The Ministry of Corporate Affairs (MCA) has imposed a penalty on T. Forrest & Sons India Private Limited for delaying the issuance of share certificates, a violation of Section 56(4) of the Companies Act, 2013. This article provides a detailed analysis of the case, the provisions of the Act that were violated, and the implications for the company and its officers.
Forrest & Sons India Private Limited, a company registered under the Companies Act on January 21, 2022, faced scrutiny for failing to issue share certificates within the prescribed period. According to the company, equity shares were issued to subscribers of the Memorandum of Association on April 8, 2022, but there was a delay of 17 days in issuing the share certificates.
Provisions of the Act
Section 56(4)(a) of the Companies Act, 2013: “Every company shall, unless prohibited by any provision of law or any order or court Tribunal or other authority deliver the certificates of all securities allotted, transferred or transmitted within a period of two months from the date of incorporation, in the case of subscriber to the memorandum.”
Section 56(6) of the Companies Act, 2013: “Where any default is made in complying with the provisions of subsection (1) to (5) the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.”
The company had attempted to rectify the default by submitting Form GNL-1 for compounding of offences under Section 441 read with Section 56 of the Companies Act, 2013. However, the Regional Director (Northern Region) rejected this form, stating that the matter required adjudication under Section 56 rather than compounding.
Adjudication of Penalty
Following the rejection of the compounding application, the MCA appointed an Adjudicating Officer to examine the case. The company was found to have violated Section 56(4)(a) by delaying the issuance of share certificates. As per Section 56(6), both the company and its officers were liable for a penalty.
Consideration of Factors
Taking into account the nature of the default and the fact that T. Forrest & Sons India Private Limited is classified as a small company under Section 2(85) of the Act, the Adjudicating Officer imposed a penalty as follows:
| Name of Person | Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.) |
| Company | 50,000 | 25,000 |
| Amit Tiwari | 50,000 | 25,000 |
| Daniel Richard Wallbank | 50,000 | 25,000 |
The total penalty imposed was Rs. 75,000, considering the reduced penalty provision under Section 446B for small companies and their officers.
Compliance and Appeal
The company and the officers were directed to pay the penalty through the MCA21 portal within 90 days of receiving the order. They were also instructed to file Form INC-28 along with the adjudication order and payment challans.
Additionally, the company has the right to appeal against this order to the Regional Director (Northern Region) within 60 days of receiving the order, as per Section 454(5) and (6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014.
Conclusion
The penalty imposed on T. Forrest & Sons India Private Limited serves as a reminder of the importance of adhering to the provisions of the Companies Act, 2013. Timely issuance of share certificates is a crucial compliance requirement, and any delays can result in significant penalties. Companies must ensure that they meet all statutory obligations to avoid such penalties and ensure smooth corporate governance.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF
COMPANIES,
UTTAR PRADESH,
37/17, Westcott Building, The Mall,
Kanpur — 208001 (U.P.)
Phone : 0512 — 2310323/2310443
Order NO.07/01/ADJUDICATION-56(6)/T. FORREST /2024 DATED 04/07/2024
ORDER OF VIOLATION OF UNDER SECTION 56 (6) OF THE COMPANIES, ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES 2014
IN THE MATTER OF MIs. T. FORREST & SONS INDIA PRIVATE LIMITED
Appointment of Adjudicating Officer: –
1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-AD 11 dated 24.03.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules,2014 under the provisions of this Act.
Company: –
2. Whereas the Company M/s T. FORREST & SONS INDIA PRIVATE LIMITED has been registered under the provisions of Companies Act on 21.01.2022, and is having its registered office situated at TSE 34 8th Flr Galaxy Blue Sapphire Plaza Plot C-3, Sector, -4, Greater Noida West NA,Gautam BuddhaNagar,Gautam Buddha Nagar, Uttar Pradesh,201318. The authorized capital of the company is Rs. 25930450/-
3. Whereas the company has filed Suo-moto adjudication application under section 56 (6) of the companies act, 2013 for violation of section 56(4) (a) of the companies act 2013 with this office. The company has stated that it has issued equity shares to its subscriber of Memorandum of. Association on 8th April 2022 and accordingly there was a delay of 17 days in issuing equity share certificates to its shareholder our part under section 56 (4) (a) of the companies act, 2013. In order to make the default good the company had submitted form GNL-1 compounding of offences under section 441 read with section 56 of the companies act_ 2013 vide SRN no. F24319493 dated 09.09.2022 before RD (NR). However, this form has been rejected by Hon’ble Regional Director, (NR) in hearing on 3rd January 2024 mentioning that it is a matter of adjudication under section 56 of the companies act, 2013 rather than compounding.
4. Provisions of the Act: –
Section 56 (4) (a) of the Companies Act, 2013 provides that: –
“Every company shall, unless prohibited by any provision of law or any order or court Tribunal or other authority deliver the certificates of all securities allotted, transferred or transmitted.
(a) within a period of two months from the date of incorporation, in the case of subscriber to the memorandum.
Section 56(6) of the Companies Act, 2013 provides that —
“Where any default is made in complying with the provisions of subsection (1) to (5) the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.”
5. As per provisions of section 466B of the Companies Act, 2013 provides that “Notwithstanding anything contained in this act, if penalty is payable for non-compliance 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 persons, as the case maybe 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 I case of a company one lakh rupees in case of an officer who is in default or any other person, as the case may be”.
6. Order:
Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose penalty as prescribed under section 56(6) of the Act. The default of the penalty imposed on the company (Being Small Company as per section 2(85) of the Act) and officers in default are shown in the table below:
| Nature of default Section | Relevant Section under the Co. Act.2013 | Name of persons on whom penalty imposed |
Maximum Penalty (Rs.) |
Final Penalty Imposed as per Sec.446B (Rs.) |
| Non- issuance of share certificate of under section 56(4) (a) of the companies act, 2013 | 56(6) | Company | 50000 | 25000 |
| AM IT TIWARI | 50000 | 25000 | ||
| DANIEL RICHARD WALLBANK |
50000 | 25000 |
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the notice(s).
7. The Notice shall pay the amount of penalty so imposed through MCA21 portal only as per rule 3(14) of Companies (Adjudication of Penalties) 2014. within 90 days receipt of this order. The company needs to file InC-28 as per the provisions of the act, attaching a copy of adjudication order along with payment challans.
8. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi 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].
9. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of noncompliance of this order. In Case appeal is made 0/o Registrar of Companies, U.P. maybe informed alongwith the penalty imposed & the payments made.
(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur
NO.07/01/ADJUDICATION-56 /T. FORREST /2024/2080 to 2082
DATED. 4/7/2024
