MCA Imposes Heavy Penalty for CSR Violations: Section 135(1) & 135(5)

editor7 10 Apr 2024 801 Views 0 comment Print Company Law | Notifications/Circulars, Orders

This summary pertains to the adjudication order issued by the Office of the Registrar of Companies, Maharashtra, Pune, regarding the violations of Sections 135(1) and 135(5) of the Companies Act, 2013, by CLAIRVOYANT INDIA PRIVATE LIMITED (CIN: U72200PN2014FTC153250). The order details the imposition of penalties under Section 454(3) of the Companies Act, 2013, for non-compliance with Corporate Social Responsibility (CSR) provisions.

Background

Company Details: CLAIRVOYANT INDIA PRIVATE LIMITED, registered office at Sr. No. 35/1/2, Plot No. 6, Office No. 1 & 2, First Floor, Kshitij Heights, Baner, Pune, Maharashtra, 411045.

Appointment of Adjudicating Officer

The Ministry of Corporate Affairs (MCA), via its Gazette Notification dated 24.03.2015, appointed the undersigned as Adjudicating Officer under Section 454(1) of the Companies Act, 2013, for adjudging penalties related to CSR non-compliance.

Case Facts

i. CSR Committee Constitution Requirement:

Under Section 135(1) of the Companies Act, 2013, companies meeting certain financial thresholds must form a CSR Committee.
CLAIRVOYANT INDIA met these thresholds with a net profit of ₹6,57,30,409.89 for the financial year ending 31-03-2020.
The company was required to form a CSR Committee as it had a net profit exceeding the prescribed limit for the fiscal year.

ii. CSR Spending Requirement:

Section 135(5) mandates that companies spend at least 2% of their average net profits over the preceding three years on CSR activities.
If the company fails to spend the required amount, it must transfer the unspent CSR funds to one of the specified funds within six months of the end of the financial year.
CLAIRVOYANT INDIA was required to spend ₹8,93,311 on CSR activities by 31-03-2021.

Violations

i. Failure to Constitute CSR Committee: Despite meeting the financial criteria, CLAIRVOYANT INDIA failed to constitute a CSR Committee as required under Section 135(1) of the Companies Act, 2013.

ii. Non-Compliance with CSR Spending:

The company did not spend the mandated CSR amount of ₹8,93,311 by 31-03-2021.
The unspent CSR amount was not transferred to any of the specified funds by the deadline of 30-09-2021.

Proceedings and Findings

i. Suo-Moto Application: CLAIRVOYANT INDIA filed a suo-moto application on 08.05.2023, acknowledging their non-compliance with Section 135 of the Companies Act, 2013.

ii. Adjudication Notice: A notice was issued to the company and its officers on 01.12.2023, highlighting the violations of Sections 135(1) and 135(5).

iii. Company’s Response: The company argued that the amendments to Section 135(9), effective from 22.01.2021, exempted them from constituting a CSR Committee since their CSR spend was below ₹50 Lakhs.

They also stated that upon realizing the non-compliance, the CSR amount was transferred to the Prime Minister National Relief Fund on 14.09.2022.
The company submitted supporting documents during the hearing to substantiate their claims.

iv. Adjudication Officer’s Hearing: The hearing was conducted on 30.01.2024, where the company’s representative reiterated their defense and presented relevant documents.

Legal Provisions and Interpretation

i. Section 135(1) & 135(5):

These sections mandate that companies meeting certain financial criteria must form a CSR Committee and ensure CSR spending.
Failure to adhere to these provisions constitutes a violation of the Companies Act, 2013.

ii. Section 135(7):

Specifies penalties for non-compliance with CSR provisions.
The penalty for the company is twice the amount required to be transferred to the specified fund.
The penalty for each officer in default is one-tenth of the amount required to be transferred to the specified fund.

Penalty Imposed

i. On the Company: The company was penalized an amount of ₹17,86,622 (twice the unspent CSR amount) plus an additional ₹2,00,000, totaling ₹19,86,622.

ii. On Officers in Default: Each officer in default was penalized an amount of ₹89,311.

Conclusion

CLAIRVOYANT INDIA PRIVATE LIMITED was penalized for failing to adhere to CSR provisions under the Companies Act, 2013. The company acknowledged the breach and took corrective action post facto. However, the adjudicating officer imposed penalties to enforce compliance and emphasize the importance of CSR obligations.

****

OFFICE OF THE
REGISTRAR OF COMPANY
MAHARASHTRA, PUNE

Order No. RoCP/ADJ/order/ CLAIR/135/23-24/30 To 34 Date: 10 APR 2024

ADJUDICATION ORDER

*****

Adjudication Order of penalties in the matter CLAIRVOYANT INDIA PRIVATE LIMITED (U72200PN2014FTC153250) under Section 454(3) of the Companies Act, 2013 for violation of Section 135(1)/135(5) of the Companies Act, 2013

Please Read:

Companies (Adjudication Of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019 (G.S.R.131(E) ).
Provisions of sub-section (1) and (5) of Section 135 of the Companies Act, 2013.
Gazette Notification of Ministry of Corporate Affairs vide No. A42011/ 112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015)

In respect of:

CLAIRVOYANT INDIA PRIVATE LIMITED having CIN U72200PN2014FTC153250 having its registered office as per MCA21 Registry at Sr. No. 35/ 1/ 2, Plot No. 6, office No.1 & 2, First Floor, Kshitij Heights, Baner, Pune, Maharashtra — 411045.

1. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its Gazette Notification No. A42011/ 112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015) appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (herein after known as Act) r/w Rule 3(1) of Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company:

CLAIRVOYANT INDIA PRIVATE LIMITED (U72200PN2014FTC153250) (herein after referred as Company) is a registered company with this office under the provisions of section 7 of the Companies Act, 2013 having its registered office as per MCA21 Registry at address Sr. No. 35/ 1/2, Plot No. 6, Office No. 1 & 2„First Floor, Kshitij Heights, Baner„Pune,Pune,Maharashtra,411045,India

3. Facts about the Case:

a) In terms of provisions of section 135(1) of the Act, every company having net worth of five hundred crore or more, or turnover of one thousand crore or more or a net profit of rupees five crore or more shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more Directors, out of which at least one Director shall be an Independent Director.

b) In terms of provisions of section 135(5) the Board of every Company referred to sub-section (1) shall ensure that the Company spends, in every financial year, at least two percent of average net profit of the Company, made during the three immediately preceding financial years or where the Company has not Completed the period of three financial year since its incorporation, during such immediate preceding financial year in pursuance of its Corporate Social Responsibility policy.

c) The Company has filed suo-moto application for adjudication proceedings vide SRN F61235800 on 08.05.2023, bringing to the kind attention of the Authority a non-compliance with the provision of section 135 of the Companies Act, 2013. It is seen that Company has not constituted a Corporate Social Responsibility Committee even though the net profit pursuant to the provisions of section 198 of the Companies Act, 2013 for the financial year ended 31-03-2020 is Rs.6,57,30,409.89/- which triggered the limits as specified under section 135(1) of the Companies Act. 2013 and did not disclose the same in Board’s Report for the year 2020-21 and Company failed to spend the CSR amount by 31-03-2021 and further failed to transfer the unspent amount to one of the specified funds by 30-092021 as per section 135(5) of the Companies Act, 2013.

Hence, the Company and the officers are liable for action under the provisions of the sub-section (7) of Section 135 of the act for violation of section 135(5) 85 section 450 of the Act for violation of section 135(1).

d) The AO had issued a notice to the Company vide notice No. ROCP/ADJ/135/CLAIR/23-24/2145 to 2148 dated 01.12.2023 (herein after refereed as Adjudication Notice) under section 454(4) read with 135 of the Companies Act, 2013 read with Rule 3(2) of Companies (Adjudication of Penalties), 2014 to the Company and its officers in default for the violation of the provisions of the act as mentioned in para “c” above;

e) A reply to the Adjudication notice has been received on 13.12.2023 and it was stated that the provisions of Section 135(9) of the Act in respect of the constitution of the CSR committee, were newly inserted by the Companies (Amendment) Act, 2020 issued by the Ministry of Corporate Affairs dated 28.09.2020, with effect from 22.01.2021. Pursuant to the new amendment, the provisions of sub-section (1) of section 135 of the Act, to constitute a Corporate Social Responsibility Committee of the Board, were not applicable to the Company, as the CSR spend for the Company for the financial year 2020-21 was less than the prescribed threshold of Rs.50 Lakhs. The company also informed that when the present Board of the Company were made aware of the about the non-compliance, the same is made good by contributing the applicable CSR amount of Rs.8,93,311/ – on 14.09.2022 to the Prime Minister National Relief Fund, a fund specified in Schedule VII of the Act.

f) The Adjudication Officer also had conducted a hearing of the Authorized Representative of the above mentioned Company to give the opportunity of being heard before imposing penalty by issuing hearing notice vide Notice No.ROCP/ADJ/135/CLAIR/23-24/2556 to 2559 dated 24.01.2024, CS Sanjay U. Patare appeared before the AO being the Authorized Representative of the Company on 30.01.2024 and during the hearing authorized representative furnished a reply as under:

1) Considering the previous regulatory requirements, Company, due to meeting the specified net profit threshold, was obligated to constitute a CSR Committee by 31st March 2021. However, the Companies (Amendment) Act, 2020 which was effective 22nd January 2021, dispensed off with the requirement to constitute a CSR Committee if the CSR spend is not exceeding INR 50,00,000 (Rupees Fifty Lakh only) under Section 135 (5) of the Act. The Company leveraged the benefit of the said amendment noting the obligated CSR spent was INR 8,93,311 (Eight lakhs ninety-three thousand three hundred and eleven) which is lesser than INR 50,00,000 (Rupees Fifty Lakh only). Hence, the Company was not required to constitute the CSR Committee during the financial year 2020-21 and humbly submits that the provision of the Sub-section (1) of Section 135 regarding the constitution of CSR Committee was not applicable to the Applicant Company effective 22nd January 2021 itself.

2) Section 135 (2) mandates every company to disclose the composition of the CSR Committee in the Board’s report under Section 134 (3). Pursuant to newly introduced sub-section (9) to Section 135 of the Act vide Companies (Amendment) Act, 2020 effective 22n^d January 2021, the Company was not required to constitute the CSR Committee. Accordingly, the Company did not require to make the statement on CSR Committee in the Board’s report for the financial year 2020-21.

3) Pursuant to Section 135 (5) every obligated company is required to spend the CSR amount on or before 31st March of the spending financial year, failing which, it has to transfer the CSR amount not pertaining to ongoing project to a fund specified under the Schedule VII of the Act, within a period of six months of the expiry of the said financial year i.e., on or before 30th September. The Section 135 (5) lays down the limited responsibility on ‘the Board’ cl(6)ensure timely spending’ of the CSR amount on or before 31st March and if failed, then ‘to transfer the CSR amount not pertaining to ongoing project to the specified fund’ under Schedule VII on or before 30th September. It is meant that only the person(s) who were responsible as on the due dates, to ensure compliance with the provisions of the Section 135 (5) i.e. ‘ensuring spend’ and ‘transferring the CSR amount not pertaining to ongoing projects to specified fund’ shall be held responsible along with the company since it is not susceptible of continuance and distinguishable from the non-compliance which is committed once and for all by not adhering to comply within the due dates.

Further, pursuant to Section 135 (7), a one-time penalty is prescribed, and no penalty is prescribed for continuation of non-compliance for the period for which the default continues. However, there are several other provisions under the Act which expressly provides for penalty for everyday delay/ default or non-compliance during which the default continues, which makes it clear that the Regulator has deliberately prescribed those defaults as a ‘continuing default’.

4) In case of the Company, it was obligated to spend the CSR amount by ^31StMarch 2021 or failing which, it should have transferred the CSR amount not related to ongoing project to the specified fund under Schedule VII of the Act by 30th September 2021. Failing both, the Company encountered a noncompliance obligating it to penal provisions under Section 135 (7). Thus, the Company and officer(s) in default i.e. Previous Board of the Company inadvertently committed the default and are the person (s) responsible for inadvertent non-compliance committed under Section 135 (5) of the Act.

5) It is humbly submitted that the Company was taken over from the Previous Board (as defined in response to SCN) by the Present Board (as defined in response to SCN dated) effective 16th December 2021. While the Company was taken over as an operating entity, the takeover process involved voluminous data, relevant transactions and considerable amount of time amidst the surge of Covid second wave. Noting the forgoing, the Present Board took commercially reasonable efforts to understand, review the documentation and compliance status of the taken over entity. When the Present Board of the Company were made aware about this non-compliance, it immediately ensured that the same was made good by contributing the applicable CSR amount of Rs. 8,93,311.00 on 14th September 2022 to the Prime Minister National Relief Fund, a fund specified in Schedule VII of Act.

6) Violation of CSR provisions under Section 135 (5) is not a Continuing Offence:

Before dwelling deep into the meaning of the expression ‘Continuing Offence, it is essential to understand Section 472 of The Code of Criminal Procedure,1973 which states that in case of a continuing offence, a fresh period of limitations shall begin to run at every moment of time during which the offence continues.

In P, Ramnatha Iyer’s Law Lexicon it is stated that the expression Continuing Offence’ as defined under Section 56(2) of Bengal Act, 1891. It states that, “it is a transaction or series of acts constituting an offence set on foot by a single impulse, and operated by an unintermittent force, no matter how long a time it may occupy”.

The concept of a continuing offence is illustrated by Hon’ble Supreme Court in the case of State of Bihar vs Deokaran Nenshi (1973), the Court held that, “a continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. The distinction between the two kinds of offences is between an act or omission which constitutes an offence once and for all and an act or omission which continues, and therefore, constitutes a fresh offence every time or occasion on which it continues. In the case of a continuing offence, there is thus the ingredient of continuance of the offence which is absent in the case of an offence which takes place when an act or omission is committed once and for all.”

The Hon’ble Supreme Court in CWT vs Suresh Seth (1981) 129 ITR 328, held that “the Court should not be eager to hold an act or omission as a continuing wrong or default unless there are word in the statue concerned which make out that such was the intention of the legislature.”

While deciding a one-time offence, In Jiyuan LI vs Registrar of Companies and Tiyanjin Tianshi India Private Limited vs Registrar of Companies (2012) 171 CompCas 280 (Delhi), the Hon’ble High Court of Delhi held that, “unless the offence was repeated or committed on a daily basis after the initial default, it cannot be said to be a continuing default”.

The Authorized representative submitted the Court order copies/relevant extracts wherever possible as Annexures.

4. Relevant provisions of the Companies Act, 2013:

(1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during 1/the immediately preceding financial year] shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director:

Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.

(2) The Board’s report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,–

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company 3/in areas or subject, specified in Schedule VII];

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall,–

(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, 4/or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years] in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial years.

Provided also that if the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to spend under this sub-section for such number of succeeding financial years and in such manner, as may be prescribed.

Explanation.–For the purposes of this section “net profit” shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198.

(6) Any amount remaining unspent under sub-section (5), 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) If a company is in default in complying with the provisions of sub-section (5) or sub-section (6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule 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.

(8) The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions.

(9) Where the amount to be spent by a company under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.] Section 92(4) of the Act provides that Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the :late on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting, with such fees or additional fees as may be prescribed

5. Discussion and Findings:

a) It is a fact that the company has suo moto applied for the instant proceedings citing that there was a violation of the provisions of the Section 135 of the Act and that the company had failed to constitute the CSR committee and has failed to spend the required CSR amount and has further failed to transfer the unspent CSR amount to a fund specified in Schedule VII within a period of six months of the expiry of the financial years.

b) The facts of the case are that the company had earned a profit of more than Rs. 5 Cr in financial year 2019-2020 and thus the CSR provisions were applicable to the company in the financial year 2020-2021. The total amount which was required to be spent by the company on CSR in the financial year 2020-2021 was Rs.8,93,311/-.

c) The company failed to constitute the CSR committee during the financial year 2020-2021 and also failed to spend the required amount as stated above and further failed to transfer the same to Sch. VII specified fund. The company transferred the amount on 14.09.2022 to the Prime Minister National Relief Fund.

d) It is a fact that the company has suo moto applied for the instant proceedings citing that there was a violation of the provisions of the Section 135 of the Act and that the company had failed to constitute the CSR committee and has failed to spend the required CSR amount and has further failed to transfer the unspent CSR amount to a fund specified in Schedule VII within a period of six months of the expiry of the financial years.

e) There was a change of management in the company w.e.f. 16.12.2021 as under:

DIN/PAN	Name	Current Desi rata	Date of appointment		Date of Cessation
00552253	VIKAS BHALLA	Director	27.09.2022	27.09.2022
00552253	VIKAS BHALLA	Additional Di rector	16.12.2021	16.12.2021	27.09.2022
06945241	SHANTANU PRAKASH MIRAJKAR	Director	27.11.2014	27.11.2014	16.12.2021
06945253	AMITA MIRAJKAR SHANTANU	Director	27.11.2014	27.11.2014	16.12.2021
07074463	BAUINDER SINGH SABHARWAL	Director	27.09.2022	27.09.2022
07074463	BAUINDER SINGH SABHARWAL	Additional Director	16.12.2021	16.12.2021	27.09.2022
07094579	BHAVNA NEWLE CHOPRA	Director	27.09.2022	27.09.2022
07094579	BHAVNA NEWLE CHOPRA	Additional Director	16.12.2021	16.12.2021	27.09.2022
07840302	CHANDRA SEKHAR AM BADI PUDI	Director	01.01.2021	01.01.2021	16.12.2021
09014576	SHEKHAR SASTRY VEMURI	Director	01.01.2021	01.01.2021	16.12.2021
10117773	SANDEEP TIBREWAL	Director	21.09.2023	21.09.2023
5.0117773	SANDEEP TIBREWAL	Additional Director	01.06.2023	01.06.2023	20.09.2023

f) The company has taken a plea that since the old management was responsible for constituting the CSR committee and for spending the amount or transferring the amount in case it is unspent during the financial year 2020-2021. The company has also submitted that the said offence can not be considered as a continuing offence and should be treated as one time default which occurred on 30-09-2021 and the management responsible should be the Directors who were on board during the time.

g) To understand the provisions and the intent of the law in letter and spirit, the clarifications issued by the Ministry vide E-file no.CSR-05/01/2021-CSR-MCA – General Circular No. 14 /2021 dated 25th August 2021 are perused and the following relevant parts of the same are reproduced below:

`..the objective of CSR provisions is to involve the corporates as partners in the social development process. Use of corporate innovations and management skills in the delivery of ‘public goods’ is at the core of CSR implementation by the companies…’

`…CSR is a Board-driven process, and the Board of the company is empowered to plan, decide, execute, and monitor the CSR activities of the company based on the recommendation of its CSR Committee. The CSR architecture is disclosure-based and CSR-mandated companies are required to file details of CSR activities annually in MCA21 registry. Companies are required to make necessary disclosures in the financial statements regarding CSR including non-compliance. The existing legal provisions such as mandatory disclosures, accountability of the CSR Committee and the Board, and provisions for audit of accounts of the company provide sufficient mechanisms for monitoring…’

`….Further, companies are not permitted to spend the unspent CSR amount, other than the amount pertaining to ongoing projects, on any CSR activity during the intervening period of six months after the end of the financial year. Such unspent CSR amount is required to be transferred to any fund included in Schedule VII of the Act….’

`…In the annual action plan, the CSR Committee of the company is required to provide for modalities of utilisation of funds. The CSR Committee shall recommend to the Board on budget allocation for any CSR project including modalities of utilisation of funds in every project. Further, as per rule 4(5) of the Companies (CSR Policy) Rules, 2014, the Board of a company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect…’

`…The penalty does not relieve the company from the obligations under the law, and the penalty is over and above the obligated amount required to be transferred under section 135(5) or 135(6). The penalty is the consequence of not abiding by the law, and not an alternative for the same….’

h) From the foregoing clarifications, it is understood that the CSR amount and its spending by the corporates is a philanthropic action by the company for contributing to the larger social good/public welfare and any amount which is not spent is to be transferred to the Government.

i) The objective of CSR provisions is to involve the corporates as partners in the social development process. It is not a one time/ formal act which is expected out of the corporates. They are supposed to be partners in the social development. Social development too is vast subject and requires meticulous planning and execution. That is the reason, a dedicated committee is envisaged in the Act to form a policy and ensure that it is implemented. It is thus clearly established that any willing and duty bound Board of Directors, would have taken efforts from the beginning of the financial year in which the CSR activities are required to be performed by the company.

j) Yet, the company is taking a plea that the requirement of constituting the committee were exempted from 22.01.2021. This argument by the company is not tenable. It is pertinent to note here that the first board meeting of the company for the financial year 2020-2021 was held on 16/06/2020 as per the annual return for that financial year filed by the company vide SRN T77262756 on 08.02.2022. Further, before such exemption was granted, six (06) board meetings were held and no CSR committee was established despite the provisions were applicable. For all these meetings, there is no ways and means to predict that the provisions will not be applicable w.e.f. 22.01.2021 which is a future date. Company and officers in default have clearly defaulted in constituting the CSR committee w. e f. 01.04.2020 till 22.01.2021.

k) The continuity of offence is based not only on whether there is any per day penalty or not, but also based on period of default which the company has not considered in its reply. Thus, the new board of Directors, are equally liable for not transferring the unspent amount w.e.f. 16.12.2021 till the time the amount was actually transferred that is on 14.09.2022 to the Prime Minister National Relief Fund, a fund specified in Schedule VII of the Act. Needless to say, the old management is liable w.e.f. 01.10.2021 till their exit from the company that is 16.12.2021.

l) Furthermore, as seen from the Form AOC -4, for filing the financial statement, vide SRN T77252880 dated 08.02.2022, it is seen that the Board’s report has not discussed any aspect regarding the unspent amount, requirement of CSR committee or exemption of it. It is clear that there is violation of Section 134 of the companies Act, 2013 for the financial year 2020-2021.

m) Further, the adjudication notice was sent to the company and its current management on 01.12.2023 by invoking provisions of Section 20 of the Act to serve a copy of the notice to all the Directors/Officers of the company. It is seen from the records that no reply is received from any of the old Directors. Also, the company in its various replies has not confirmed the service of notice to the old management.

6. ORDER:

a. Considering the above facts of the case and the relevant provisions; the undersigned now hereby pronounces the order. Further, the delay in issuance of the order is on account of checking MCA21 records; other administrative reasons, Also, that the company had initially applied for compounding of offence; however; the provisions of section 135 were amended to be proceeded under adjudication regime w.e.f. 22/01/2021; and accordingly the matter was considered under adjudication.

b. applicant company and its officers, who have defaulted the provisions of section 135(1) r/w 135(5) and of the Companies Act, 2013.

c. In exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and having considered the facts and circumstances of the case and oral submissions made by the representative of Noticee(s) physical hearing and after taking into account the factors mentioned herein above, I do hereby impose the penalty on the company and its officers in default pursuant to Rule 3(12) of Companies (Adjudication Of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication Of Penalties) Rules, 2014 r/w General Circular No. 1/2020 dated 02.03.2020; as per table below for violation of section 135(1) and 135(5) of the Act:-

a. Penalty for violation of sub-section (1) of section 135 : under 450:-

Penalty imposed on company/ director(s)	No. of days of default	First default (In Rs)	Default continues (In Rs)	Total / maximum penalty (In Rs)
Clairvoyant India Private Limited	296	10000	1000*296=296000	2,00,000/-

*(Date of default is considered from 01.04.2020 to 21.01.2021). Penalty on the old management will be levied separately.

b. Penalty for violation of sub-section (5) of section 135 under 135(7):-

Penalty imposed on company/ director(s)	Penalty for default (In Rs)	Total / maximum penalty (In Rs)
CLAIRVOYANT INDIA PRIVATE LIMITED	8,93,311*2	17,86,622/-
Baljinder Singh Sabharwal	8,93,311*1/10	89,311/-
Bhavna Newle Chopra	8,93,311*1/10	89,311/-
Vikas Bhalla	8,93,311*1/10	89,311/-

*(Date of default is considered from 01.10.2021 to 13.09.2022) as 14.09.2022 is the date on which the amount was transferred to Prime Minister National Relief Fund. Penalty is levied on management w.e.f. 16.12.2021.

d. In the interest of justice and opportunity of being heard, separate adjudication notices are being simultaneously issued to the old management for submissions, if any before passing the order.

e. I am of the opinion that penalty so imposed is commensurate with the aforesaid failure committed by the notice(s).

f. The Noticee(s)/applicant(s) shall pay the penalty so imposed through Ministry of Corporate Affairs portal only as per rule 3(14) of Companies (Adjudication Of Penalties) Rules, 2014.

g. Appeal against this order may be filed under section 454(5) of the Act, in writing with the Regional Director (Western Region), Ministry of Corporate Affairs100, Everest, 5th Floor, Netaji Subhash Road, Marine Drive, Mumbai-400002, within a period of sixty 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 order. [Section 454 of the Act read with Companies (Adjudication of Penalties) Rules, 2014 as emended by Companies (Adjudication of Penalties) Amendment Rules, 2019.

h. Your attention is also invited to section 454(8)(ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order in terms of the provisions of section 454(8)(i) of the Act.

i. 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 CLAIRVOYANT INDIA PRIVATE LIMITED and all directors/officers in default mentioned herein above and also to Office of the Regional Director (Western Region), and Ministry of Corporate Affairs at New Delhi.

(Mangesh Jadhav, ICLS)
Adjudicating Officer
Registrar of Companies
Maharashtra, Pune