On October 16, 2023, the Ministry of Corporate Affairs, Government of India, rendered a significant penalty order under Section 454 of the Companies Act, 2013, against Misys Trade and Risk Management India Private Limited. This article offers an in-depth analysis of the penalty order, elucidating the underlying facts, the legal framework, and the repercussions faced by the company and its directors.
1. Appointment of Adjudicating Officer: The penalty order starts by introducing the appointed Adjudicating Officer, Benudhar Mishra, who holds the authority to levy penalties under Section 454 of the Companies Act, 2013.
2. About the Company: It is clarified that Misys Trade and Risk Management India Private Limited, referred to as the “Company,” operates under the provisions of the Companies Act, 1956. The company’s registered address is specified as 1302, Tower-3, India Bulls Finance Centre, Senapati Bapat Marg, Elphinstone Road (West), Mumbai, Maharashtra, India.
3. Facts about the Case: The article underscores that when the Company increased its share capital from Rs. 1,00,000 divided into 10,000 equity shares of Rs. 10 each to Rs. 7,95,11,650 divided into 79,51,165 equity shares of Rs. 10 each, it was legally obligated to make the appropriate appointment.
4. Sections 203(1), 203(4), and 203(5) of the Companies Act, 2013: The penalty order reproduces essential sections of the Companies Act, emphasizing the requirement for companies to appoint key managerial personnel, including managing directors, company secretaries, and chief financial officers.
5. Factors Considered in Penalty Determination: The Adjudicating Officer is instructed to consider various factors when determining the penalty amount under Section 203(5) of the Act. These include evaluating disproportionate gains or unfair advantages due to the default and the losses incurred by investors because of the default.
6. The Hearing Process: The article delves into the hearing process, indicating that the Company and its officers in default were provided with an opportunity to be heard and make submissions. Ms. Sonali Pawaskar, a Practicing Company Secretary, represented the Company during this stage. The Company’s representatives acknowledged that they were required to appoint a whole-time Company Secretary from July 6, 2012, but only did so on April 23, 2019. This non-compliance with Section 383A of the Companies Act, 1956, and Section 203 of the Companies Act, 2013, was acknowledged.
However, the presenting officer pointed out the Companies (Amendment) Ordinance, 2019, which came into effect on November 2, 2018, stating that the period from July 6, 2012, to November 1, 2018, was compoundable. As such, this period was not considered for adjudication and should be compounded with the appropriate authority under Section 441 of the Companies Act, 2013. The presenting officer concluded that the period from November 2, 2018, to April 22, 2019, would be taken up for adjudication under Section 454 of the Companies Act, 2013.
a) The article separates the default period into two parts:
8. The Penalty Order: The penalty order specifies the penalties imposed on the Company and its directors for the delay in compliance with Section 203. The penalty amounts are determined based on the duration of the default period and are deemed commensurate with the nature of the failure.
9. Compliance and Consequences: The Company and the individual officers in default are required to pay the designated penalty through the “Ministry of Corporate Affairs” portal and provide proof of payment within 90 days of receiving the order. The article also highlights the option to file an appeal within 60 days from the date of receipt of the order. Failure to pay the penalty within 90 days may result in fines, as per Section 454(8)(ii) of the Companies Act, 2013. Prosecution may be pursued in case of default.
This penalty order signifies the strict enforcement of corporate regulations and underscores the significance of complying with statutory provisions, particularly in appointing key managerial personnel. By analyzing this case, businesses can better understand the repercussions of non-compliance and the need for timely corrective measures. Furthermore, it illustrates the unwavering commitment of the Indian government to ensuring corporate compliance and safeguarding the interests of investors and stakeholders.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES
100, “EVEREST”, MARINE DRIVE,
MUMBAI – 400 002
e-Mail ID: firstname.lastname@example.org
Date: 16 OCT 2023
Order of Adjudication of Penalty under Section 454 for violation of Section 203 of the Companies Act, 2013
IN THE MATTER OF MISYS TRADE AND RISK MANAGEMENT INDIA
Adjudicating Officer: – Benudhar Mishra, ICLS, ROC, Mumbai, Maharashtra.
Presenting Officer: – Ms. Rujuta Bankar, ICLS, Asst. ROC, Mumbai, Maharashtra.
Authorized person on behalf of Company: – Ms. Sonali Pawaskar, Practicing Company Secretary.
1. Appointment of Adjudicating Officer: –
Ministry of Corporate Affairs vide its Gazette Notification No.A-42011/112/2014-Ad.II dated 24.03.2015 appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 [herein after known as Act] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Company: –
Whereas the Company MISYS TRADE AND RISK MANAGEMENT INDIA PRIVATE LIMITED [herein after known as Company] is registered with this office under the provisions of Companies Act, 1956 having its registered address at 1302, Tower-3, India bulls Finance Centre Senapati Bapat Marg, Elphinstone Road (West), Mumbai MH 400013 as per the MCA Portal.
3. Facts about the case:-
share capital from Rs.1,00.000/- divided into 10,000 equity shares of Rs. 10/- each to Rs. 7,95.11,650/- divided into 79.51,165 equity shares of Rs. 10/- each, the company was mandated by law to make such rightful appointment.
4. Sections 203(1), 203(4) and 203(5) of the Companies Act, 2013 are reproduced as under: –
Section 203 — Appointment of Key Managerial Personnel
Section 203 (1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel, -(i) managing director, or chief executive officer or manager and in their absence, a whole-time director; (ii) company secretary; and(iii) Chief Financial Officer.
Section 203 (4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a sorting of the Board within a period of six months from the date of such vacancy.
Section 203 (5) If any company makes any default in complying with the provisions of this section such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is continuing one with further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.
5. Factors to be taken into account by the Adjudicating Officer: –
While adjudging quantum of penalty under Section 203(5) of the Act, the Adjudicating Officer shall have due regard to the following factors, namely:
a. The amount of disproportionate gain or unfair advantage, wherever 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 quantify the unfair advantage made by the Noticee or the loss caused to the investors in a default of this nature.
6. Hearing: –
The undersigned in exercise of power conferred under sub-Section 3 of Section 454 of the Companies Act, 2013 had issued hearing notice dated 30.08.2022 to the Company and Officers in default for giving an opportunity to be heard and for submissions in the matter, if any. In response to the hearing notice, representative of the Company, Ms. Sonali Pawaskar appeared and gave consent to adjudicate and pass necessary orders for adjudicating the penalty as per the provisions of the Companies Act, 2013.
The representatives of the Company stated that the company was required to appoint Whole time Company Secretary w.e.f. 06.07.2012. However, the Company appointed the Whole-time Company Secretary on 23.04.2019 only. Hence, there is a violation of provisions of Section 383A of Companies Act, 1956 and Section 203 of the Companies Act, 2013.
However, the presenting officer referring to the Companies (Amendment) Ordinance, 2019 dated 12.01.2019 which came into effect from 02.11.2018 stated that the period of default from 06.07.2012 to 01.11.2018 is compoundable in nature, henceforth such period shall not be made part of adjudication and the same need to be compounded accordingly with the appropriate authority u/s 441 of the Companies Act, 2013.
Thus. the presenting officer considering the above amendment adjudged that the period from 2.11.2018 to 22.04.2019 for non-compliance of provisions of section 203 of the Companies Act, 2013 shall be taken up for adjudication under section 454 of the Companies Act, 2013.
7. Findings: –
a) The period of default for non-compliance of provision of section 383(A) of the Companies Act, 1956 is 06.07.2012 to 1.11.2018 is compoundable and accordingly it is not taken up for adjudication.
b) The period from 02.11.2018 to 22.04.2019 for non-compliance of provisions of section 203 of the Companies Act, 2013 is taken up for adjudication in terms of provision of section 203 read with section 454 of the Companies Act,
203 of the Companies Act, 2013 for delay mentioned against their names. I am of this opinion that, the penalty is commensurate with the aforesaid failure committed by the Noticee.
|Sr. No||Penalty imposed on the Company/ Director(s) Director(s)||Period of default||No of day days of default||First
|1.||MISYS TRADE AND RISK MANAGEMENT INDIA PRIVATE LIMITED||2.11.2018
|171||5,00,000||171 X 1000||6,71,000||6,71,000|
|2.||MANIKANDAN GANESAN, Director||2.11.2018
|171||50,000||171 X 1000||2,21,000||2,21,000|
|3||VINOD PATRICK NORONHA, Director||02.11.2018 to 11.04.2019||160||50,000||160 X 1000||2,10,000||2,10,000|
|4.||MEHJABEEN ESMAIL POONAWALA, Additional Director||02.11.2018 to
|171||50,000||171 X 1000||2,21,000||2,21,000|
b. As per the signatory details available on MCA 21 Portal, the above-mentioned individual(s) were officer in default during the period of violation.
c. The noticee shall pay the said amount of penalty through “Ministry of Corporate Affairs” portal and proof of payment be produced for verification within 90 days of receipt of this
d. Appeal against this order may be filed in writing with the Regional Director (Western Region) within a period of 60 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
e. Your attention is also invited to Section 454(8)(ii) of the Companies Act, 2013, where penalty imposed by the adjudicating officer or the Regional Director within a period of ninety days from the date of the receipt of the copy or the order, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees.
f. Therefore, in case of default in payment of penalty, prosecution will be filed under Section 454(8)(i) and (ii) of the Companies Act, 2013 at your own costs without any further notice.
Registrar of companies and Adjudication
officer, Maharashtra, Mumbai.