Introduction: In a recent development, the Ministry of Corporate Affairs (MCA) has imposed penalties on Fine Gems Export Private Limited and its directors for violations under Section 10(1) of the Companies Act, 2013. The order, dated November 23, 2023, by the Registrar of Companies, cum Official Liquidator, Rajasthan High Court, Jaipur Bench, sheds light on the adjudication process and the consequences faced by the company and its directors.
Detailed Analysis:
1. Appointment of Adjudicating Officer: The MCA appointed the Registrar of Companies/Adjudicating Officer to address the penalty proceedings under Section 454 of the Companies Act, 2013. The adjudication involves violations related to Section 10(1) of the Companies Act, 2013.
2. Respondent Company and Directors: Fine Gems Export Private Limited and its directors – Anila Kothari, Mahendra Kumar Golechha, Navneet Maheshwari, and Murli Devi Maheshwari – faced penalties for the alleged violations.
3. Relevant Provisions of Companies Act, 2013: Section 10(1) of the Companies Act, 2013 emphasizes that the memorandum and articles, once registered, bind the company and its members to observe all provisions. Section 450 outlines penalties for contraventions of the Act, and in this case, it is applied for violating Section 10(1).
4. Facts of the Case: The adjudication application revealed that during the Financial Year 2015-16 & 2016-17, Fine Gems Export Private Limited intended to engage in real estate activities. Due to circumstances, the company could not carry out the intended activities and, instead, used surplus funds for loans and investments.
5. Show Cause Notice and Adjudication: The company received a Show Cause Notice for non-compliance with Section 10(1) of the Companies Act, 2013. The Respondent Company furnished replies, and an Adjudication Notice followed. The matter was set for a hearing on November 7, 2023.
6. Penalty Imposition: The Adjudicating Officer, Shri Ruvit Kumar, considered the facts and imposed penalties. The penalties, calculated based on the default period, were imposed on the company and its directors. The nature of the default and the final penalty amounts are detailed in the order.
7. Appeal Information: The order provides information on the process of filing an appeal against the decision. Companies and individuals have sixty days from the date of receipt of the order to file an appeal with the Regional Director (NWR), Ministry of Corporate Affairs, Ahmedabad.
8. Consequences of Non-payment: The order emphasizes the consequences of non-payment of the imposed penalties. Non-compliance may lead to fines or imprisonment as per the provisions of the Companies Act, 2013.
Conclusion: The MCA’s imposition of penalties on Fine Gems Export Private Limited and its directors serves as a reminder of the strict adherence required to the provisions of the Companies Act, 2013. The case highlights the importance of complying with the specified activities mentioned in the memorandum and the repercussions faced by companies deviating from the designated business scope. Companies should remain vigilant in adhering to legal requirements to avoid penalties and legal actions.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES CUM OFFICIAL LIQUDIAOTR,
ATTACHED TO RAJASTHAN HIGH COURT, JAIPUR BENCH AT JAIPUR
CORPORATE BHAWAN, 0/6-7, RESIDENCY AREA, CIVIL LINES, JAIPUR- 302001
ORDER FOR PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICTION OF PENALTIES) RULES, 2014 AND COMPANIES (ADJUDICATON OF PENALTIES AMENDEMENT RULES, 2015 FOR THE VIOLATION OF SECTION 10(1) OF COMPANIES ACT, 2013 IN THE MATTER OF: –
01. Fine Gems Export Private Limited, Company
322-Delhi Wala Building, Gopal Ji Ka Rasta, Johri, Jaipur, Rajasthan- 302003.
02. Anila Kothari, Director
03. Mahendra Kumar Golechha, Director
04. Navneet Maheshwari, Director
05. Murli Devi Maheshwari, Director ………. Respondents
Date of Hearing — 07.11.2023
Present: –
01. Shri Ruvit kumar, ROC-Cum-01, Rajasthan, Jaipur
02. Shri Raunak Agrawal, AROC-cum-AOL, Rajasthan, Jaipur
03. Shri Amol Vyas, Advocate and authorized representative of the Respondents.
04. Shri Raunak Bansal, Company Secretary and authorized representative of the Respondents.
ADJUDICATION ORDER
1. Appointment of Adjudicating Officer: –
Whereas the Ministry of Corporate Affairs vide its Gazette Notification No. SO 831 (E) dated 24.03.2015 appointed the Registrar of Companies/undersigned as Adjudicating Officer in exercise of the Power conferred by Section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules, 2014. The Registrar of Companies vide the Companies (Amendment) Act, 2019 is entrusted with power to adjudicate penalty as provided under Section 450 of the Companies Act, 2013 (penal provision of section 10 (1) of the Companies Act, 2013).
2. Respondent Company:
Whereas Fine Gems Export Private Limited, Company (CIN U36911RJ1988PTC004689) has its registered office at 322-Delhi Wala Building, Gopal Ji Ka Rasta, John’, Jaipur, Rajasthan- 302003.
3. Relevant Provisions of the Companies Act, 2013: –
Whereas as per provision of section 10 (1) of the companies Act, 2013 “subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.”
Whereas as per the provision of section 450 of the Companies Act, 2013 “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, any 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.”
4. Facts of the Case:
> As per the adjudication application, this office has observed that during the Financial Year 2015-16 & 2016-17, the Respondent Company intended to carry on the business of real estate. For the same, the company has purchased land for construction of complex. Further, out of purchased land, a piece of land was acquired by the Government and the company has received compensation from the Government in this regard.
Further, due to lack of land, the real estate activities were not carried out by the company. Further, the surplus laying with the company has been used for extending loans and investments and has earned interest thereon.
This office has further observed that the Respondent Company has carried out Financial Activity during the Financial Year 2015-16 & 2016-17 without altering its memorandum and violated the provision of section 10(1) of the Companies Act, 2013.
> In view of the above, this office has sent Show Cause Notice to the Respondent Company and its Directors vide letter dated 27.07.2023 for non-compliance of section 10(1) of the Companies Act, 2013. In this regard, the Respondent Company has furnished its reply vide letter dated 28.08.2023 and 20.09.2023.
> Further, this office has issued an Adjudication Notice dated 18.10.2023 to the Respondent Company and its directors and accordingly the matter has been fixed for a hearing on 07.11,2023.
5. At the time of hearing, Shri Amol Vyas, Advocate and Shri Raunak Bansa I, Company Secretary and authorized representative of the Respondents appeared in the matter. Further, the authorized representative of the Respondents has submitted that section 450 of the Companies Act, 2013 is penal provision for violation of section 10(1) of the Companies Act, 2013 instated of section 10(2) of the Companies Act, 2013, as shown in the Show Cause Notice and requested Competent Authority to adjudicate the matter with penal provision of section 450 of the Companies Act, 2013.
6. In view of the above facts, the undersigned has reasonable cause to believe that the provision of section 10 (1) of the Companies Act, 2013 has not been complied with by the Respondent Company and its directors and therefore liable for penal action under section 450 of the Companies Act, 2013. Accordingly, in exercise the power of 454 (3) of the Companies Act, 2013, I inclined to impose a penalty on the company and its directors in accordance with section 446B of the Companies Act, 2013, as under-.
| Nature of default | Violations under Compani es Act, 2013 | Name of persons on whom penalty imposed | No. of days for defa ult | Total default amount (In Rs.) | Maximum Limit for Penalty (In Rs.) | Final Penalty Imposed (In Rs.) pursuant to section 446B of the Companies Act, 2013. |
| Carried out activities other than activities mentioned in memoran cium |
Section 10 (1)
|
Fine Gems Export Private Limited | 731 | 10,000+ 731*100/- =83,100/- | 2,00,000/- | 41,550/- |
| Anila Kothari | 731 | 10,000+ 731*100/- =83,100/- | 50,000/- | 25,000/- | ||
| Mahendra Kumar Golechha | 731 | 10,000+ 731*100/- =83,100/- | 50,000/- | 25,000/- | ||
| Navneet Maheshwari | 731 | 10,000+ 731*100/- =83,100/- | 50,000/- | 25,000/- | ||
| Murli Devi Maheshwari | 731 | 10,000+ 731*100/- =83,100/- | 50,000/- | 25,000/- | ||
| Grand Total | 1,41,550 – | |||||
| Number of days calculated from 01.04.2015 to 31.03.2017 (defaulting period). | ||||||
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the Noticee and penalty so imposed upon the Officers-in-default shall be paid from their personal sources/ income. It is further directed that penalty imposed shall be paid through the Ministry of Corporate Affairs portal only as mentioned under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 under intimation to this office.
7. Appeal against this order may be filed in writing with the Regional Director (NWR), Ministry of Corporate Affairs, Ahmedabad within a period of sixty days from the date of receipt of this order, in e-Form ADJ (available on Ministry website mca.gov.in setting forth the grounds of appeal and shall be accompanied by a certified copy of this order (section 454(5) & 454(6) of the Companies Act, 2013 read with Companies (Adjudicating of Penalties) Rules, 2014).
8. Attention is also invited to section 454(8)(i) and 454(8)(ii) of the Companies Act, 2013, which state that in case of non-payment of penalty amount, 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 and officer in default shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty five thousand rupees but which may extend to one lakh rupees or both.
9. In ‘terms of the provisions of sub-Rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, copy of the order is being sent to the following: –
I. Fine Gems Export Private Limited at 322-Delhi Wala Building, Gopal Ji Ka Rasta, Johri, Jaipur, Rajasthan- 302003.
II. Anila Kothari at ___.
III. Mahendra Kumar Golechha at ___.
IV. Navneet Maheshwari at __.
V. Murli Devi Maheshwari at __.
VI. Regional Director, NWR, Ahmedabad at ROC Bhavan, Opp. Rupal Park Society, Behind Ankur Bus Stop, Naranpura, Ahmedabad, Gujarat-380 013
The adjudication notice stands disposed off with this order.
(RUVIT KUMAR)
ROC-cum-OL & Adjudicating officer,
Rajasthan, Jaipur
Signed on this 23rd day of November 2023.
Place: Jaipur, Rajasthan.
File No. ROC-JP/General/Management Dispute/262
Date:- 24/11/2023
