Delay in filing declaration u/s 10A in e-form 20 A – MCA reduces Penalty to 20%

Introduction: In a recent case before the Regional Director (Southern Region) of the Ministry of Corporate Affairs (MCA) in Chennai, M/s. Onecup Beverages Private Limited faced penalties for a delay in filing the declaration under Section 10A of the Companies Act, 2013. The matter, adjudicated under Section 454(7) of the Companies Act, 2013, resulted in a noteworthy reduction in penalties, shedding light on the MCA’s lenient approach.

Background: M/s. Onecup Beverages Private Limited, incorporated on 29.01.2019, found itself in hot water due to a delay in filing the declaration under Section 10A of the Companies Act, 2013. This section mandates that a company with a share capital, incorporated after the commencement of the Companies (Amendment) Ordinance, 2018, cannot commence business or exercise borrowing powers without filing a declaration within 180 days from the date of incorporation. The declaration, filed through e-form 20A, must confirm that every subscriber to the memorandum has paid the agreed-upon value of the shares.

Adjudication and Penalties: Despite these provisions, M/s. Onecup Beverages Private Limited filed the declaration in form INC 20A with a delay of 113 days. The Registrar of Companies, Kerala, upon review, passed Adjudication Order No. ROC/S-454/10A/81/2020 dated 13.01.2020. This order, under Section 454(3) & (4) of the Act, 2013, imposed a penalty of Rs. 50,000/- on the company and Rs. 1,00,000 on the Director, Shri Ricky Wilson.

Appeal and Hearing: In response to the adverse order, the appellants filed an appeal in accordance with Section 454(5) of the Act, using Form ADJ on 08.2022. The appeal, submitted within the limitation period, sought a lenient view, emphasizing the absence of intentional or deliberate actions to violate the law and highlighting the lack of prejudice to public interest.

The hearing, conducted on 15.11.2023, provided a platform for the appellants to reiterate their submissions, emphasizing the non-malicious nature of the delay.

Reduction in Penalties: The Regional Director, in the hearing held on 15.11.2023, decided to intervene in the impugned adjudication order, specifically to reduce the quantum of penalties. The penalties imposed by the ROC, Kerala, were reduced from Rs. 50,000/- to 20% of the original penalty, amounting to Rs. 10,000/- for the company and from Rs. 1,00,000/- to 20%, resulting in Rs. 20,000/- on Director Shri Ricky Wilson.

Compliance and Conclusion: In compliance with the Regional Director’s directive, the appellants promptly remitted the revised penalty amounts. The company paid Rs. 10,000/-, and the Director, Shri Ricky Wilson, paid Rs. 20,000/-.

The appellants are further directed to file the order in Form No. INC-28 within 30 days on the MCA-21 Portal.

Conclusion: This case serves as an illustration of the MCA’s willingness to consider individual circumstances and take a lenient stance in cases where violations are not deliberate or prejudicial to public interest. The reduction in penalties for M/s. Onecup Beverages Private Limited underscores the importance of transparency and communication in regulatory compliance, allowing businesses to rectify unintentional errors without bearing excessively burdensome consequences.

ADJ/22/RD (SR)/2023-24

Before the Regional Director
(Southern Region)
Ministry of Corporate Affairs, Chennai

In the matter of the Companies Act 2016
Section 454(7) of Companies Act 2013

In the matter of M/s. OneCup Beverages Private Limited

1. M/s. Onecup Beverages Private Limited
XVI-444, Palakuzhiyil South of Petta
Arakuzha Road, Muvattupuzha, Ernakulam
Kerala.

2. Shri Ricky Wilson  …………Appellant

Date of hearing : 15.11.2023

Present : Smt. Kavitha Surana,
Practicing Company Secretary

ORDER

M/s. Onecup Beverages Private Limited (hereinafter referred to as the Company), was incorporated on 29.01.2019. As per provisions of Section 10A of CA 2013, a company incorporated after the commencement of the Companies (Amendment) ordinance, 2018 and having a share capital shall not commence any business or exercise any borrowing powers unless a declaration is filed by a Director within a period of one hundred and eighty days from the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration. The Rule 23A of Companies (incorporation) Rules,2014 provides that the declaration u/s 10A by a director shall be in the prescribed e-form 20A and that it shall be filed with the Registrar. However the company has field the declaration in form INC 20A on 18.11.2019 with the delay of 113 days. The Registrar of Companies, Kerala on perusal of the said default, passed the Adjudication Order No. ROC/S-454/10A/81/2020 dated 13.1.2020 for the delay of 113 days under Section 454 (3) & (4) of the Act, 2013 and imposed a penalty of Rs. 50,000/- upon the company and Rs.1,00,000 on the Director in default viz. Shri Ricky Wilson.

2. Aggrieved by the said Order dated 13.01.2020 of ROC, Kerala , the appeal was filed by the Appellants in terms of Section 454 (5) of the Act in Form ADJ on 08.2022 vide SRN: F20260154. The appeal was filed within the limitation period.

3. The appellants have sought to take a lenient view keeping in view that there was no intentional or deliberate action on the part of the appellant to violate the provisions of law and taking into consideration of the fact that no prejudice is caused to the public interest, prayed for lesser penalties.

4. That the hearing of the appeal was held on 15.11.2023. The authorized representative has reiterated the submissions made in the appeal.

5. There is a ground in interfering with the impugned adjudication order of the Registrar of Companies to the extent of reducing the quantum of penalty. Accordingly, in the hearing held on 15.11.2023, the penalties imposed by ROC, Kerala are reduced from Rs. 50,000/- to 20 % of the penalty imposed i.e Rs.10,000/- for the company and from Rs.1,00,000/- to 20 % of the penalty imposed i.e. Rs.20,000/- on director in default Shri Ricky Wilson.

6. Pursuant to the directions of the undersigned, the appellant has remitted the penalty amount and had submitted copies of receipts evidencing payment of penalty as detailed below :

7. That the Appellants are directed to file this order in Form No. INC-28 within a period of 30 days on MCA-21 Portal.

Dated at Chennai this the 18^th day of January, 2024.

(Dr. RAJ SINGH)
REGIONAL DIRECTOR (SR)