Registrar of Companies (Karnataka) has issued an order adjudicating penalties on Vidyuttech Services Private Limited for violating provisions of section 42 Companies Act, 2013 related to private placement of securities. Company accepted money before passing relevant resolutions and issued private placement offer letters without filing the required resolutions with the Registrar. The company, along with its directors, has been found liable for penalties under section 42(10) of the Act.
MCA order imposes penalties on the company and its directors for the two instances of non-compliance, totaling Rs. 4,00,000 for each default.
According to Section 42(1) of the Companies Act, 2013, a company is allowed, subject to the provisions of this section, to engage in private placement of securities. Section 42(3) of the Act states that a company involved in private placement must issue a private placement offer and application in the prescribed form and manner to identified persons, whose names and addresses are recorded by the company as prescribed. Additionally, Rule 14(8) of the Companies (Prospectus of Securities) Rules, 2014, stipulates that a company should issue a private placement offer cum application letter only after the relevant special resolution or Board resolution has been filed with the Registry.
Registrar of Companies. Karnataka
Kendriya Sadan, 2nd Floor, ‘E’. Wing,
Koramangala, Bengaluru – 560034
Phone 080-25537449/25633105
E-mail ID: [email protected]
File No. ROC(8)/Adj.Ord.454.42/Vidyuttech/Co.No.154044/2023/
Date: 25.05.2023
ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT 2013 READ WITH RUI E 3 OF THE COMPANIES (ADJUDICATION OF PENALITES) RULES, 2014 FOR VIOLATION OF PROVISIONS OF SECTION 42 OF THE COMPANIES ACT. 2013 READ WITH RULES FRAMED THEREIN BY VIDYUTTECH SERVICES PRIVATE LIMITED
Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/11212014-Ad.11 dated 24.03.2015 has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by Section 454 of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of the Companies Act, 2013.
2. The company, Vidyuttech Services Private Limited (hereinafter referred to as Company) was incorporated on 04.11.2015 and is currently registered under the jurisdiction of Registrar of Companies, Karnataka with its registered office situated at 2nd Floor, HustleHub Tech Park Building, Sector 2, HSR Layout. Bengaluru, Karnataka 560102.
3. As per section 42(1) of the Companies Act, 2013, a company, may. subject to the provisions of this section, make a private placement of securities and as per section 42(3) of the Act, a company making private placement shall issue private placement offer and application in such form and manner as may be prescribed to identified persons, whose names and addresses are recorded by the company in such manner as may be prescribed. Further, as per Rule 14(8) of Companies (Prospectus of Securities) Rules, 2014, a company shall issue private placement offer cum application letter only after the relevant special resolution or Board resolution has been filed in the Registry.
4. The company has submitted a suo-motu adjudication application on 12.12.2022 with this office. It is submitted in the said application that the company has made 2 separate allotments under section 42 of the Act i.e. on 14.02.2022 and 29.04.2022. In both these allotments, the company has failed to comply with the provisions mentioned in the above part In the first instance, the company had received money from one of the allottees prior to the company passing the relevant resolutions and issuing offer letter which was returned by the company and received later after due compliances were made. Necessary documents in the form of email communications have been provided by the company in favour of this allottee indeed being one of the identified persons provided for in section 42(2) of the Act In the second instance, the company had issued private placement offer cum application letter and allotted the shares prior to the company filing the relevant resolutions With the Registrar.
5. Pursuant to the adjudication application filed by the company, Notice of hearing was sent on 20.022023 and physical hearing was held on 09.03.2023. It was attended by Mr. Ashwin Shat practicing company secretary and authorised representative. During the hearing, he has argued that the said non-compliance, as already stated in the application, is merely a procedural lapse which is inadvertent and a lenient view may be taken on the same. Further, as per the proviso to Rule 3(6) of Companies (Adjudication of Penalties) Rules 2014, the company was asked to submit certain information in writing on the issues relevant for determination of the default to which the company submitted its reply on 12.05.2023.
6. It is observed that the company has accepted monies in contravention of section 42 of the Act and the company, it promoters and directors are liable for penalty as provided under section 42(10) of the Act. Further, as per the records, it is observed that Mr. Xitij Avinash Kothi and Mr. Gaurav Srivastava, the promoters of the company are also the directors.
7. As the company Is a startup company (certificate from DPIIT regarding the same has been provided by the company), the provisions of imposing lesser penalty as per section 446B of the Act shall be applicable in this case. The same has also been prayed for by the company in its adjudication application.
8. As per the provisions of section 446B of the Act, notwithstanding anything contained in this Act 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 any 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.
9. It is seen that the company has violated the proviso to section 42 of the Act at two distinct instances, each of which constitutes a separate default and needs to be penalised individually, the details of which are as tabulated below.
| S. No. | Date of allotment | Amount raised through private placement | Corresponding MS-3 form filed for allotment |
| 1. | 14.02.2022 | Rs. 5,41,02,510 | 781132979 |
| 2. | 29.042022 | Rs. 2,59,70,670 | 799169625 |
10. Therefore, having considered the facts and circumstances of the case and the submissions made by the company and directors through their authorised representatives, in view of the above two violations of section 42 of the Companies Act, 2013 read with the corresponding rules, I do hereby impose penalty under section 42(10) read with section 446B of the Act on the company and the directors / officers who were in default of the offence committed in a manner as tabulated below:
| S. No. | Particulars of notice | Penalty imposed for Default 1 |
Penalty imposed for Default 2 |
| 1. | Company | Rs. 2,00,000 | Rs. 2,00,000 |
| 2. | Mr Xitij Avinash Kothi, Promoter-cum-Director | Rs. 1,00,000 | Rs. 1,00,000 |
| 3. | Mr. Gaurav Srivastava. Promoter-cum-Director | Rs. 1,00,000 | Rs. 1,00,000 |
| Total penalty imposed for each default | Rs. 4,00,000 | Rs. 4,00,000 | |
11. The company and its promoters / directors / key managerial personnel who are in default are hereby directed to pay the penalty amount as tabulated above, within 90 days from the date of receipt of this Order and file Form INC-28 attaching a copy of the Order and payment challans. In case of directors, such penalty amount is required to be paid out of their own funds. The notice shall pay the said amount of penalty online by using the website mca.gov.in (Miscellaneous head) specifying the details of this Order and the name of the noticee who is paying the penalty.
12. Appeal, if any, against this Order may be filed with the Regional Director (South East Region), Hyderabad within a period of 60 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.
14. Your attention is also invited to section 434(8) of the Companies Act, 2013 in case of non-compliance of this Order wherein necessary penal action will be initiated under section 454(8)0 and 454(8)0i) of the Companies Act, 2013 against the company and directors / key managerial personnel who are in default without further notice in the matter.
(Sanjay Sood)
Registrar of Companies Karnataka
and Adjudicating Officer
