The Ministry of Corporate Affairs (MCA) has imposed penalties on United Telecoms Limited for violations related to an Extraordinary General Meeting (EGM) notice. The case revolves around the failure to include a statement regarding the proposed independent director’s qualifications. This article discusses the details of the violation and the penalties imposed.
Detailed Analysis
United Telecoms Limited, incorporated in 1984 under the jurisdiction of the Registrar of Companies, Karnataka, received a complaint from one of its shareholders. The complaint highlighted a deficiency in the explanatory statement attached to the notice for an EGM scheduled for August 6, 2021. Specifically, the notice lacked a statement, as required by Section 152(5) of the Companies Act, 2013. The missing statement should have expressed that, in the opinion of the board, the proposed independent director fulfilled the conditions specified in the Act and was independent of the management.
Section 152(5) of the Act mandates that a director’s consent to hold office must be filed with the Registrar within 30 days of their appointment. In cases where an independent director is appointed at a general meeting, the explanatory statement attached to the notice must include the required statement.
Following instructions from the Directorate regarding the non-compliance, the Registrar of Companies, Karnataka, issued adjudication and hearing notices to the company and its directors. The hearing took place on May 31, 2023. Mr. Bimlendu Kumar, a practicing company secretary and the company’s authorized representative, attended the hearing. He explained that the violation was procedural and minor, requesting a waiver of the penalty.
In addition, Ms. Chalasani Sandhya Rao, a non-executive director of the company, submitted a letter through her attorney indicating that she was the one who identified the violation and brought it to the attention of the authorities.
Separate adjudication notices were sent to Ms. Swetha Jain and Ms. Dipika Todi, the company secretaries. Ms. Swetha Jain responded, stating that she had resigned from the company as of August 16, 2018, and provided copies of her resignation letter and DIR-12 form. Ms. Dipika Todi confirmed her resignation, effective February 24, 2022, and explained that the independent director’s appointment was in accordance with the law, except for the missing statement.
Under Section 159 of the Act, individuals or directors who contravene Sections 152, 155, and 156 may be liable for penalties. In this case, the managing director, whole-time director, and company secretary are held responsible.
United Telecoms Limited, as a public company, is not classified as a small company according to the provisions of the Companies Act, 2013. However, considering the minor and non-repetitive nature of the violation, the maximum penalty was not levied.
Conclusion
The penalties imposed by the MCA on United Telecoms Limited serve as a reminder of the importance of adhering to statutory requirements and maintaining transparency in corporate governance. The failure to include a required statement in the EGM notice resulted in penalties against specific officers of the company.
This case highlights the need for companies to ensure that all compliance obligations are met, and that even seemingly minor violations can result in financial penalties. The penalties should be paid promptly to avoid further legal action, and the company is required to serve a copy of the order to the directors and officers responsible. Directors, officers, and company secretaries must stay informed about their responsibilities and obligations to prevent regulatory non-compliance.
*****
Ministry of Corporate Affairs
Registrar of Companies, Karnataka
Kendriya Sadan, 2nd Floor, ‘E’ Wing,
Koramangala, Bengaluru – 560 034
Phone : 080-25537449/2633105
E-mail ID: roc.bangalore@mca.gov.in
File No, ROC(B)/Adj.0rd.454-152/United Telecom/Co.No,D07800/2023/ Date: 05.09.2023
Order of Adjudication of Penalty Under Section 454 of the Companies Act, 2013 read with Rule 3 of the Companies (Adjudication of Penalties & Rules) Rules, 2014. For Violation of Provisions of Section 152 of the Companies Act, 2013 read with Rules framed therein by United Telecoms Limited.
Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II dared 24.01.2015 has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by Section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules 2014 lot adjudging penalties. under the provisions of the Companies Act 2013
2. The company, United Telecoms Limited (hereinafter referred to as Company) was incorporated on 07.03.1984 under the jurisdiction of Registrar of Companies, Karnataka and the registered office of the company is presently situated No. 18A/19, Doddanekundi Industrial Area, Mahadevapura Post, Whitefield. Bangalore — 560048.
3. A complaint was received from a shareholder of the company stating that the explanatory statement attached to the notice dated 14.07.2021 of the EGM to be held on 06.08.2021 with respect to the appointment of independent director (Item No 4 regarding appointment of Mr. Vijay Jain) do not include a statement that in the opinion of the Board, the independent director proposed to be appointment fulfil conditions specified in the Act and the rules made thereafter and that the proposed director is independent of the management.
4. As per the provisions of section 152(5) of the Act, a person appointed as a director shall not act as a director unless he gives his consent to hold the office as director and such consent has been filed with the Registrar within 30 days of his appointment in such manner as may be prescribed and as per the proviso to this subsection, in the case of appointment of an independent director in the general meeting. an explanatory statement for such appointment, annexed to the notice for the general meeting, shall include a statement that in the opinion of the Board, he fulfils the conditions specified in this Act for such an appointment.
5. Pursuant to the instructions received from the Directorate to proceed in the matter of non-compliance of section 152 of the Act, this office had issued adjudication notice followed by hearing notices to the company and its directors for the said violation on 1605,2023. Hearing was held on 31.05.2023 which was attended by Mr. Bimlendu Kumar, practicing company secretary and authorised representative of the company and all directors except Ms. Chalasani Sandhya Rao. He made his submissions on the same lines as detailed out above and prayed for waiver of penalty as tree non-compliance was procedural and minor This office also receive(‘ a letter dated 01.06.2023 from Ms. Chalasani Sandhya Rao through her attorney holder who submitted that Ms. Chalasani W25 a non- executive director of the company and the ore who brought out the violation in the complaint to this office
6. separate adjudication notices dated 26.07.2023 were sent to Ms. Swetha Jain and Ms. Dipika Todi, company secretaries of the company for the above-mentioned non-compliance. A reply was received from Ms. Swetha Jain on 09.08.2023 stating that she had resigned form the company w.e.f. 16.08.2018 and copies of her resignation letter and DIR-12 form filed were attached A reply from Ms. Dipika Todi was received an 09.08.2023 stating that she had also resigned from the company w.e.f. 24 02.2022. She further submitted that the appointment of the independent director in question was in accordance with law, except for the aforementioned missing statement- It is noticed that Ms. Dipika Todi was the company secretary-of the subject company during the occurrence of this default.
7. As per provisions of section 159 of the Act, if any individual or director of a company, contravenes any of the provisions of section 152, section 155 arid section 156, such individual or director of the company shag t Cable to a penalty which may extend to fifty thousand rupees and where the default is a continuing one, with a further penalty which may extend to five hundred rupees for every day after the first during which such default continues. For the purrpose of this default. the massaging director, whole time director and the company secretary are held liable.
8 The officers of the company. as mentioned in para 10 of this order, have violated the Provision to section 152(5) of the Act and are liable for penalty as provided under sect on 159 of the Act.
9. It is seen that the company is a public company and does not fall under the definition of a small company as per the provisions of section 2(85) of the Companies Act, 2013. However, giving due regard to the factors provided in Rule 3(12) of Companies Adjudication of Penalties Rules, 2014, since the non compliance is a minor and non-repetitive default, maximum penalty is not being levied.
10. Therefore, having considered the fats and circumstances of the case and the submissions made by the company, promoters and directors through their authorised representatives, in view of the above said violation, in exercise of the powers vested under section 454(3)(a) of the Act, I do hereby impost penalty on the company, promoters and directors who were in default of the offence committed in a manner as tabulated herein’
| S No. | Particulars of noticee |
Penalty imposed |
| i. | Potluri Padmavathi, Managing Director | Rs. 30,000 |
| ii. | Krantipriya Chakravarty Mitra, Wholetime Director | Rs. 30,000 |
| iii. | Dipika Todi, Company Secretary |
Rs. 30,000 |
11. The company and its promoters/ directors/ Key managerial personnel who are in default are hereby directed to pay the penalty amount as tabulated above. within 90 days from the date of receipt of this Order and file Form INC-28 attaching 3 copy of the Order and payment challans. In case of CireCtors.5uch penalty amount required to be paid out of their own funds. The noticee shall pay the said amount of penalty online by using the website www. mca.gov.in (Miscellaneous head) spec4ing the details of this Order and the name of the noticee who is paying the penalty..
12. Appeal, if any, against this Order may be Filed with the Regional Director (South East Region), Hyderabad within El periled of 60 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.
13. Your attention 15 also invited to section 454(8) of the Companies Act. 2013 in case of non-compliance of this Order wherein necessary penal action will be initiated under section 454(8)(i) and 454(8)(ii) of the Companies Act 2013 against the company and directors /key. managerial personnel who are in default without further notice in the matter.
14. The company is required to serve a copy of this Order on the director(s)/Officer(s)-in‑ default mentioned above in terms of provisions of section 20 of the Companies Act, 2013.
(Sanjay Sood)
Registrar of Companies, Karnataka
and Adjudicating Officer
