Excessive Borrowing without Shareholders’ Approval -MCA imposes penalty

In this case Yuva Nidhi Company Limited violated Section 180(1)(c) of the Companies Act, 2013, leading to a penalty imposed by the Ministry of Corporate Affairs (MCA). The company borrowed beyond its permissible limits without securing approval from shareholders – a breach that was flagged and acted upon by the Registrar of Companies, Gujarat Dadra & Nagar Haveli.

As per the detailed order issued by the Adjudicating Officer, the company and its directors were found to be in default. The fact of the matter was deduced from the financial statements of FY 2015-16, FY 2016-17, and FY 2018, where the company’s borrowing exceeded the permissible limit. Despite receiving a notice of adjudication, neither the company nor its directors replied or attended the hearing, leading to an ex-parte order for penalty.

Under section 454 of the Companies Act, 2013, the adjudicating authority imposed penalties on both the company and its directors. The criteria for the penalty included the disproportionate gain, loss caused to investors, and the repetitive nature of the default. However, the actual extent of the unfair advantage gained or loss caused to the investors due to this violation remained unquantified.

BEFOR THE ADJUDICATING OFFICER
REGISTRAR OF COMPANIES GUJARAT DADRA & NAGAR HAVELI

Order No. ROC-Guj/Yuva Nidhi/Adj. Order/Sec. 180/2023/1128 To 33 Dated: 25 May 2023

Ex-PARTE ORDER FOR PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES, 201 FOR VIOLATION OF SECTION 180(1)(c) OF THE COMPANIES ACT, 2013.

IN THE MATTER OF M/s. YUVA NIDHI COMPANY LIMITED.
(U65991GJ2013PLC077222)

Date of hearing-09.05.2023

Presents

(1) Shri R. C. Mishra- Adjudicating Officer

(2) Shri Gajanan Kate- Presenting Officer

(3) Shri Niranjan Lal Yadav-Junior Technical Assistant

Company/Officers in Default/Authorized Representative:

1. ATUL KUMAR SINGH (Director)

2. MEHULKUMAR UPENDRABHAI VYAS (Director)

3. SURENDRASINGH SABHAJIT SINGH RAJPUT (Director)

4. RAVINDERSINGH RAMJISINGH (Director)

Appointment of Adjudication Authority: –

1. The Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad. II dated 24.03.2015 has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred under section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 (Notification No. GSR 254(E) dated 31.03.201 for adjudging penalties under the provisions of Act.

Company:

2. Whereas, M/s. Yuva Nidhi Company Limited (herein after referred to as “the Company” is a Company registered under the provisions of the Companies Act, 1956/2013 in the State of Gujarat, having CIN (U65991GJ2013PLC077222) on 15.10.2013 and presently having its registered office situated at E- 407, Galaxy Arcade Commercial CO. OP. Soc, B/H Galaxy Avenue, Opp. Galaxy Cinema, Naroda, Ahmedabad, Gujarat, 382330, India.

Fact of the case:

3. WHEREAS in terms of provisions of section 180 (1) The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution, namely:

(c) To borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its 1 [paid-up share capital, free reserves and sec ties premium], apart from temporary loans obtained from the company’s bankers in the ordinary course of business:

4. WHEREAS It is observed from the Financial Statements of FY 2015-16, FY 2016-17 and FY 2 18 that the borrowing amount of the company are exceeded from permissible limits of the se 180(1)(c) of the Companies Act, 2013 and the company has not obtained shareholders approval. Hence, the Company and its officer(s) made violation of section 180(1) (c) of the Companies

Show Cause Notice, reply and personal hearing:-

5.Whereas, the office of the undersigned issued adjudication notice under section 454 of the Companies A t, 2013 for violation of section 180(1)(c) of the Companies Act, 2013 to the Company and its officers in s default on 28.04.2023 and also opportunity of being heard was given on 09.05.2023.

6. In response to the adjudication notice dated 28.04.2023 issued by the undersigned, neither the company noi the directors have replied nor attended the said hearing.

Submission of Presenting Officer:

The presenting officer submitted that sufficient opportunity has been given the company and its officers in default but it appears that neither they submitted reply nor appear for physical hearing as per schedule fi ed. It is further submitted that the company and its officers in default have violated the provisions of section 180(1)(c) of the Companies Act, 2013. Hence, the Adjudicating Authority has empowered u/s 4’4 of the Companies Act, 2013 to impose penalty for Violation of section 180(1)(c) of the Companies A t, 2013.

7. While adjudging quantum of penalty under section 180(1)(c) of the Companies Act, 2013, the Adjudicating Officer shall have due regard to the following factors, namely:

(a) The amount of disproportionate gain or unfair advantage, whenever quantifiable, made as a result of default.

(b) The amount of loss caused to an investor or group of investors as a result of the default.

(c) The repetitive nature of default.

8. With regard to the above factors to be considered while determining the quantum of penalty, it is noted at the disproportionate gain or unfair advantage made by the notice or loss caused to the investor as result of the delay on the part of the notice to redress the investor grievance are not available on the record. Further, it may also be added that it is difficult to quantify the unfair advantage made by the notice or the loss caused to the investors in a default of this nature.

9. Having considered the facts and circumstances of the case and after taking into accounts the factors above, the undersigned has reasonable cause to believe that the company and its officers have failed to deposit the penalty for violation of section 180(1)(a) of the Companies Act, 2013. I hereby impose a penalty on company and its Directors / officer in default as per Table below:

Penalty on company and Officers in default for the aforesaid default are as under:

10.The noticee shall pay the amount of penalty individually for the company and its directors (out of own pocked) by way of form No. INC-28 of e-payment (available on Ministry Website www.mac.gov.in) under “Pay miscellaneous fees” category in MCA fee and payment Service within 0 (ninety) days of this order and the Challan/SRN generated after payment of penalty through online ode shall be forwarded to this office along with the copy of form No.INC- 28.

11. Appeal if any, against this order may be filed in writing with the Regional Director, North estern Regional, Ministry of Corporate Affairs, ROC Bhavan, Opp. Rupal Park, Nr. Ankur Bu’ stand, Naranpura, Ahmedabad (Gujarat) 380 013 within a period of sixty days from the date of receipt of this order, in e-Form ADJ setting forth the grounds of appeal and shall be accompanied by the certified copy of this order. (Section 454 of the Companies Act, 2013 read with the Companies (Adjudicating of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019).

12. Please note that as per the provisions of section 454(8)(i) of the Companies Act, 2013, where company does not pay the penalty imposed by the Adjudication officer or the Regional Director within a is period of Ninety days (90 days) from the date of the receipt of the copy or order, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakhs rupees. Further as per section 454(8)(ii) of the Companies Act, 2013, where an of officer of a company who is in default does not pay the penalty within a period of Ninety days (90 days from the date of receipt of the copy of the order, such officers shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupe s but which may extend to one lakh rupees, or with both.

13. Your attention is also invited to section 454(8) of the Companies Act, 2013 in the event o f non- compliance of this order which provides that in case of default in payment of penalty, prosecution will be filed u/s. 454(8)(ii) of the Companies Act, 2013 at your own costs without any further notic The adjudication notice stands disposed of with this order.

(R. C MISHRA) ICLS
Adjusticating officer,
Register of Companies,
Gujarat, Dadraand Nagar Haveli.