Failure to Maintain Register of Directors & KMPs: MCA Imposes ₹7 Lakh Penalty

The Ministry of Corporate Affairs (MCA) recently imposed a penalty on Best & Crompton Engineering Projects Limited and its officers for non-compliance with Section 170(1) of the Companies Act, 2013. This violation pertains to the failure of the company to maintain a proper Register of Directors and Key Managerial Personnel (KMPs), as mandated under Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Best & Crompton Engineering Projects Limited, a registered company under the Companies Act, 2013, was found to have not maintained the required Register of Directors and KMPs at its registered office in Chennai. This register is crucial as it must contain detailed particulars of directors and KMPs, including their appointment dates, cessation dates, and other relevant details.

Following an inspection conducted under Section 206(5) of the Companies Act, 2013, it was noted that the company had failed to comply with the statutory requirements regarding the maintenance of the Register of Directors and KMPs. Subsequently, an adjudication notice was issued to the company and its officers, informing them of the violation and the impending penalties.

The company and its officers, including directors like Ravi Narayanasamy Balachandran and Kakulamaari Srinivas Kalyan Rao, responded by filing an adjudication application. The adjudicating authority conducted a hearing and considered the submissions made by the company.

After careful consideration of the facts and submissions, the adjudicating authority imposed a penalty of Rs. 3,00,000 on Best & Crompton Engineering Projects Limited and Rs. 1,00,000 each on the officers involved. This penalty, totaling Rs. 7,00,000, was mandated under Section 172 of the Companies Act, 2013, for the company’s failure to maintain the required register.

Additionally, the adjudicating authority directed the company to rectify the default by maintaining the register as per legal requirements and submit proof of compliance within a specified timeframe. Non-compliance with these directives could lead to further penalties or legal actions under Section 454 of the Companies Act, 2013.

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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES, TAMIL NADU, ANDAMAN & NICOBAR ISLANDS, CHENNAI
II FLOOR, C- WING, SHASTRI BHAVAN, 26, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI- 6

F.NO.ROC/CHN/BEST & CROMPTON /ADJ/S.170(1) /2024 DATE: 30 APR 2024

ADJUDICATION ORDER UNDER SECTION 170(1) OF THE COMPANIES ACT, 2013 READ WITH RULE 17 OF THE COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS), RULES 2014 IN THE MATTER OF M/S BEST & CROMPTON ENGINEERING PROTECTS LIMITED

1. Appointment of Adjudicating Officer:-

The Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 has appointed Registrar of Companies, Chennai as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter referred as Act or Companies Act, 2013) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company: –

Whereas the company viz M/s. Best & Crompton Engineering Projects Limited with CIN U28920TN1999PLC043385 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the Companies Act, 2013 having its registered office as per MCA21 Registry at No. 19A, Emerald Apartments, Flat No. 4, First Floor, Wheatcrofts Road, Nungambakkam, Chennai, Tamil Nadu 600034. The financial & othe details of the subject company as available on MCA-21 portal is stated as under:

1. Directors ‘during the period of violation

2. Section and Penal Provision as per Companies Act, 2013

Section 170: Register of Directors and key Managerial Personnel and their Shareholding

(1) Every company shall keep at its registered office a register containing such particulars of its Directors and key managerial personnel as may be prescribed, which shall include the details of securities held by each of them in the company or its holding, subsidiary, subsidiary of company’s holding company or associate companies.

Rule 17 of the Companies (Appointment and Qualification of Directors), Rules, 2014–Register of Directors and Key Managerial Personnel

(1) Every company shall keep at its registered office a register of its directors and key managerial personnel containing the following particulars, namely:-

(a) Director Identification Number (optional for key managerial personnel);

(b) present name and surname in full;

(c) any former name or surname in full;

(d) father’s name, mother’s name and spouse’s name(if married) and surnames in full;

(e) date of birth;

(f) residential address (present as well as permanent);

(g) nationality (including the nationality of origin, if different);

(h) occupation;

(i) date of the board resolution in which the appointment was made;

(j) date of appointment and reappointment in the company;

(k) date of cessation of office and reasons therefor;

(l) office of director or key managerial personnel held or relinquished in any other body corporate;

(m) membership number of the Institute of Company Secretaries of India in case of Company Secretary, if applicable; and

(n) Permanent Account Number (mandatory for key managerial personnel if not having DIN);

(2) In addition to the details of the directors or key managerial personnel, the company shall also include in the aforesaid Register the details of securities held by them in the company, its holding company, subsidiaries, subsidiaries of the company’s holding company and associate companies relating to-

(a) the number, description and nominal value of securities;

(b) the date of acquisition and the price or other consideration paid;

(c) date of disposal and price and other consideration received;

(d) cumulative balance and number of securities held after each transaction;

(e) mode of acquisition of securities;

(f) mode of holding — physical or in dematerialized form; and

(g) whether securities have been pledged or any encumbrance has been created on the securities.

Section 172: Penalty

” If a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees, and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default.”

3. Issue of Adjudication Notice:

An Inspection of Books and Accounts of the company M/s. Best & Crompton Engineering Projects Limited was carried out U/s 206(5) of the Companies Act, 2013 by an Officer authorized by the Central Government wherein the observations of the Inspecting Officer are as follows:

During the Inspection conducted by the Inspecting Officer in the Registered Office of the Company, it is observed that the Company has not been maintaining the Register of Directors and Key Managerial Personnel as mandated and prescribed under Section 170(1) of the Companies Act, read with Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014. This is in violation of Section 170(1) of the Companies Act, 2013 read with Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and the company and the directors are liable for penal action under Section 172 of the Companies Act, 2013.’

Accordingly, on submission of the Inspection Report by the Inspecting Officer, the Ministry vide letter dated 10.04.2023 has directed this Office to take necessary action against the defaulters of the company as per provisions of the Companies Act, 2013.

After that the Adjudicating Authtoity has issued Adjudication Notice to the company and its directors vide Notice No. ROC/CHN/INSPN.FOLL/43385/ P.15/S.170(1)/2021/2023 dated 31.05.2023.

4. Reply of Company and Directors for Adjudication Notice issued:

Pursuant to the Adjudication notice, the company, and Directors/ Officers namely Shri. Seshagiri Rao Ippagunta, Shri. Ravi Narayanasamy Balachandran, Shri. Kakulamaari Srinivas Kalyan Rao and Shri.Amuvil Krishnaswamy Rangarajan have filed an Adjudication application in eform GNL-1 vide SRN: F62903539 dated 04.08.2023 and submitted a physical application on 28.08.2023.

5. Adjudication Hearing:

On receipt of the Adjudication application form the company and its Officers in default, the Adjudicating Authority had issued notice of Hearing dated 14.02.2024 by fixing the hearing on 20.02.2024 at 01:45 PM. Pursuant to the said notice, Mr. Rohan Rajasekaran, Advocate has appeared on behalf of the company and its director/ Officers in default before the Adjudicating Authority on 20.020.2024 and made submissions that the company was maintained one statutory register unfortunately the same was misplaced during shifting of registered office. However, the company was prepared the said register once again and entered all the details based on the info/ soft copies available with the company.

(ii) The company being a subsidiary with paid up capital of Rs.55 Crores does not fall under the definition of small company as per provision of section 2(85) of the companies Act, 2013. Therefore, of imposing the provision lesser penalty as per section 446(b) shall not be applicable in this case.

6. Decision

Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that applicant company and its officers, have violated the provisions of Section 170 of the Companies Act,2013 as the company has not maintained a register containing such particulars of its Directors and key managerial personnel properly.

Accordingly, I am inclined to impose a penalty as prescribed under Section 172 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:

Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.3,00,000/- (Rupees Three lakhs) is imposed on the Company and Rs.1,00,000/- (Rupees One lakh) is imposed on Officers in default as mentioned above. Totally Rs. 7,00,000/-(Rupees Seven laid’s) as penalty amount for violation of Section 170(1) of the Companies Act, 2013.

(ii) Further, in exercise of Section 454 (3)(b) of the Companies Act,2013 the subject company is directed to rectify the default by maintaining a Register containing such particulars of its Directors and Key Managerial Personnel as required U/s. 170 of the Companies Act, 2013 and also to submit the proofs of maintenance of Register along with necessary documents to this office within 15 days from the date of receipt of this order.

7. The said amount of penalty shall be paid through online by using the website mca.gov.in(Misc. head) within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

8. Whereas Appeal against this order may be filed with the Regional Director (SR), Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26 Haddows Road, Chennai-600006, Tamil Nadu within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website mca.gov.in] 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 (Adjudicating of Penalties) Rules, 2014].

9. Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order, “(8)0 Where company fails to comply with the order made under sub­section (3) or sub-section (7), as the case may be within a period of ninety days from the date of the receipt of the copy of 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.

(ii) Where an officer of a company or any other person who is in default fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be 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-live thousand rupees but which may extend to one lakh rupees, or with both.”

(B. SRIKUMAR, ICLS)
REGISTRAR OF COMPANIES
TAMILNADU, CHENNAI.
ADJUDICATING OFFICER