Summary: The Ministry of Corporate Affairs (MCA) in Mumbai has issued a penalty order to SITAMAN Industries Pvt Ltd for non-compliance with Section 118 of the Companies Act, 2013. Appointed as the Adjudicating Officer, the Registrar of Companies found that SITAMAN Industries failed to maintain proper records and attendance sheets for board meetings, as well as inadequately filling out MBP-4 forms related to contracts with related parties. Despite the company’s claim that the lapses were unintentional and due to oversight, the inspecting officer determined that the violations warranted a penalty. Considering factors such as the company’s size, business nature, and the non-repetitive nature of the default, a total penalty of Rs. 17,500 was imposed, including Rs. 12,500 on the company and Rs. 2,500 each on directors Karishma Anand Patel and Preya Bhargav Patel. The penalty must be paid within 90 days to avoid further fines or imprisonment for the officers. The company has the right to appeal the order within 60 days.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES,
MUMBAI, MAHARASHTRA
100, “EVEREST”, MARINE DRIVE, MUMBAI – 02.
Website: www.mca.gov.in
E-M ID: [email protected]
Order No. ROC(M)/ADJ-SEC.1118/SITAMAN/SR No. 225/JTA(AP)/2024-25 /RD-07/469 To 471/ date: 05.08.2024
Order for Penalty under Section 118 r/w Section 454(3) of Companies Act,2013
SITAMAN INDUSTRIES PVT LTD
CW: U29308Ma12017PTC293053)
APPOINTMENT OF ADJUDICATING OFFICER: –
1. Ministry of Corporate Affairs vide its Gazette Notification No A-42011/ 112/2014-Ad.11 dated 24.03.2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 [herein after referred as “the Act”] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
COMPANY: –
2. Whereas the Company SITAMAN INDUSTRIES PRIVATE LIMITED [herein after known as Company] is registered with this office under the provisions of Companies Act, 1956/2013 having its registered address at 41, 2ND FLOOR, MERCHANT CHAMBERS, VITTHALDAS, THACKARSEY MARC, NEW MARINE LINES, CHURC HGATE, MUMBAI, Mumbai City, Maharashtra,400020,India. as per the MCA portal.
FACTS ABOUT THE CASE:
3. The Company filed a Compounding application u/s 441 of the Act vide SRN No. F89926216 AND F89922652 dated 10/01/2024 for compounding offences pursuant to Section 441 r/w Sec. 118. Considering the violation u/s 118 of the Ad on the part of the Company in which penal provision is given u/s 118(11) of the Act, the office of the undersigned directed the Company to file suitable adjudication application to adjudicate the default u/s 118 of the Act. Accordingly, the office of the undersigned received copy of adjudication application u/s 454 r/w Section 118 of the Act on 26/04/2024.
4. The Company in its Application stated that Inspection of books of accounts and other records of the Company was ordered by the Ministry u/s 206(5) and Section 207 of the Act. During the course of inspection, inspection officer observed and pointed out that the Company/or its directors / officers contravened Sec. 118 by not keeping attendance sheet of the meetings of Board, not mentioning proper particulars in column no. 14 of MBP-4 prepared by Company in relation to register of contracts with related parties.
5. The inspecting officer vide letter no. RD(WR)/Insp./JDI/SITAMAN/541 dated 04.2019 asked the Company/or its directors / officers to furnish replies/explanations/documents for said violation. The Company filed its reply vide letter dt 04/05/2019 to the said Inspection letter mentioning that the said lapses were totally due to oversight and not intentional at first place.
6. In terms provisions of as per Section 118 (10) of the Companies Act, 2013, (10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government.
SUBMISSION OF THE COMPANY:
7. Crux of the Submission of the Company is as under:
i. The lapse on the part of the Company was genuine/bonafide belief and no malafide intentions of the Company/any of its directors.
ii. The Company is a small Company in accordance with the provisions of the Act with its paid-dup capital being Rs. 1,00,000/ and having only 2 shareholders. Since there are no employees in the company the regular and routine affairs of the Company looked into by the Directors. The Company is glorified partnership firm in a corporate form and the said lapse are inadvertent and without any mala fide intention.
THE RELEVANT PROVISION OF THE COMPANIES ACT, 2013
118. Minutes of Proceedings of General Meeting, Meeting of Board of Directors and Other Meeting and Resolutions Passed by Postal Ballot
(10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980). and approved as such by the Central Government.
(11) If any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.
446B. Notwithstanding anything contained in this Act, if penalty is payable for noncompliance 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 person, as the case may be, shall be liable to a penalty which shall not he more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be.
Explanation. For the purposes of this section‑
(a) “Producer Company” means a company as defined in clause (I) of section 378A;
(b) “start-up company” means a private company incorporated under this Act or under the Companies Act, 1956 and recognised as start-up in accordance with the notification issued by the Central Government in the Department for Promotion of Industry and Internal Trade.]
FINDINGS
8. While adjudging quantum of penalty under Section 189(6) of the Act, the Adjudicating Officer have considered following factors for the reasons mentioned below:
| a. | Size of the Company | Small Company |
| b. | Nature of business carried on by the company | To engage in the business either on its own or indirectly through other companies as manufacturers, suppliers, dealers, traders, importer and exporters in Engineering goods of every description and in particular Textile Machinery, Textile Equipments and to manufacture, produce, repair, alter, |
| convert, recondition, buy, sell, hire, trade and deal in Textile machinery, spares, accessories, fitting, tools, tackles and other engineering goods. | ||
| c. | Injury to public interest | Unquantifiable |
| d. | Nature of the default- | Non-compliance of Section 118(10) of the Act. |
| e. | Repetition of the default | No |
| f. | The amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default | Unquantifiable. |
| g. | The amount of loss caused to an investor or group of investor or creditor, as a result of the default |
The company filed suo-moto adjudication application. With regard to the above factors to be considered while determining the quantum of penalty, it is noted that the disproportionate gain or unfair advantage made by the Noticee or loss caused to the investor as a result of the delay on the part of the Noticee to redress the investor grievance are not available on record. Further, it may also be added that it is difficult to quantify the unfair advantage made by the Noticcc or the loss caused to the investors in a default of this nature.
ORDER
9. All the officers, who have defaulted the provisions of section 189 of the Act for provisions of Section 118(10) and thus Directors are liable for action under Section 118(11) of the Act.
10. Company falls under definition of Small company as per Provision of Sec 2(85) of the Act, as per MGT 7 filed for FY 2018-2019 filed vide SRN R26880484 dated 27/12/2019 and MGT 7A filed for FY 2022-2023 filed vide SRN F63179469 dated 16/08/2023.
11. In exercise of the powers conferred on me vide Notification dated 24th March 2015 and having considered the facts and circumstances of the case besides reply of the company after taking into account the factors mentioned in the relevant Rules followed by
amendments in section 454(3) of the Companies Act, 2013, I am of the opinion that penalty shall be imposed for the default related to non-compliance of section 189 of the Act.
For the purpose of determination of penalty, under section 189 (6) the following, table is to be considered: –
| Sr No | Penalty imposed on Director(s) / Authorised Officer of the Company. | Maximum Penalty in (Rs.) | Penalty as per Sec 446B |
| 1 | SITAMAN INDUSTRIES PVT LTD | 25,000 | 12,500 |
| 2 | KARISHMA ANAND PAIEL | 5,000 | 2,500 |
| 3 | PREYA BHARGAV PATEL | 5,000 | 2,500 |
| TOTAL | 35,000 | 17,500 |
TOTAL PENALTY PAYABLE: – Rs.17,500/-
12. I am of this opinion that, the penalty is commensurate with the aforesaid failure committed by every officer of the Company.
13. 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 order.
14. Please note that as per Section 454(8)(i) of the Companies Act, 2013, where company does not pay the penalty imposed by the Adjudicating Officer or the Regional Director within a period of ninety days from the date of receipt of the copy of the order, the 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.
15. Where an officer of a company who is in default does not pay the penalty within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.
16. Therefore, in case of default in payment of penalty, prosecution will be filed under Section 454(8)(i) and (ii) of the Companies Ad, 2013 at your own costs without any further notice.
17. Further, the company and its officers are hereby direct that the penalty amount shall be remitted from their own sources through MCA21 portal within 90 days from the date of receipt of order. The company needs to file INC-28 as per the provisions of the Act, attaching the copy of the adjudication order along with payment challans.
18. As per 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, appeal, if any, against this order may be filed in writing with the Regional Director, Western Regional, Ministry of Corporate Affairs, 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 the certified copy of this order.
19. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to the Company and Noticee/s and also to Office of the Regional Director, Western Region, Ministry of Corporate Affairs.
(B MISHRA)
Adjudication officer and Registrar of Companies,
Maharashtra, Mumbai.
