MCA imposes penalty Rs. 3.5 Lakh for carrying business not mentioned in MOA

The Registrar of Companies, West Bengal has recently penalized a company and its officer in default for INR 3,50,000/- for conducting business activities that were not included in the company’s main object clause as specified in its memorandum of association (MOA). The company was engaged in manufacturing and dealing in starch, which was not covered under the existing clause of the MOA, which specified the business of fine chemicals. Despite the company’s belief that starch is a chemical substance and falls under the scope of the MOA’s main objects, it was later discovered that starch is, in fact, a food substance. This violation of Section 4(1)(c) read with Section 10 read with Section 13 of the Companies Act, 2013, has led to the imposition of the maximum penalty under Section 450 of the Act. This incident highlights the importance of carefully considering and including appropriate clauses in a company’s MOA to avoid legal issues in the future.

GOVERNMENT OF INDIA
Ministry of Corporate Affairs
Office of the Registrar of Companies (West Bengal)
Nizam Palace, 2, M. S. 0. Building,
2nd Floor, 234/4, Acharya Jagadish Chandra Bose Road
 KOLKATA — 700 020.

Order No. ROC/ADJ/2023/171600/ 2780-2783 Date: 31.03.2023

SUBJECT: SERVICE OF ORDER OF ADJUDICATION PROCEEDINGS FOR VIOLATION OF SECTION 4 OF THE COMPANIES ACT, 2013 IN THE MATTER OF REGAAL RESOURCES LIMITED

Sir,

Please find herewith a copy of the Order passed by Adjudicating Officer dated 29.03.2023 for necessary compliance within the prescribed time failing which penal action will follow without further intimation.

[A.K. Sethi, ICLS]
Registrar of Companies & Adjudicating Officer
West Bengal

Registrar of Companies
GOVERNMENT OF INDIA
Ministry of Corporate Affairs
Office of the Registrar Companies (West Bengal)
KOLKATA-700020

GOVERNMENT OF INDIA
Ministry of Corporate Affairs
Office of the Registrar of Companies (West Bengal)
Nizam Palace, 2nd M. S. 0. Building, 2nd Floor
Acharya Jagadish Chandra Bose Road
KOLKATA – 700 020

No. ROC/LEGAL/ADJ/2023/171600/penalty order/

 Dated: 29-03-2023

ADJUDICATION ORDER FOR PENALTY U/S 454(3) OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 AS AMENDED BY THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2019 IN MATTER OF NON COMPLIANCE OF THE PROVISIONS OF SECTION 4 READ WITH SECTION 10 OF THE COMPANIES ACT, 2013

In respect of: REGAAL RESOURCES LIMITED (CIN: U15100WB2012PLC171600)

1. Appointment of Adjudicating Officer:-

1. Ministry of Corporate Affairs vide its Gazette Notification No A-42011/112/2014-Ad.II 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] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudicating penalties under the provisions of this Act. The undersigned vide Companies (Amendment) Act, 2020 is entrusted to adjudicate penalties under section 450 of the Companies Act, 2013.

2. Company:-

REGAAL RESOURCES LIMITED [herein after known as Company] is a registered

company with this office incorporated on 02.01.2012 under the provisions of Companies Act, 1956 having its registered office as per MCA21 Registry at address 6th Floor, D2/2, Block-EP & GP, Sector-V Kolkata Kolkata WB 700091 INDIA.

3. Facts about the Case:-

1) The provisions of section 4(1)(c) of the Act, provides inter alia that:

The memorandum of a company shall state—

The objects for which the company is proposed to be incorporated and any matter

considered necessary in furtherance thereof;

According to Section 450 of the Act, If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day. after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person.

2) The Company has filed Suo- moto Application in GNL- 1 vide SRN: F59602805 dated 14.03.2023 for adjudication of penalties for violation of the provisions of Section 4 read with Section 10 of the Companies Act, 2013.

3) With reference to the Adjudication Application dated 14.03.2023, the matter is referred for Adjudication since the captioned Company and every officer of the Company in default or such other person is liable to penalty under Section 450 for violation of Section 4 read with Section 10 of the Companies Act, 2013.

4) Accordingly, the adjudication officer has issued hearing notice vide No. ROC/ADJ/2023/171600 dated 16.03.2023 scheduling a physical hearing on 21.03.2023 for Adjudication under Section 454(4) read with Section 450 of the Companies Act, 2013 as amended by the Companies (Amendment) Act, 2020, to the company and its officers in default for the violation of the provisions of the act as mentioned in para “1 & T

5) Manoj Kumar Banthia, PCS being the Authorised Representative of the Company and its Directors, attended the hearing physically on 21.03.2023 and orally omitted that the company was incorporated on 02.01.2012 and thereafter with effect from 16.02.2015, the main object of the company was altered of include therein inter alia the business of fine chemical etc. After such alteration, the company set up a plant for manufacturing starch, in the belief that the starch is a part of chemical and also part of object of the company. The commercial production started in September, 2018. However upon advice, the company further altered its main object to include therein the business of starch specifically on 10.02.2020.

Further, the company suo moto submits that it carried on the business of starch in the year 2018-19 and 2019-20 without any specific clause in its memorandum of association relating to starch.

Also, it is stated in the petition filed before the Registrar of Companies, West Bengal that:

a. By passing a special resolution on 16.02.2015, the applicant company altered its main objects to include therein inter alia the business of manufacturing and dealing in fine and heavy chemicals, alkalies, manures, etc.

b. The management acquired land in Thakurganj in the state of Bihar in the year 2015 to set up a plant for production of starch. The plant for manufacture of starch was completed in the year 2018. The commercial production started in the month of September, 2018

c. The company was carrying on the business of manufacturing and dealing in starch under belief that starch is a chemical substance and is adequately covered by its altered clause 4 of the main objects of its memorandum of association. However upon advice, it came to the knowledge of the company that starch is a food substance and is not covered by existing clause 4 of the memorandum of association of the company.

d. Immediately upon receipt of such advice, the company altered its object clause by passing a special resolution on 10.02.2020.

e. Since the company carried on the business of manufacturing and dealing in starch in the financial year 2018- 19 and 2019-20 without any specific clause in memorandum of association relating to starch, it has breached the provision of Section 4 of the Companies Act, 2013.

f. The aforesaid inadvertent breach of Section 4 of the enactment was unintentional and does not prejudicially affect the interest of any person. As on date there is no non- compliance under the relevant section.

7) Furthermore, in light of the above, it is prima facie evident that there is an apparent default of provision of Section 4(1)(c) read with Section 10 read with Section 13 of the Act for which the company and its directors are liable to penalty under Section 450 of the Act. The penal provision is attracted for the period 16.02.2015 till 09.02.2020.

ORDER

1. the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person under Section 450 of the Companies Act, 2013.

2. In exercise of the powers conferred vide Companies (Amendment) Act, 2020, the undersigned is entrusted to adjudicate penalties under section 450 of the Companies Act, 2013 with effect from 21.12.2020 and after taking into account the factors mentioned herein above, I do hereby impose the penalty of Total 3,50,000/- (Rupees Three Lakh Fifty Thousand only) i.e., Rs. 2,00,000/- (Rupees Two Lakh only) on the Company and Rs. 50,000/- (Rupees Fifty Thousand only) on 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.

3. The noticee shall pay the said amount of penalty individually for the company and its directors (out of own pocket) by way of e-payment [available on Ministry website mca.gov.in] under “Pay miscellaneous fees” category in MCA fee and payment Services within 90 days of receipt of this order. The Challan/SRN generated after payment of penalty through online mode shall be forwarded to this Office Address.

4. Appeal against this order may be filed in writing with the Regional Director (ER), Ministry of Corporate Affairs, Kolkata located at Nizam Palace, 2nd M. S. 0. Building, 3rd Floor, 234/4, A.J.C. Bose Road, Kolkata-700020, West Bengal 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 the this order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].

5. 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.

6. 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 REGAAL RESOURCES LIMITED and all directors/officers in default mentione are in above and also to Office of the Regional Director (Eastern Region) and Ministry of Corporate Affairs at New Delhi.

7. Date of hearing: 21,’ March, 2023

Date of Pronouncement: 29′” March, 2023

[A. K. Sethi, ICLS]
Adjudicating Officer & Registrar of Companies
West Bengal