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The importance of adhering to regulatory requirements in the corporate sector cannot be overstated. In a recent case adjudicated upon by the Registrar of Companies, Madhya Pradesh, North Star Construction Private Limited found itself in the crosshairs of legal penalties for its failure to file Balance Sheet as mandated by Section 137 of Companies Act, 2013. The gravity of this violation prompted the imposition of penalties against the company and its officers, highlighting the stringent enforcement of corporate governance standards in India.

Background

North Star Construction Private Limited, a registered company under the Companies Act, 2013, with its registered office in Indore, Madhya Pradesh, came under scrutiny due to its failure to comply with statutory obligations regarding the submission of Balance Sheet as mandated by Section 137 of Companies Act, 2013. The company’s directors, including Sh. Vijay Rathi, Sh. Satya Narayan Malpani, and Sh. Rajesh Patel, faced allegations of neglecting their duties in ensuring regulatory compliance.

Adjudication Process

The Ministry of Corporate Affairs appointed an adjudicating officer to investigate the matter and enforce penalties as prescribed by law. Upon examination of the case, it was revealed that North Star Construction Private Limited had not filed its balance sheets for the financial years 2019-20 onwards. Show cause notices were issued to the company and its officers, followed by notices of inquiry, setting the stage for a formal adjudication process.

Despite being duly notified, neither the company nor its representatives attended the hearing, exacerbating the seriousness of the non-compliance issue. The adjudicating officer meticulously reviewed the facts and circumstances, considering the correspondence exchanged and the company’s record of default.

Imposition of Penalties

In line with the provisions of Section 137(3) of the Companies Act, 2013, penalties were levied against North Star Construction Private Limited and its officers for their failure to file Balance Sheet as mandated by Section 137 of Companies Act, 2013 within the stipulated timelines. The penalties were determined based on the number of default days and were commensurate with the severity of the violation.

For the financial years 2019-20 to 2022-23, the company and its officers faced penalties ranging from Rs. 12,150 to Rs. 66,900, reflecting the accumulated defaults over multiple years. The adjudicating officer emphasized that penalties should be borne by the officers-in-default from their personal sources, underlining the individual accountability in ensuring corporate compliance.

Compliance and Appeal

The adjudication order mandated the remittance of penalty amounts through the Ministry of Corporate Affairs portal within 60 days, accompanied by the filing of requisite documentation. Additionally, provisions for filing appeals within 60 days were outlined for aggrieved parties, offering a recourse for challenging the adjudication decision.

Conclusion

The case of North Star Construction Private Limited underscores the stringent enforcement of regulatory norms in India’s corporate landscape. Non-compliance with statutory obligations not only attracts financial penalties but also tarnishes the reputation of companies and their officers. The adjudication process serves as a reminder of the imperative for corporate entities to prioritize regulatory compliance to maintain transparency, accountability, and integrity in their operations.

*****

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
Office of The Registrar of Companies, Madhya Pradesh
Sanjay Complex, ‘A’ Block, 3rd Floor,
Jayendraganj, Gwalior-474009
E. mail: roc.gwalior@mca.gov.in

No. ROC-G/Adj. Pen./U/s. 137(1)/North Star/3975 Dated: 21 MAR 2024

1. M/s. North Star Construction Private Limited, 301, Meghadoot Tower, Plot No. 21, Scheme No 54, Indore- 452010, M.P.

2. Sh. Vijay Rathi S/o. Sh. Jamna Prasad Rathi, Director

3. Sh. Satya Narayan Malpani S/o. Sh. Prahlad Das Malpani, Director

4. Sh. Rajesh Patel S/o. Sh. Kanchan Singh Patel, director

5. Regional Director, North- western Region, Ministry of Corporate Affairs, Ahmedabad (Gujarat)

6. E- governance cell for uploading the documents.

In the matter of Companies Act, 2013

And

In the matter of adjudication proceeding under sub-section (1) of Section 137 of the Companies Act, 2013.

And

In the matter of M/s. North Star Construction Private Limited

(cm- U45301MP1985PTC003101)

Date of hearing 20th March, 2024

Appointment of adjudicating officer:

1. Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II dated 24.03.2015 appointed undersigned as adjudicating officer in exercise of the powers conferred by Section 454 of the Companies Act, 2013 (hereinafter known as “Act”) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudicating penalties under the provisions of this Act.

Company:

2. Whereas company (CIN- U45301MP1985PTC003101) hereinafter knows as company) is a registered company with this office under the provisions of the Companies Act, 2013 having its registered office situated at 301, Meghdoot Tower, Plot No. 21, Scheme No. 54, Indore 452010 as per the MCA website.

Sl. No.

Particulars Details
1. Paid-up capital (F.Y. 2018-19) 5,82,900
2. Turnover (F.Y. 2018-19) 0
c. Revenue from operation 0
d. Other income 0
3. Holding company No
4. Subsidiary company No
5. Whether company registered under Section 8 No
6. Whether company registered under any other Special Act. No

Facts of the case:

3. Whereas, as per information available on MCA21 data base, the company has not filed its statutory document i.e. Balance Sheet for the Financial year 2019-20 to till date. Thus it is apparent that company has violated the provisions of Section 137(1) of the Companies Act, 2013, which attracted penal provisions of Section 137(3) of the Companies Act, 2013.

4. Subsequently this office had issued show cause notice U/s. 137(1) to the company and its officers in default vide No. ROC-G/Adj. Pen./u/s. 137(1)/ North Construction/3448 to 3451 dated 31.01.2024 and notice as issued to company was undelivered with postal authority remark “Refused”.

5. Thereafter, Notice of inquiry vide No. ROC-G/Adj. Pen./u/s. 137(1)/North Construction/3867 to 3870 dated 06.03.2024 were issued to the company and its officers in default. As per [Rule 3(3), Companies (Adjudication of Penalties Rules, 2014 and the date of hearing was fixed on 20.03.2024 at 11.00 A.M. in the office of Registrar of Companies, Madhya Pradesh, Sanjay Complex, A-Block, 3rd Floor, Jayendraganj, Gwalior.

6. On the date of hearing i.e. 20.03.2024, no person or representative of the company has attended the hearing.

7. Order:

Having considered the facts and circumstances of the case and after taking into account the factors above and letter dated 31.01.2024 issued by ROC, Gwalior were not delivered and returned back, and notice dated 06.03.2024 issued by ROC, Gwalior was delivered. It is concluded that the company is liable for penalty as prescribed under Section 137(3) of the Act for the financial year 2019-20 to till date viz. North Star Construction Private Limited, in terms of Section 137(1) of the Act.

8. Accordingly, I am inclined to impose a penalty as prescribed under Sub­section 3 of section 137 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:

Financial year Period No. of days of
defaults
2019-20 29.10.2020 to 20.03.2024 1238
2020-21 29.10.2021 to 20.03.2024 873
2021-22 29.10.2022 to 20.03.2024 508
2022-23 29.10.2023 to 20.03.2024 143

(Penalty amount for Balance Sheet u/s. 137 for financial year 2019-20)

Nature of default

Relevant section under the Companies Act, 2013 Name of persons on whom penalty is imposed No. of days of default Total penalty as per Section 137(3) Penalty
imposed
Final penalty imposed u/s. 1i6B
Non- filing of
annual return
S. 137(1) On company 1238 Rs. 10,000/-+ (100×1238) Rs. 1,33,800/-.

Maximum penalty
Rs. 2,00,000/-

Rs. 1,33,800/- Rs. 66,900/-
Vijay Rathi 1238 Rs. 10,000/-+ (100×1238) Rs. 1,33,800/-. Maximum penalty
Rs. 50,000/-
Rs.50,000/- Rs. 25,000/-
Satya
Narayan
Malpani
1238 Rs. 10,000/-+ (100×1238) Rs. 1,33,800/-.

Maximum penalty
Rs. 50,000/-

Rs.50,000/- Rs. 25,000/-
Rajesh Patel 1238 Rs. 10,000/-+ (100×1238) Rs.1,33,800/-.

Maximum penalty
Rs. 50,000/-

Rs.50,000/- Rs. 25,000/-

(Penalty amount for Balance Sheet u/s. 137 for financial year 2020-21)

Nature of default

Relevant section under the Companies Act, 2013 Name of persons on whom penalty is imposed No. of days of default Total penalty as per Section 137(3) Penalty
imposed
Final
penalty-
imposed
u/s. 446B
Non- filing of
annual return
S. 137(1) On company 873 Rs. 10,000/-+ (100×873) Rs. 97,300/-

Maximum penalty
Rs. 2,00,000/-

Rs. 97,300/- Rs. 48,650/-
Vijay Rathi 873 Rs. 10,000/-+ (100×873) Rs. 97,300/-.

Maximum penalty
Rs. 50,000/-

Rs. 50,000/- Rs. 25,000/-
Satya
Narayan
Malpani
873 Rs. 10,000/-+ (100×873) Rs. 97,300/-.

Maximum penalty
Rs. 50,000/-

Rs. 50,000/- Rs. 25,000/-
Rajesh Patel 873 Rs. 10,000/-+ (100×873) Rs. 97,300/-.

Maximum penalty
Rs. 50,000/-

Rs. 50,000/- Rs. 25,000/-

(Penalty amount for Balance Sheet u/s. 137 for financial year 2021-22)

Nature of default

Relevant section under the Companies Act, 2013 Name of persons on whom penalty is imposed No. of days of default Total penalty as per Section 137(3) Penalty
imposed
Final
penalty-
imposed
u/s. 446B
Non- filing of
annual return
S. 137(1) On company 508 Rs. 10,000/-+ (100×508) Rs. 60,800/-.

Maximum penalty
Rs. 2,00,000/-

Rs. 60,800/- Rs. 30,400/-
Vijay Rathi 508 Rs. 10,000/-+ (100×508) Rs. 60,800/-.

Maximum penalty
Rs. 50,000/-

Rs. 60,800/- Rs. 25,000/-
Satya
Narayan
Malpani
508 Rs. 10,000/-+ (100×508) Rs. 60,800/-.

Maximum penalty
Rs. 50,000/-

Rs. 60,800/- Rs. 25,000/-
Rajesh Patel 508 Rs. 10,000/-+ (100×508) Rs. 60,800/-.

Maximum penalty Rs. 50,000/-

Rs. 60,800/- Rs. 25,000/-

(Penalty amount for Balance Sheet u/s. 137 for financial year 2022-23)

Nature of default

Relevant section under the Companies Act, 2013 Name of persons on whom penalty is imposed No. of days of default Total penalty as per Section 137(3) Penalty
imposed
Final
penalty-
imposed
u/s. 446B
Non- filing of
annual return
S. 137(1) On company 143 Rs. 10,000/-+ (100×143) Rs. 24,300/-

Maximum penalty Rs. 2,00,000/-

Rs. 24,300/- Rs. 12,150/-
Vijay Rathi 143 Rs. 10,000/-+ (100×143) Rs. 24,300/-.

Maximum penalty Rs. 50,000/-

Rs. 24,300/- Rs. 12,150/-
Satya
Narayan
Malpani
143 Rs. 10,000/-+ (100×143) Rs. 24,300/-.

Maximum penalty Rs. 50,000/-

Rs. 24,300/- Rs. 12,150/-
Rajesh Patel 143 Rs. 10,000/-+ (100×143) Rs. 24,300/-.

Maximum penalty Rs. 50,000/-

Rs. 24,300/- Rs. 12,150/-

9. I am of this opinion that penalty is commensurate with the aforesaid failure committed by the notice and penalty so imposed upon the officers-in-default shall be paid from their personal sources/income. It is further directed that penalty imposed shall be paid through the Ministry of corporate Affairs portal only as mentioned under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 under intimation to this office.

10. The penalty amount shall be remitted by the company through MCA21 portal within 60 days from the date of order. The company needs to file INC-28 as per the provisions of the act attaching the copy of adjudication order alongwith payment challans.

11. Any person aggrieved by the order of adjudicating authority under Section 3 of Section 454 may prefer an appeal to the Regional Director having jurisdiction in the matter.

12. Every appeal under sub-section (5) of section 454 shall be filed within 60 days from the date on which the copy or order made by the adjudicating authority is received by the aggrieved person and shall be in such form, manner and be accompanied by such fee as may be prescribed.

13. As per Section 454(8) (i) where a company fails to comply with the order made under sub-section (3) or sub-section (7) as the case may be within a period of 90 days from the date of receipt of the copy of the copy of the order, the company shall be punishable with fine which shall not be less than twenty five thousand but which may extend to five lakh rupees.

14. Where an officer of a company or any other person who is in default fails to comply with the order made under sub-section (3) or sub-section (7) as the case may be within a period of 90 days from the date of receipt of the order such officer shall be punishable with imprisonment which may extend to six months or with the fine which shall not be less than twenty five thousands rupees but which may extend to one lakh or with both.

15. This order is without prejudice to the rights available to this office to’ initiate separate action including but not limited to the penal actions for contraventions of related, incidental and/or continuing offences/ contraventions.

16. In terms of the provisions of sub-rule 3 of the Companies (Adjudication of Penalties) Rules, 2014 copy of the order is being sent to M/ s. North Star Construction Private Limited, 301, Meghadoot Tower, Plot No. 21, Scheme No 54, Indore- 452010, M.P., Sh. Vijay Rathi S/o. Sh. Jamna Prasad Rathi, Director, Sh. Satya Narayan Malpani, Director, Sh. Rajesh Patel, director, Regional Director, North-Western Region, Ministry of Corporate Affairs, Ahmedabad (Gujarat), E-governance cell for uploading on MCA website.

The adjudication notice stand disposed off with this order.

(Mukesh Kumar Soni, ICLS)
Registrar of Companies,
Madhya Pradesh, Gwalior.

Order dated: 20.03.2024
Place Gwalior, Madhya pradesh

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