On June 21, 2024, the Regional Director (Western Region) of the Ministry of Corporate Affairs issued Order No. Saptasatij Industries/134/F90881566/2023-24/5015 regarding an appeal filed under Section 454(5) of the Companies Act, 2013. This appeal was against the penalty order imposed for violations of Section 134 of the Companies Act by Saptasatij Industries Private Limited and its directors. The appeal was filed in response to an earlier adjudication by the Registrar of Companies (RoC), Pune, which had penalized the company and its directors for non-compliance with disclosure requirements in the Board Report and maintenance of auditing records.
Initially, the RoC Pune had imposed a total penalty of ₹4 lakh, with ₹3 lakh on Saptasatij Industries Private Limited and ₹50,000 each on its directors, Krupali Liladhar Warade and Saurabh Arun Warade. The appeal was filed within the required 60 days, and the appellants argued that the contraventions had been rectified and that the penalty should be reduced. They contended that none of the company’s creditors or shareholders would be prejudiced by a reduction in the penalty and requested that a lower composition fee be levied due to their status as a small company.
During the hearing on June 4, 2024, the authorized representative for the appellants admitted the contravention and provided evidence to support the claim that Saptasatij Industries qualifies as a small company under Section 2(85) and Section 446B of the Companies Act. According to these provisions, small companies are subject to reduced penalties for non-compliance. The Regional Director agreed that the company qualifies as a small company and therefore the penalty should be modified.
The Regional Director decided to reduce the penalty by 50%, aligning with Section 446B of the Companies Act. The modified penalty amounts are ₹1.5 lakh for the company and ₹25,000 each for the directors, totaling ₹2 lakh. This reduction acknowledges the company’s status as a small company and reflects the provisions for reduced penalties under the Act.
The appellants were directed to pay the modified penalty within 90 days from the receipt of the order. Failure to comply could lead to further legal actions, including prosecution under Section 454(8) of the Companies Act. The order underscores the Regional Director’s role in ensuring compliance with corporate governance norms while considering the financial status of the companies involved. The decision was signed and sealed by the Regional Director, Santosh Kumar, and is to be published on the Ministry of Corporate Affairs website.
BEFORE THE REGIONAL DIRECTOR, WESTERN REGION
MINISTRY OF CORPORATE AFFAIRS, MUMBAI
Order No. Saptasatij Industries/134/F90881566/2023-24/5015 Dated: 21 JUN 2024
APPEAL UNDER 454(5) OF COMPANIES ACT, 2013 AGAINST ORDER PASSED FOR OFFENCES COMMITTED UNDER SECTION 134 OF THE COMPANIES ACT, 2013.
In the matter of SAPTASATIJ INDUSTRIES PRIVATE LIMITED & ORS
| 1. | Saptasatij Industries Private Limited | – Company |
| 2. | Krupali Liladhar Warade | – Director |
| 3. | Saurabh Arun Warade | – Director |
…Appellants
Through: Lucky Barisal., Practicing Company Secretary and Authorized Representative of the Appellants.
Absence of Proper disclosure in Board Report: MCA RD reduces penalty to Rs. 2 Lakh
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 Saptasatij Industries Private Limited (Company) having CIN U29299PN2002PTC016861 and, its Directors, against Order No. RoCP/ ADJ/order/134/SIPL/2089 dated 22/11/2023 (ROC Order) of Registrar of Companies, Pune for violating provisions of Section 134 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 22/11/2023 held the Company, its Directors, who have defaulted, liable for penalty under Section 134(8) of the Act for failing to make necessary disclosures in the Board ‘ Report and not taking due care for the maintenance of the auditing records at the premises of the company for preventing irregularities as under:
| Penalty imposed on Company / Director (s) | Total maximum penalty (In Rs.) |
| Saptasatij Industries Private Limited. | 3,00,000 |
| Krupali Liladhar Warade | 50,000 |
| Saurabh Arun Warade | 50,000 |
| TOTAL | 4,00,000 |
4. Appellants have filed Form-ADJ vide SRN F90881566 dt. 23/01/2024. 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) The company has willfully accepted its non-compliance and has already rectified its error.
b) None of the creditors or shareholders of the company shall be prejudiced.
c) The order under appeal be set aside and since the contravention has been made good, a minimum amount of composition fee may kindly be levied.
6. The matter was posted for hearing as per Section 454(5) r/w Section 454(7) of the Act on 04/06/2024. Lucky Bansal, 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 134 of the Companies Act, 2013. The Authorized Representative further stated that the company is a small company within the meaning of Section 2(85) read with Section 446B of the Companies Act, 2013 and have submitted requisite documents in support of her claim which has been taken on record.
7. Facts of the Case:
a. An inquiry of the company under Section 206 of the Companies Act, 2013 was conducted by an Inspecting Officer and it was observed that the Directors have failed to make necessary disclosures in the Board Report as per Section 134 of the Act. Also, it is concluded that the company and its directors have not due care for the maintenance of the auditing records at the premises of the company for preventing irregularities and hence, the company and every officers of the company has violated Section 134 of the Act and are liable for action under Section 134(8) of the Act.
b. The PCS has raised the issue of small companies by saying that the company is a small company within the meaning of Section 2(85) read with Section 446B of the Companies Act, 2013.
| Small company defined under Section 2(85) of the Companies Act, 2013 | ||
| Paid up capital | Turnover | Applicable |
| Rs.50 Lakhs | Upto Rs.2 Crores | Upto 31/03/2021 |
| Rs.2 Crores | Upto Rs.20 Crores | w.e.f. 01/04/2021 to 14/09/2022 |
| Rs.4 Crores | Upto Rs.40 Crores | w. e. f . 15/ 09/ 2022 |
Financial position of the company for determining the small company status is as under:
| Particulars | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 |
| Turnover | 12,41,75,140 | 13,24,27,476 | 10,03,25,200 | 13,51,42,000 | 14,15,97,000 |
| Paid-up Capital | 1,39,48,000 | 1,39,48,000 | 1,39,48,000 | 1,39,48,000 | 1,39,48,000 |
From the above, it is clear that the company is a small company within the meaning of Section 2(85) read with Section 44613 of the Companies Act, 2013.
Hence, the company falls within the definition of small company.
c. Since, Section 44613 of the Companies Act, 2013 is overriding provisions over Section 454 read with Section 134(8) of the Companies Act, 2013 as the word is used “Notwithstanding anything contained in this Act, if penalty is payable for non-compliance of any of the provisions of this Act…” and therefore application of Section 446B shall be considered at the date of passing order (in present case 22/11/2023) considering the paid up share capital, turnover of the company as on 22/11/2023 determining the status of the appellant company as small company within the meaning of Section 2(85) of the Companies Act, 2013 for imposing adjudication fees under Section 454 read with Section 134(8) subject to maximum as prescribed under Section 44613 if subject company is a small company.
8. That the punishment for contravention of section 134 is prescribed under section 134(8) of the Companies Act, 2013 which states that “If a company is in default by complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees”.
Further, Section 446B of the Companies Act, 2013 provides lesser penalties for certain companies which states 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 person, as the case may 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 and one lakh rupees in case of an officer who is in default or any other person, as the case may be.”
9. RoC, Pune had also joined the proceedings virtually. He had no objection for modification of penalty imposed by him to be reduced by 50% by giving the benefit of Section 446B read with Section 134(8) of the Act.
10. Taking into consideration the Adjudication Order of the Registrar of Companies, Mumbai, submissions made by the Appellants in their application, further letter of RoC, Mumbai dt.17/05/ 2024 and, oral submissions of the authorized representative during the hearing, this forum is of the view that: –
a) The company falls under the definition of small company within the meaning of Section 2(85) read with Section 44613 of the Companies Act, 2013 and therefore, the penalty amount imposed by RoC, Pune vide Adjudication Order dt. 22/11/2023 is ‘modified’ under provisions of Section 454(7) of the Act and reduced by 50% by giving the effect of Section 446B read with Section 134(8) of the Companies Act, 2013:-
| Penalty imposed on Company / Director (s) | Penalty imposed on Company / Director (s) | Penalty ‘Modified’ by Regional Director (In Rs.) |
| Saptasatij Industries Private Limited. | 3,00,000 | 1,50,000 |
| Krupali Liladhar Warade | 50,000 | 25,000 |
| Saurabh Arun Warade | 50,000 | 25,000 |
| TOTAL | 4,00,000 | 2,00,000 |
11. In view of above, the said appeal /application is hereby disposed off and the appellants are hereby, directed to pay the Adjudication Fees which have been ‘Modified’ by the Regional Director at Para ’10(a)’ (as per the above table) within 90 days from the date of receipt of this order, failing which, Registrar of Companies, Mumbai, is directed to proceed further under Section 454(8) of the Companies Act, 2013 by filing prosecution against the company and every officers in default for violation of Section 134 of the Companies Act, 2013
A copy of this order shall be published on the website of the Ministry of Corporate Affairs as per Rules.
Signed and sealed on 20th day of June 2024.
(SANTOSH KUMAR)
REGIONAL DIRECTOR
WESTERN REGION, PUNE
