Company Caried on business not mentioned in MOA: MCA imposes Penalty

The Office of the Registrar of Companies, Punjab and Chandigarh, issued an order under Section 454 of the Companies Act, 2013, addressing the violation by Paramount Dye Tec Limited (CIN: U13997PB2024PLC060422) for not including the business of trading fiber in its Memorandum of Association (MOA) as required under Section 4(1)(c) of the Act. The company, incorporated on January 4, 2024, began trading in fiber on March 4, 2024, without proper disclosure in its MOA. Upon realizing the oversight, the company amended its MOA through an Extraordinary General Meeting on May 29, 2024, and filed the necessary documentation on May 31, 2024. Despite this corrective action, the company acknowledged the non-compliance and voluntarily applied for adjudication under Section 454. The Registrar, considering various factors like the size of the company and the nature of the default, imposed penalties on the company and its directors. The penalties were determined under Section 450 of the Companies Act, 2013, and the Companies (Adjudication of Penalties) Rules, 2014, focusing on the nature of the default and the potential impact on public interest and investors.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF
COMPANIES PUNJAB AND CHANDIGARH,
CORPORATE BHAWAN
PLOT NO.4-B, SECTOR 27B, CHANDIGARH
PHONE NO.172-2639415, 2639416

Order No. ROC-CHD/468 Dated. 14/08/2024

Order under Section 454 for Violation of Section 4 (1) (c) of the Companies Act, 2013 read with Section Companies (Adjudication of Penalties) Rules, 2014

IN THE MATTER OF NIIS. PARAMOUNT DYE TEC LIMITED
CIN: U13997PB2024PLC060422

1. Appointment of Adjudicating Officer

The Ministry of Corporate Affairs vide its gazette notification no SO 831(E) dated 24.3.2015, has appointed the undersigned as Adjudicating Officer (AO) 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 adjudging penalties under the provisions of this Act.

2. Company

PARAMOUNT DYE TEC LIMITED (herein after referred to as “the company”) is a company registered with this office under the Provisions of the Companies Act, 2013 (or previous Acts in force, as applicable) having its registered office situated at Village Mangarh, Machiwara Road, Kohara, Ludhiana. The financial and other details of the subject company as per incorporation documents available on MCA-21 Portal is as under.

3. RELEVANT PROVISIONS WHICH ARE APPLICABLE IN THE PRESENT CASE OF THE COMPANIES ACT, 2013

Memorandum.—(1) The memorandum of a company shall state—

(a) the name of the company with the last word “Limited” in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company Provided that nothing in this clause shall apply to a company registered under section

(b) the State in which the registered office of the company is to be situated,

(c) the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof;

(d) the liability of members of the company, whether limited or unlimited, and also state,—

(i) in the case of a company limited by shares, that liability of its members is limited to the amount unpaid, if any, on the shares held by them, and

(ii) in the case of a company limited by guarantee, the amount up to which each member undertakes to contribute—

(A) to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and

(B) to the costs, charges and expenses of winding up and for adjustment of the rights of the contributories among themselves;

(e) in the case of a company having a share capital,—

(i) the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount and the number of shares which the subscribers to the memorandum agree to subscribe which shall not be less than one share; and

(ii) the number of shares each subscriber to the memorandum intends to take, indicated opposite his name,

(f) in the case of One Person Company, the name of the person who, in the event of death of the subscriber, shall become the member of the company.

(2) The name stated in the memorandum shall not—

(a) be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law, or

(b) be such that its use by the company—

(i) will constitute an offence under any law for the time being in force; or

(ii) is undesirable in the opinion of the Central Government.

(3) Without prejudice to the provisions of sub-section (2), a company shall not be registered with a name which contains—

(a) any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or

(b) such word or expression, as may be prescribed, unless the previous approval of the Central Government has been obtained for the use of any such word or expression

(4) A person may make an application, in such form and manner and accompanied by such fee, as may be prescribed, to the Registrar for the reservation of a name set out in the application as—

(a) the name of the proposed company; or

(b) the name to which the company proposes to change its name.

(5) 1[(i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of twenty days from the date of approval or such other period as may be prescribed.

Provided that in case of an application for reservation of name or for change of its name by an existing company, the Registrar may reserve the name for a period of sixty days from the date of approval.)

(I) Where after reservation of name under clause (/), it is found that name was applied by furnishing wrong or incorrect information, then,—

(a) if the company has not been incorporated, the reserved name shall be cancelled and the person making application under sub-section (4) shall be liable to a penalty which may extend to one lakh rupees,

(b) if the company has been incorporated, the Registrar may, after giving the company an opportunity of being heard—

(i) either direct the company to change its name within a period of three months, after passing an ordinary resolution,

(ii) take action for striking off the name of the company from the register of companies,

or

(iii) make a petition for winding up of the company.

(6) The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E in Schedule I as may be applicable to such company.

(7) Any provision in the memorandum or articles, in the case of a company limited by guarantee and not having a share capital, purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member, shall be void.

446B. Lesser penalties for certain companies: —

Notwithstanding anything contained in this Act, if penalty is payable for non­compliance 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

As per Section 450

Section 450 of the Companies Act, 2013 provides for penalty wherein penalty has not been provided for violation of any of the provision of the Companies Act, 2013 and the same is reproduced as under-

“Punishment where no specific penalty or punishment is provided “jf 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, I ecognition, 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 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”

4. FACTS ABOUT THE CASE

Whereas the company and its director(s) have Suo-moto filed the present application under section 454 for non-compliance of provisions under section 4 (1) (c) of the Companies Act, 2013 stating therein that-

“The violation committed by the company pertains to non-compliance with the disclosure requirements for the Memorandum of Association as per provisions of Section 4(1)(c) of the Companies Act, 2013 i.e. since its incorporation 1 e. 04 01 2024, the company carried on the business of trading of fiber, not mentioned in any specific clause in its memorandum of association. The default was made on 04 03.2024. Hence, it has violated the provisions of Section 4 of the Companies Act, 2013.”

5. SUBMISSION BY THE COMPANY

The Applicant Company vide adjudication application dated 20 06.2024 submitted as follows:

a) The company observed the above violation and it was noticed that the company is engaged in the manufacturing and trading of fibers, however, the said object was not incorporated in the Memorandum of Association of the company.

b) The company immediately took the initiative and incorporated the desired object in the MOA of the company vide its Extra Ordinary General meeting held on 29.05.2024.

c) Further, the company also filed form MGT-14 for the said alteration of MOA dated 31.05.2024.

d) Company vide affidavit dated 12.08 2024 declared that it has commenced the business of manufacturing and trading of fibers with effect from 04 03.2024 and no business activity related to the manufacturing or trading of fibers was conducted by the company prior to this date. Further, declared that the company shall be responsible and bound by the law for any business activities related to fibers that may come to light at a later, date, which were conducted before the stated commencement date.

6. Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely –

a) size of the company

b) nature of business carried on by the company,

c) injury to public interest,

d) nature of the default,’

e) repetition of the default,’

f) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the deflate and

g) the amount of loss caused to an investor or group of investors or creditors as a result of the default.

Provided that, in no case, the penalty imposed shall be less than the minimum penalty prescribed, if any, under the relevant section of the Act

7. FINDINGS AND OBSERVATIONS

The company has violated Section 4 (1) (c) of the Companies Act, 2013 as stated by the Company in its application whereby the Company carried on business of trading of fiber not mentioned in its memorandum of Association on 04 03.2024 only.

8. ADJUDICATION OF PENALTY:

Now in exercise of the powers conferred on the undersigned vide Notification dated 24th March 2015 and having considered the application submitted by the company on 20.06.2024, I hereby impose the penalties on the company and directors as under•

Penalty for violation of Section 4(1)(C) read with section 450 and Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014:

The company carried on the business of trading of fibs e since incorporation and had not mentioned it in the main objects of Memorandum of association, hence violated the provisions of sections 4 (1) (c) of the Companies Act, 2013 Therefore, penalty is levied on the subject company and directors in terms of the Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 as under:-

9. I am of the opinion that penalty is commensurate with the aforesaid failure committed by the Noticee and penalty 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. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, COO Complex, Lodhi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454(5) & 454(6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014].

11. Youi attention is invited to Section 454(8) as under:

(i) Where company fails to comply with the order made under sub-section (3) or sub­section (7), as the case may be, within a period of ninety days from the date of the receipt of the copy of the older, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees, and

(ii) in case of an officer of a company who is in default, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.

a) In terms of the provisions of sub-rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, copy of the order is being sent to the following as under:

(i) M/s Paramout Dye Tec Limited.

(ii) Sh. Kunal Arora, M.D & CFO

(iii) Smt. Palki Arora, Director.

(Kamna Sharma)
Registrar of Companies & Adjudication Officer
Punjab & Chandigarh