Delay in filing declaration u/s 10A in e-form 20 A – MCA reduces Penalty by 80%

Introduction: In a recent case before the Regional Director (Southern Region) of the Ministry of Corporate Affairs (MCA) in Chennai, M/s. Ideenkriese Tech 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 significant reduction in penalties, showcasing the MCA’s pragmatic approach towards mitigating financial burdens on companies.

Background: M/s. Ideenkriese Tech Private Limited, incorporated on 27.11.2018, encountered regulatory scrutiny 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, must file a declaration within 180 days from the date of incorporation. The declaration, submitted through e-form 20A, verifies that every subscriber to the memorandum has paid the agreed-upon value of the shares.

Adjudication and Penalties: Despite these stipulations, Ideenkriese Tech Private Limited filed the declaration in form INC 20A with a delay of 72 days. The Registrar of Companies, Kerala, upon review, passed Adjudication Order No. ROC/S-454/10A/719/ 2020 dated 19.02.2020. This order, under Section 454(3) & (4) of the Act, 2013, imposed a penalty of Rs. 50,000/- on the company and Rs. 72,000 on the Director, Shri Ananthu Vinod.

Appeal and Hearing: In response to the adverse order, the appellants filed an appeal within the limitation period in accordance with Section 454(5) of the Act, using Form ADJ on 12.08.2022. The appellants sought leniency, emphasizing the absence of intentional or deliberate actions to violate the law and highlighting the lack of prejudice to public interest.

The hearing, held on 15.11.2023, provided an opportunity for the appellants to reiterate their submissions, emphasizing the inadvertent 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 significantly reduced from Rs. 50,000/- to 20% of the original penalty, amounting to Rs. 10,000/- for the company. Similarly, the penalty on Director Shri Ananthu Vinod was reduced from Rs. 72,000/- to 20%, resulting in Rs. 14,400/-.

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 Director Shri Ananthu Vinod paid Rs. 14,400/-.

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 pragmatic approach to penalties, recognizing the unintentional nature of certain regulatory violations. The significant reduction in penalties for Ideenkriese Tech Private Limited showcases the MCA’s commitment to facilitating business growth by alleviating financial burdens arising from inadvertent lapses in compliance.

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ADJ/24 /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. Idenkriese Tech Private Limited

1. M/s. Ideenkriese Tech Private Limited
XXI/ 370A, Vettukattil (Hospital) Building
Muvattupuzha P.O.
Muvattupuzha, Ernakulam.

2. Shri Ananthu Vinod, Director ………………… Appellant

Date of hearing: 15.11.2023

Present: Smt. Kavitha Surana,
Practicing Company Secretary

ORDER

M/s. Ideenkriese Tech Private Limited (hereinafter referred to as the Company), was incorporated on 27.11.2018. 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 filed the declaration in form INC 20A with the delay of 72 days. The Registrar of Companies, Kerala on perusal of the said default, passed the Adjudication Order No. ROC/S-454/10A/719/ 2020 dated 19.02.2020 for the delay of 72 days under Section 454 (3) & (4) of the Act, 2013 and imposed a penalty of Rs. 50,000/- upon the company and Rs.72,000 on the Director in default viz. Shri Ananthu Vinod.

2. Aggrieved by the said Order dated 19.02.2020 of ROC, Kerala , the appeal was filed by the Appellants in terms of Section 454 (5) of the Act in Form ADJ on 12.08.2022 vide SRN: F21058961. 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 72,000/- to 20 % of the penalty imposed i.e. Rs.14,400/- on director in default viz. Sri Ananthu Vinod, Director.

6. Pursuant to the directions of the undersigned, the appellant has remitted the penalty amount and has produced receipt evidencing payment of fee 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)