 days and the company had also filed the MGT-5 to the appellant company within the period of 30 days, unfortunately due to a lack of guidance, the company had not filed MGT-6 which resulted in violation of the provisions of the Section 89 of the Act.

3.3 The Appellants has further stated that it was not their intention to violate the provision and it was only due to a lack of guidance and expertise and there was no any intention to deceive anyone and the non-compliance did not result in any unlawful gain or loss to any one including the appellant company and that the penalty imposed by the ROC was heavy and will inflict irreparable financial injury to the appellants and that to prove its bona fide, the appellants had filed application before the ROC. With the above submission the appellants have requested for reduced penalty as permitted under section 454(7) of the said act.

4. In view of the above, taking into consideration the facts of the appeal and the submissions made by the authorized representative, The then Regional Director had reduced the penalty imposed by the Registrar of Companies to Rs. 1,00,000/- for the Company and Rs.40,000/- each for 5 directors i.e., Mr. Vamshi Krishna Mokshagundam, Mr. Praveen Nune, Mr. Balachandar Ganesh, Mr. Timothy William Handorf and Mr. Benjamin Alan Yax (total aggregating to Rs.3,00,000/-). The appellants were directed to comply with this order and were also reminded about the provisions of Section 454(8) of the Act, in case of failure to comply.

5. Accordingly, the appellants have paid the penalty as under

6. In view of the compliance reported, the appeal is accordingly disposed of, and this order is issued to the Appellants with a copy to Registrar of Companies, Karnataka and Joint Secretary, E-Governance Cell, Ministry of Corporate Affairs, New Delhi for information and necessary action.

7. Issued under my hand and seal on this the 28th of May 2025.

(Richa Kukreja)
Regional Director, SER(I/C)
Ministry of Corporate Affairs, Hyderabad