In a recent adjudication, the Regional Director of the Western Region, Ministry of Corporate Affairs, Mumbai, upheld a substantial penalty of ₹1.59 lakh imposed on Kudos Finance and Investments Private Limited and its officers. The penalty relates to non-compliance with the Companies Act, 2013, specifically regarding the delay in filing Forms MGT-4, MGT-5, and MGT-6.
Background of the Case
Kudos Finance and Investments Private Limited, along with its officers, faced penalties for failing to adhere to provisions under Section 89 of the Companies Act, 2013. The key non-compliance involved the delayed filing of mandatory forms which are crucial for maintaining transparency in shareholder information and beneficial ownership.
Adjudication Details
On February 9, 2024, the Registrar of Companies (RoC) Pune issued an adjudication order imposing a penalty for the delayed filing of Forms MGT-4, MGT-5, and MGT-6, totaling ₹16.59 lakh. The penalty was calculated based on the default period of 546 days, which led to significant financial implications for the company and its officers.
- Penalty Breakdown:
- Company: ₹5,00,000 (under Section 89(7))
- Individual Officers: ₹2,00,000 each (maximum as per Section 89(7))
- Manish Chhajed: ₹1,59,200 (under Section 89(5))
Grounds for Appeal
Kudos Finance and its officers filed an appeal arguing the following points:
1. Procedural Irregularities: The appellants claimed that the RoC acted contrary to established norms and failed to consider their explanations.
2. Financial Hardship: They argued that the company had not generated income for the past two years.
3. Non-Malafide Intent: They asserted that the non-compliance was not intentional.
4. Inaccurate Penalty Calculation: The appeal challenged the calculation of penalties, particularly for individuals not in default during the relevant period.
Hearing and Representations
During the hearing on July 2, 2024, Anil Kumar Dhanotiya, the practicing company secretary representing the appellants, reiterated the appeal’s grounds. Despite admitting the contraventions, the representation argued against the imposed penalties, particularly for officers who were not in office during the default period. They also highlighted discrepancies in the MCA-21 portal records.
Regional Director’s Decision
After reviewing the appeal, the Regional Director confirmed the RoC’s order, ruling that:
1. No Inherent Defect: The original adjudication was consistent with the provisions of the Companies Act.
2. Penalty Validity: The penalties imposed were valid and in accordance with the Act’s stipulations.
The appeal was dismissed, and the appellants were directed to pay the penalty within 90 days, or face prosecution under Section 454(8) of the Act.
BEFORE THE REGIONAL DIRECTOR, WESTERN REGION
MINISTRY OF CORPORATE AFFAIRS, MUMBAI
Order No. Kudos Finance/89/F94307253/2023-24/5840 Dated: 16th July 2024
APPEAL UNDER 454(5) OF COMPANIES ACT, 2013 AGAINST ORDER PASSED FOR OFFENCES COMMITTED UNDER SECTION 89 OF THE COMPANIES ACT, 2013 READ WITH RULE 9 OF THE COMPANIES (MANAGEMENT & ADMINISTRATION) RULES, 2014.
In the matter of KUDOS FINANCE AND INVESTMENTS PRIVATE LIMITED & ORS
| 1. | Kudos Finance and Investments Private Limited | Company |
| 2. | Pavitra Pradip Walvekar | Additional Director |
| 3. | Swati Jindal | Director |
| 4. | Audumbar Dattatray Rant | Director |
| 5. | Naresh Vigh | Director |
| 6. | Rizwan Hasan Shaikh | Additional Director |
…Appellants
Through: Anil Kumar Dhanotiya, Practicing Company Secretary.
HON’BLE REGIONAL DIRECTOR (WESTERN REGION)
ORDER
Appeal under sub-Section (5) of Section 454 of the Companies Act, 2013 (Act) r/ w the Companies (Adjudication of Penalties) Rules, 2014 (Rules) has been filed by ‘Kudos Finance and Investments Private Limited’ (Company) having C1N U65910PN2009PTC148795 and, its Officers, against Order No. RoCP/ ADJ/89/23-24/KUDOS/8(iii)/B/2872 dated 09/02/2024 (ROC Order) of Registrar of Companies, Pune for violating provisions of Section 89 of the Companies Act, 2013 read with Rule 9 of the Companies (Management & Administration) Rules, 2014.
2. The appeal lies within the jurisdiction of the Regional Director, Western Region, Ministry of Corporate Affairs, Government of India.
3. The Registrar of Companies, Pune (RoC Pune) vide Adjudication Order dated 09/02/2024 imposed penalty under Section 89(7) of the Act upon the company and its officers in default and penalty under Section 89(5) of the Act upon Mr. Manish Chhajed for violation of Section 89 of the Act as under:
| Nature of
Default |
Company / Officers to whom penalty in posed | No. of Days in default | Penalty for defaults as per Section 89(7) / 89(5) of the Act | Total Penalty in Rs. | Penalty imposed (Rs.) (as per maximum Penalty Prescribed |
| Section 89(1), 89(6) for delay of 546 days in filing of forms MGT-4, MGT-5 & MGT-6
|
Kudos Finance and Investments Private Limited | 546 |
Rs.1,000/ day as per Sec.89(7) of the Act. |
1000X546 5.46.000 | Rs. 5,00,000 |
| Pavitra Pradip Walvekar | 546
|
1000X546 5,46,000 | Rs. 2,00,000 | ||
| Swati Jindal | 546 | 1000X546 5,46,000 | Rs. 2,00,000 | ||
| Naresh Vigh | 546 | 1000X546 — 5,46,000 | Rs. 2,00,000 | ||
| Audumbar Dattatray Raut | 546 | 1000X546 5.46.000 | Rs. 2,00,000 | ||
| Rizwan Hasan Shaikh (from date of appointment i.e. 30/04/2022) | 419
|
1000X419 == 4,19,000 | Rs. 2,00,000 | ||
| Manish Chhajed | 546 | Rs.50,000 Rs.200 / day as per Sec.89(5) of the Act | 500001200X546 1,59.200 | Rs. 1,59,200 | |
| Toal | Rs.16,59,200/- | ||||
No. of days have been calculated from 24/12/2021 (date of filling of From MGT-7 and F. Y 2020-21) to till date of Notice (i.e23/06/2023 for F. Y 202-21)
4. Appellants have filed Form-ADJ vide SRN F94307253 dt.05/04/ 2024. As per provisions of sub-Section (6) of Section 454, every appeal under sub-section (5) shall be filed within sixty (60) days from the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person. On examination of the application/appeal, it is seen that the said application/appeal has been filed within 6() days from the date of passing of the adjudication order.
5. Grounds of Appeal & Relief sought:
a) The Learned Respondent (ROC) has acted in a manner which is contrary to well-established norms of dispensing justice.
b) The Order under appeal has been passed without considering the genuine explanations given by the Appellants(s).
c) The Appellants are unable to generate any income since last 2 years.
d) The non-compliances have occurred without any malafide intention. c) Quash/set aside the Adjudication Order passed by the ROC.
f) Discharge the company and its officers without any cost or penalty to order.
6. The matter was posted for hearing as per Section 454(5) r/w Section 454(7) of the Act on 02/07/2024. Anil Kumar Dhanotiya, Practicing Company Secretary appeared on behalf of Appellants as their authorized representative. The authorized representative reiterated the submission made by the applicants in their application and have admitted the contravention of Section 89 of the Companies Act, 2013. However, he submitted that no penalty under Section 89(7) of the Act to be imposed against the company and its officers in default for non-filing of MGT-4, MGT-5 & MGT-6. Ile further argued that Appellant No.5 & 6 were not officers in default during the relevant period. However, as per the Adjudication Order, number of days have been calculated from 24/12/2021 (date of filing of Form MGT-7 and F.Y. 2020-21) to till date of Notice (i.e. 23/06/2023 for F.Y. 2020-21). Also, Appellant No.5 i.e. Naresh Vigh has been appointed as Additional Director/Director w.e.f. 16/03/2019 and Appellant No.6 i.e. Rizwan Hasan Shaikh has been appointed Additional Director w.e.f 30/04/2022. However, in MCA-21 portal, both are still shown as Director/Additional Director as DIR-12 for their cessation have not ben filed with ROC.
7. That the punishment for contravention of section 89(1) of the Act is prescribed under section 89(5) of the Act and punishment for contravention of section 89(6) of the Act is prescribed under section 89(7) of the Act Companies Act, 2013 which states that
a) Section 89(5) of the Act: – “If any person fails to make a declamation as required under sub-section (1) or sub-section (2) or sub-section (3), lie shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a farther penalty of two hundred rupees for each day after the first during which such failure continues subject to maximum of five lakh rupees.”
b) Section 89(7) of the Act: – “if a company, required to file a return under sub-section (6), fails to do so before the expiry of the time specified therein, 11w company and every officer of the company who is in default shall be liable to a penalty of one thousand rupees for each day during which such failure continues, subject to a maximum of five lakh rupees in the case of a company and two lakh rupees in case of an officer who is in default.”
8. Facts of the Case:
a) An inquiry was conducted by the Inspecting Officer (10) and during the inquiry, it was observed that the company has filed Form MGT-7 vide SRN T57697252 for the Financial Year 2020-21 on MCA portal along with attachments. In the said attachments, the company has furnished the list of shareholders of the company. In SR.7 of the list of shareholders, a person named Mr. Manish Chhajed is the registered owner of the shares of the subject company and does not have any beneficial ownership in the company.
b) Mr. Manish Chhajed has failed to file the declaration to the company in the form MGT-4 which is a mandate as per law as Mr. Manish Chhajed is only the registered owner and not beneficial owner. As such, Mr. Manish Chhajed has failed to comply with the Section 89(1) of the Act and liable under Section 89(5) of the Act.
c) Also, the company has failed to file the return of declaration in Form MGT 6 with Registrar of Companies to intimate the beneficial ownership of the shares held in the name of Mr. Manish Chhajed. Thus, the company and its officers in default have failed to comply with provisions of Section 89(6) of the Act and are liable for action under Section 89(7) of the Act.
9. ROC vide his further report dt.01/07/2024 has stated that:
(i) Company has accepted the default in para 5 of the appeal.
(ii) No copies of MGT-4/MGT-5 were provided during the course of inquiry or adjudication process evidencing that the declaration of the beneficial interest has been received by the company.
(iii) From the MCA records, the MGT-6 as required under provisions is still not filed with the ROC and Appellant No.6 Mr. Rizwan Shaikh was appointed as additional director w.e.f. 30/04/2022. Hence, he is considered liable for abovesaid non-compliance as the company continues to remain non-compliant as per the provisions of Section of the law.
10. Taking into consideration the Adjudication Order of the Registrar of Companies, Pune; submissions made by the Appellants in their application, oral submissions of authorized representative during the hearing and further report of ROC dt.01/ 07/2024; I am of the considered view that there is no inherent defect in the Adjudication Order dt. 09/02/2024 and the same is in accordance with the provisions of the Act, and hence, the Adjudication Order dated 09/02/2024 passed by ROC, Pune is ‘Confirmed’.
11. In view of the above, the present appeal is dismissed with directions to the appellants to pay penalty imposed by the Registrar of Companies, Pune vide Adjudication Order dt. 09/02/2024 within 90 days, failing which, Registrar of Companies, Pune, is directed to file prosecution under Section 454(8) of the Companies Act, 2013.
A copy of this order shall be published on the website of the Ministry of Corporate Affairs as per Rules.
Singed and sealed on 16th day of July 2024.
(SANTOSH KUMAR)
REGIONAL DIRECTOR
WESTERN REGION, MUMBAI
