Introduction: The Ministry of Corporate Affairs has levied a penalty of Rs. 3.50 lakh on EPIC DESIGNERS APPARELS INDIA PRIVATE LIMITED for exceeding the permissible gap between two consecutive board meetings, violating Section 173 of the Companies Act, 2013.

Detailed Analysis:

1. Appointment of Adjudicating Officer: The Registrar of Companies, NCT of Delhi & Haryana, was appointed as the Adjudicating Officer by the Ministry of Corporate Affairs to adjudicate penalties under Section 454(1) of the Companies Act, 2013.

2. Company Details: EPIC DESIGNERS APPARELS INDIA PRIVATE LIMITED is a registered company with its office at 202-206, Tolstoy House, 15 Tolstoy Marg, New Delhi. Financial details for the fiscal year 2021-22 include a paid-up capital of Rs. 1,00,000 and a profit/loss of (Rs. 42,014).

3. Facts about the Case:

  • The company filed an application for adjudication after the Regional Director rejected a compounding application under Section 441, stating it was not maintainable.
  • The subject company failed to conduct its board meeting within 120 days, as required by Section 173 of the Companies Act.
  • A show-cause notice was issued, and a hearing held, wherein the company argued for leniency due to its dormant status.

4. Factors Considered for Adjudication:

  • The company held four board meetings in the calendar year 2021 but failed to convene the next meeting within the stipulated 120 days.
  • Section 450 of the Companies Act outlines penalties for contraventions, with a fixed penalty of Rs. 10,000 and additional daily penalties for continuing contraventions.

5. Relevant Provisions:

  • Section 173 mandates companies to hold a minimum of four board meetings annually, with not more than 120 days between consecutive meetings.
  • Section 450 prescribes penalties for contraventions, with an initial fixed penalty and additional daily penalties for continuing violations.

6. Adjudication of Penalty:

  • The company, not qualifying as a small company, doesn’t benefit from Section 446B.
  • The company’s request for remission in the penalty is rejected, considering the fixed penalty provision in the law.
  • The Adjudicating Officer, Pranay Chaturvedi, imposes penalties on the company and its officers, specifying the amount and individuals involved.

7. Order:

  • The parties are directed to pay the penalty amount within 90 days through the MCA portal.
  • An appeal against the order can be filed with the Regional Director within 60 days.
  • Non-compliance with the order invites attention to Section 454(8) consequences.

Conclusion: EPIC DESIGNERS APPARELS faces financial penalties imposed by the Ministry of Corporate Affairs for breaching the statutory requirement of conducting board meetings within the prescribed timeline. The detailed adjudication order outlines the violation, considerations, and penalties imposed on the company and its officers. This case serves as a reminder to companies about the importance of adhering to regulatory timelines to avoid legal consequences and financial penalties.

*****

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS,
OFFICE OF REGISTRAR OF COMPANIES,
NCT OF DELHI & HARYANA
4TH FLOOR, IFCI TOWER, 61, NEHRU PLACE,
NEW DELHI -110019

ORDER OF PENALTY UNDER SECTION 173 OF THE COMPANIES ACT, 2013 in the matter of EPIC DESIGNERS APPARELS INDIA PRIVATE LIMITED

(U18209DL2019FTC351906)

1. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 has appointed Registrar of Companies, NCT of Delhi & Haryana as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter known as Act) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company: –

Whereas the company viz. EPIC DESIGNERS APPARELS INDIA PRIVATE LIMITED (herein after known as ‘company’) is a registered company with this office under the Act, having its registered office as per MCA21 Register address at 202-206, Tolstoy House,15 Tolstoy Marg, New Delhi, 110001,India. The financial & other details of the subject company for immediately preceding F.Y 2021-22. as available on MCA-21 portal is stated as under:

S.
No.
Particulars Details
1. Paid up capital (in Rs.) 1,00,000
2. a. Revenue from operation (in Rs.) nil
b. Other Income (in Rs.) nil
c. Profit for the Period (in Rs.) (42,014)
3. Holding Company YES
4. Subsidiary Company NO
5. Whether company registered under Section 8 of the Act? NO
6. Whether company registered under any other special Act? NO

3. Facts about the Case:

I. That earlier an application for compounding u/s 441 was filed and accordingly RD(NR) vide order dated 30.11.2022 rejected the application stated that the application is not maintainable as default has been decriminalized.

II. That in view of the RD (NR)’s order dated 30.11.2022, the subject company filed an application vide SRN F60324365 dated 06.04.2023 for adjudication of violation of Section 173 of the Act.

III. That as per the present application, it is observed that the company had conducted its fourth board meeting for the calendar year 2021 on 17th August, 2021 and next board meeting was due to be held on or before 15th December 2021 (i.e within 120 days from the date of previous board meeting). However, the company had conducted its next Board Meeting on 27th June 2022 (i.e first board meeting for the calendar year 2022). Hence, the subject company has made default in conducting its Board Meeting on 27.06.2022 after a delay of 193 days (i.e from 16.12.2021 to 26.06.2022).

IV. Accordingly, an SCN was issued on 30.05.2023 in response to which company submitted a reply on 08.06.2023. In view of submissions made in reply, a hearing in the matter was scheduled for oral submissions on 11.10.2023. Ms. Tanya Sareen (Advocate) appeared for the hearing and submitted as under.

Considering that at present the status of the company is dormant u/s 455 of Companies Act, 2013 and on account of the fact that the company has on its own moved this application for adjudication of penalty, a lenient view may be taken, and the penalties be waived or significantly reduced.

4. Factors considered for adjudication of penalties:

i. It is observed that in the calendar year 2021, the subject company held four board meetings on 01.03.2021, 26.03.2021, 11.06.2021 and 17.08.2021. The company was required to hold its next board meeting within 120 days i.e. on or before 15.12.2021, but it could hold its next board meeting on 27th June 2022 with a gap of 193 days.

5. The relevant provision of the Act are as under:

Section 173 as on date of default

(1) “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:

The relevant provision of 450 sections as on date of default are as under:

“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.”

6. Adjudication of penalty:

i. The subject company does not get covered under the purview of small company as defined u/s 2(85) of the Act. Hence, the benefit of section 446B would not be applicable on the company.

ii. The submission of the company regarding granting any remission in the penalty cannot be considered as the law provides for a fixed penalty in this case.

iii. Now in exercise of the powers conferred on me vide Notification dated 24th March, 2015 and having considered the reply submitted by the noticee (s) in response to the notice issued on 30.05.2023 and hearing held in the matter on 11.10.2023, I do hereby impose the penalty on the company and its officer in default for violation of Section 173(1) of the Act r/w section 450 of the Companies Act, 2013 which are as follows:-

TABLE-I

Violation
Section
Penalty imposed
on company/
Officers
No. of
days
of
default
Calculation for
penalty amount
(in Rs.)
Penalty
imposed u/s
450 of the
Act, 2013
(in Rs.)
A B C D E
Under section 173 (1) of the Act Epic Designers Apparels India Private Limited (company) 193 10,000+193×1000 =2,03,000

(subject to maximum amount of Rs. 2,00,000)

2,00,000
Aman Anil Anand (director) 193 10,000+193 x 1000

= 2,03,000

(subject to maximum amount of Rs. 50,000)

50,000
Sunil Daulatram Daryanani
(director)
193 10,000+193×1000

= 2,03,000

(subject to maximum amount of Rs. 50,000)

50,000
Dinesh Gope Virwani (director) 193 10,000+193×1000

= 2,03,000

(subject to maximum amount of Rs. 50,000)

50,000

7. Order:

a. Names of parties as mentioned in the above tables are hereby directed to pay the penalty amount as per the column no. ‘E’ of Table In case of parties other than company, such amount is required to be paid out of their own funds.

b. The said amount of penalty shall be paid through online by using the website mca.gov.in (Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

c. Appeal against this order may be filed with the Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi-110003 within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website www.mca.gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of the order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 20141

d. Your attention is also invited to section 454(8) of the Act in the event of non­compliance of this order.

(Pranay Chaturvedi, ices)
(Adjudicating Officer)
Registrar of Companies
NCT of Delhi & Haryana

No. ROC/D/Adj/Order/173/Epic Designer/4594-4590

Date: 26-12-2023

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