On September 27, 2023, the Ministry of Corporate Affairs, Office of the Registrar of Companies, Tamil Nadu – Coimbatore, issued an order imposing a significant penalty under Section 454 for the violation of Section 135 of the Companies Act, 2013. The case involves M/s Jayem Automotives Private Limited (referred to as the Company) and its directors. The penalty was imposed due to the company’s failure to transfer unspent Corporate Social Responsibility (CSR) funds to the specified account, as required by law. In this article, we will provide a detailed analysis of the case, including the facts, provisions of the Companies Act, and the penalty imposed.
1. Appointment of Adjudicating Officer The order begins by highlighting the appointment of the Adjudicating Officer, who is responsible for adjudging penalties under Section 454 of the Companies Act, 2013. The Officer is appointed in accordance with the Companies (Adjudication of Penalties) Rules, 2014.
2. Company Details M/s Jayem Automotives Private Limited, the subject of this case, is a company registered under the Companies Act, 2013. The company’s registered address is provided.
3. Facts of the Case The company and its directors voluntarily filed an application with the Registrar of Companies on August 21, 2023, seeking adjudication of penalties for violating Section 135(6) of the Companies Act, 2013. This section relates to the transfer of unspent CSR funds.
4. Penalty Hearing To provide a fair opportunity for the company to be heard before imposing any penalties, the Adjudicating Officer scheduled a hearing for September 26, 2023. Mr. P. Eswaramoorthy, a Practicing Company Secretary, was authorized by the Board of Directors to represent the company during the hearing.
5. Company’s Submission During the hearing, Mr. P. Eswaramoorthy, on behalf of the company, explained that the failure to transfer Rs. 14,09,669/- (an unspent CSR amount) to a special account, as required by law, was unintentional. The funds were meant for an ongoing project initiated in the financial year 2020-21 and completed in 2022-23.
Provisions of the Companies Act, 2013
6. Section 135(6) This section mandates that any unspent CSR amount from an ongoing project must be transferred to a special account known as the “Unspent Corporate Social Responsibility Account” within thirty days from the end of the financial year. The company is then obligated to utilize this amount for CSR purposes within three financial years.
7. Section 135(7) In cases of non-compliance with Section 135, companies face penalties. The penalty can be up to twice the unspent CSR amount or one crore rupees, whichever is less. Officers of the company involved in the non-compliance can also be penalized.
Penalty Details
8. Penalty Imposed After considering the facts and the company’s submissions, the Adjudicating Officer imposed penalties on both the company and its directors, as listed below:
- M/s Jayem Automotives Private Limited: 28,19,338 INR
- Shri Jayachandran Anand: 1,40,967 INR
- Smt. Devika Anand: 1,40,967 INR
- Shri Nageswararao Dukkipati: 1,40,967 INR
- Ms. Rashmishree: 1,40,967 INR
Conclusion
This case illustrates the importance of complying with CSR regulations under the Companies Act, 2013. The penalty imposed on M/s Jayem Automotives Private Limited and its directors serves as a reminder that companies must diligently adhere to CSR-related requirements, including the proper transfer and utilization of unspent CSR funds. Failure to do so can result in significant financial penalties, as demonstrated in this order. Companies and their officers should ensure strict compliance with CSR obligations to avoid legal consequences and uphold their social responsibility commitments.
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Government of India
Ministry of Corporate Affairs
Office of the Registrar of Companies
Tamil Nadu – Coimbatore
No. 7 A G T Business Park, Phase II, 1st Floor,
Peelamedu, Coimbatore – 641014
Ref: ROC/CBE/A.O./135/11979/2023 Date: 27.09.2023
Order for Penalty under Section 454 for violation of Section 135 of the Companies Act, 2013 read with the Companies (Adjudication of Penalties) Rules, 2014
Appointment of Adjudicating Officer:
1. Ministry of Corporate Affairs vide its Gazette Notification No.A-42011/112/2014-Ad.II dated 24.3.2015 appointed 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.
Company:
1. Whereas Company M/s JAYEM AUTOMOTIVES PRIVATE LIMITED (hereinafter Known as Company) is a company registered with this office under the provisions of Companies Act, 2013 having its registered address at Door No.2, Ondipudur Road, Singanallur, Coimbatore-641 005.
Facts of the case:
2. The company and its directors have filed suo-moto application in this office on 21.08.2023 for adjudication of the penalty for violation of section 135(6) of the Companies Act, 2013.
3. The undersigned in exercise of power conferred under sub section 4 of section 454 of the Companies Act, 2013 with a view to give a reasonable opportunity of being heard before imposing any penalty, fixed the date of hearing on 26/09/2023 at 04.00 PM to adjudicate the penalty for violation of provision of section 135(6) of the Companies Act, 2013.
4. Board of Directors of the Company vide their resolution dated 12/08/2023 authorized Mr. P. Eswaramoorthy, Practicing Company Secretary to act as authorized representative of the company before the Registrar of Companies, Coimbatore, to carry out the formalities for the Adjudication of Penalties under Section 454 of the Companies Act, 2013.
5. During the hearing on 26/09/2023 , Mr. P. Eswaramoorthy, Practicing Company Secretary and authorized representative of the Respondent made submissions that the Company in all innocence without any willful or mala fide motive failed to transfer Rs.14,09,669/-, the amount remaining unspent to a special account to be called the “Unspent Corporate Social Responsibility Account” pursuant to ongoing project which was undertaken during the year 2020-21 and completed in the financial year 2022-23.
Provisions of the Companies Act, 2013
6. Sub-Section (6) of Section 135 of the Act provides that any amount remaining unspent under Sub-section (6), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social responsibility Account and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.
7. Sub-section (7) of Section 135 provides that if a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Scheule VII or the Unspent Corporate Social Responsibility Account, as the case may be or one crore Rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.
ORDER
8. Having considered the facts and circumstances of the case and the submissions made by the authorized representative of the Respondent, the Adjudicating officer do hereby impose penalty on Company and its director as per Table below for violation of Section 135(6) of the Companies Act, 2013. The penalties imposed as under should be paid by the Respondents as per Law and submit the copies of Challan to this office. The company should file the INC 28 with attachment of this order and copy of aforesaid Challan.
9.
|
S. No |
Name of the Respondents | Amount(In Rupees) |
| 1. | M/s Jayem Automotives Private Limited | 28,19,338 |
| 2. | Shri Jayachandran Anand | 1,40,967 |
| 3. | Smt. Devika Anand | 1,40,967 |
| 4. | Shri Nageswararao Dukkipati | 1,40,967 |
| 5. | Ms. Rashmishree | 1,40,967 |
| TOTAL | 33,83,206 |
10. The company and its directors are hereby directed to rectify the defect immediately on receipt of copy of this order.
11. The penalty imposed shall be paid through the Ministry of Corporate Affairs portal only.
12. Appeal, if any against this order may be filed in writing with the Regional Director, Southern Region, Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26, Haddows Road, Chennai-600 006 within a period of sixty days from the date of receipt of this order, in Form AD] setting forth the grounds of appeal and shall be accompanied by a certified copy of this order (Section 454 of the Companies Act, 2013 read with the Companies (Adjudicating Of Penalties) Rules, 2014).
13. Your attention is also invited to Section 454(8) of the Act regarding consequences of non-payment of penalty.
14. In terms of the provisions of sub-rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, a copy of this order is being sent to Company M/s Jayem Automotives Private Limited and its directors.
