MCA imposes penalty of ₹4.5 Lakh for extending loan without Prior board approval

The Registrar of Companies, Hyderabad, issued an order penalizing GVK Jaipur Expressway Limited for violating Section 179(3) of the Companies Act, 2013. The company extended a loan of ₹37 crores to GVK Development Projects Limited in March 2017 without obtaining the necessary board approval at the time, which is mandated by law. The approval was only obtained in December 2019, significantly delayed. The company and its officers were found to be in violation of the Act, leading to the imposition of penalties. The company was fined ₹2,10,000, and the officers in default were fined individually, with penalties reaching up to ₹60,000 for each. The Registrar’s order emphasizes the importance of compliance with statutory requirements and outlines the consequences of non-compliance. The affected parties have the right to appeal the order within sixty days of its issuance. This order supersedes a previous one issued on June 13, 2023, correcting typographical errors without altering the penalties imposed.

F.NO. ROCH/U45203TG2002PLC063406/TELANGANA/179 OF 2013/2023

BEFORE THE REGISTRAR OF COMPANIES, HYDERABAD
FOR THE STATE OF TELANGANA
2ND FLOOR, CORPORATE BHAWAN, THATTIANNARAM, G.S.I. POST, BANDLAGUDA,
NAGOLE, HYDERABAD-500 068

PETITION NO. ADJ. 179/ OF 2023
IN THE MATTER OF SECTION — 179 OF COMPANIES ACT 2013
AND
IN THE MATTER OF
M/S. GVK JAIPUR EXPRESSWAY LIMITED

A Company incorporated under the Companies Act, 1956 with CIN: U45203TG2002PLC063406, having its Registered office situated at Plot No 54, Second Floor, Sri Amba Tara Residency, Viman Nagar Colony, Beside Mamata High School, sardar Patel Road, Hyderabad – 500003, Telangana, India.

ORDER UNDER SECTION 454 READ WITH SECTION 450 OF COMPANIES ACT, 2013 FOR THE VIOLATION OF SECTION 179 (3)

READ WITH SECTION 117 OF THE COMPANIES ACT, 2013

1. Whereas M/s. GVK JAIPUR EXPRESSWAY LIMITED (hereinafter referred as ‘Company’) is registered in the State of Telangana vide CIN No: U72300TG2008PLC058738, having its registered office address at Plot No 54, Second Floor, Sri Amba Tara Residency, Viman Nagar Colony, Beside Mamata High School, sardar Patel Road, Hyderabad – 500003, Telangana, India, has filed an application along with its officer in default u/s 450 for adjudication of violation of section 179(3) r/w section 454 of the Companies Act, 2013 (the Act) seeking necessary orders.

2. Inquiry u/s 206(4) of the Companies Act, 2013 was conducted and during the course of inquiry, inquiry officer has observed that “the company had given loan to the tune of Rs. 37 Crore to GVK Development Projects Limited. The transaction took place in financial year 2017-18. As per MGT-14 field by the company with SRN R28044493 dated 03.01.2020, the board resolution was passed on 24.12.2019, hence, it is in violation of section 179 (3) (e) r/w section 117 (3) (g) of the Companies Act, 2013. Hence, this office has issued SCN vide letter no. ROCH/063406 (GVKJEPL-179)/ 2022/SCN dated 14.12.2022 for the violation of section 179 (3) (e) r/w section 117 (3) (g) of the Companies Act, 2013

3. It is submitted by the applicants that the applicant company had extended a loan of Rs. 37 crores to M/s. GVK Developmental Projects Private Limited on 10.03.2017 and due to the business exigencies, the company could not obtain the approval of the Board of Directors of the company in time as per section 179 (3) (e) of the Companies Act, 2013.

4. The applicant company has submitted that it has convened and held the Board meeting on 24th December 2019 and filed MGT-14 on 03.01.2020 in compliance of section 117 of the Act and shall continue to comply with the requirements of the Companies Act, 2013 including Rules, Notifications, Circulars issued thereunder.

5. Whereas as per Section 179 (3) of the Companies Act, 2013 states the following:

“(3) The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely: —

(a) to make calls on shareholders in respect of money unpaid on their shares;

(b) to authorize buy-back of securities under section 68;

(c) to issue securities, including debentures, whether in or outside India;

(d) to borrow monies;

(e) to invest the funds of the company;

(f) to grant loans or give guarantee or provide security in respect of loans;]

(g) to approve financial statement and the Board’s report;

(h) to diversify the business of the company;

(i) to approve amalgamation, merger or reconstruction;

(j) to take over a company or acquire a controlling or substantial stake in another company;

(k) any other matter which may be prescribed::”

6. Whereas Section 450 of the Companies Act, 2013 contemplates the following:

“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”

7. After considering the submission made in the application made by the company and the facts of the case it is proved beyond doubt that the officers of the company have defaulted in complying the provisions under Section 179 (3) (e) of the Act. In this regard, officers in default (within the meaning of section 2(60) of the Companies Act, 2013) are hereby directed to pay the following penalty from their own sources.

For Company:

For officer in default:

The penalty as indicated above, shall be paid and file e-Form INC-28 shall be filed within 30 days from the date of issue of this order by the defaulters (out of their own resources) with the office of RoC, Hyderabad with copies of challan in proof of payment.

8. In this regard your attention is also drawn to the provisions of Section 454(5) and (6) which contemplates that:

“(5) Any person aggrieved by an order made by the adjudicating officer under sub-section (3) may prefer an appeal to the Regional Director having jurisdiction in the matter.

(6) Every appeal under sub-section (5) shall be filed within sixty days from the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form, manner and be accompanied by such fees as may be prescribed.”

9. In this regard your attention is also drawn to the provisions of Section 454(8) (i) and (ii) of the Companies Act, 2013 which read as follows:

(i) Where company 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, 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 impriserimuril which may extend to six months or with fine which shall net he less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.

10. This is issued in supersession of order dated 13.06.2023 to correct typographical errors and no changes are made in the penalty levied.

Issued under my hand and seal on this the 19th day of June 2023.

(JOSEKUTTY V.E.)
REGISTRAR OF COMPANIES,
HYDERABAD.