Failure to Produce Certified Copies of Register of Members & Share Transfer Forms (MGT-1, SH-4): MCA imposes Penalty

Company failed to produce certified copies of Register of members in Form MGT-I, Form 7C/SH-4 relating to transfer of shares: MCA imposes Penalty

The Ministry of Corporate Affairs has issued an adjudication order under Section 88 of the Companies Act, 2013, against Cryo Scientific Systems Private Limited. The company was found in violation of maintaining its Register of Members and transferring shares as required by law. Following an inquiry, it was revealed that the company failed to submit the Certified Register of Members (Form MGT-1) and share transfer forms (Form 7C/SH-4). The company’s defense cited document damage due to floods in Chennai in 2015, affecting statutory records. The adjudicating authority, after considering the company’s explanation and its classification as a small company under Section 446B of the Companies Act, imposed reduced penalties. A total fine of ₹1,50,000 was levied on the company, and ₹25,000 on the officer in default, Mr. Narayanan. The penalty is to be paid online within 90 days, and failure to comply could result in further fines or imprisonment. An appeal may be filed within 60 days. This order highlights the necessity of proper documentation and compliance under corporate law to avoid legal consequences.

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

KNO.ROC/CHN/ CRYO SCIENTIFIC/ADJ/S.88/2024 DATE: 23 AUG 2024

ADJUDICATION ORDER UNDER SECTION 88 OF THE COMPANIES ACT. 2013
IN THE MATTER OF WS CRYO SCIENTIFIC SYSTEMS PRIVATE LIMITED

1. Appointment of Adjudicating Officer:-

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. Cryo Scientific Systems Private Limited with CIN: U36999TN1998PTC039872 (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.2/268, Rapatd Nagar, Kunrathur, High Road, Gerugambakkam, Chennai, Tamil Nadu 602101. The financial & other details of the subject company as available on MCA -21 portal is stated as under:

3. Directors during the period of violation:

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

Section 88. Register of Members, etc.

(1) Every company shall keep and maintain the following registers in such form and in such manner as may be prescribed, namely:—

(a) register of members indicating separately for each class of equity and preference shares held by each member residing in or outside India;

(5) If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2), the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

5. Issue of Adjudication Notice:

An Inquiry was conducted on the affairs of the Company M/s. Cryo Scientific Systems Private Limited under Section 206(4) of the Companies Act,2013 by an Officer authorized by the Central Government wherein the observations of the Inquiry Officer are as follows:

The Certified copies of Register of members are not maintained, Form 7C/SH-4 relating to transfer of shares not filed since incorporation.

Accordingly, on submission of the Inquiry report, the Regional Director, Ministry of Corporate Affairs, Chennai has directed to take necessary action against the defaulters as per the provisions of the Companies Act, 2013.

After that the Adjudicating Authority has issued notice to the company and Officers in default vide Notice No. Rod Chn.039872/CRYO SCIENTIFIC/S.88/P.21/ADJ/2023 dt 17.04.2024.

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

The Whole-time Director of the company vide letter dated 02.05.2024 submitted that due to unprecedented flood in Chennai in Chennai in the year 2015, many old documents and records and statutory registers got completed soaked and irreversibly damaged and could not be recovered. The list of shareholders is filed with Annual Return in Form MGT-7 and there will be no difference between the list of shareholders filed with Form MGT-7 and Register of Members. The Register of Members can be recreated from the list of shareholders, however, share transfer forms would not be possible to be recreated.

7. Adjudication Hearing:

The Adjudicating Authority had issued notice of hearing dt 02.05.2024 by fixing the hearing on 08.05.2024 at 12:45 PM. Pursuant to the notice dt 02.05.2024, Shri.Gouri Shanker Mishra, PCS appeared before the Adjudicating Authority on behalf of the company and Whole- time Director on 08.05.2024 and made submission that the company had always maintained the Register of members, many old documents including register of members damaged in the flood in Chennai in the year 2015. All the shareholders are aware of the shareholding and no changes has taken place in last few years.

8. Analysis of violation of the Companies Act,2013

It is noticed that the company has failed to produce Certified copies of Register of members in Form MGT-1, Form 7C/SH-4 relating to transfer of shares at the time of Inquiry. Thereby violated Section 88 of the Companies Act, 2013 and the Company and its Officers in default are liable for penalty under Section 88(5) of the Companies Act, 2013.

(ii) Further Section 446 B of the Companies Act, 2013 states that ” 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 anu 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 be 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”.

(ii) As per clause 85 of Section 2 of the Companies Act, 2013, small company means a company whose paid up capital and turn over shall not exceed four crore and rupees forty crore respectively. As per MCA portal paid up capital of the company is Rs.59 lakhs and turnover are less than Rs.40 Cores as per the MGT 7A filed by the company with this office for the immediately preceding FY i.e. 2021-22. Therefore, the benefits of small company are extended to this company while adjudicating the penalty.

9. Decision Having considered the factors above, Section 88 of the Form 7C/SH-4 rel, in default are ha Act,2013. Accordingly, I am Section 88 of the Company and Officers the facts and circumstances of the case and after taking into account it is concluded that the company and Officers in default violated companies Act, 2013 by not furnishing the Registrar of Members and ting to transfer of shares and therefore the Company and its Officers le for penalty as prescribed under Section 88(5) of the Companies Act, 2013.

According, I am inclined to impose a penalty as prescribed under Sub- Section 5 of Companies Act, 2013. The details of the penalty imposed on the Company and Officers in default as follows:

Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) 4E. (3) of the Companies Act, 2013 a penalty of fees Rs.1,50,000/- (Rupees One lakh fifty thousand) is imposed on the Company and  Rs.25,000/- (Rupee Twenty five thousand) is imposed on each Officers in default. Totally es One Rs. 1,75,000/- (Rup lakh seventy five thousand) as penalty amount for violation of Section 88 of the Companies Act, 2013.

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

11. 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 www.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].

12 Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order, “(8)(i) 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-five thousand rupees but which may extend to one lakh rupees, or with both.”

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