Introduction: In a recent development, the Ministry of Corporate Affairs (MCA) has taken stringent action against My Wheels Private Limited for violating Section 42(6) of the Companies Act, 2013. This violation pertains to the allotment of shares without adhering to the stipulated regulations. In this article, we delve into the details of the case, the legal provisions, and the imposed penalties.
Detailed Analysis:
1. Appointment of Adjudicating Officer: The MCA appointed an adjudicating officer, Mukesh Kumar Soni, in line with Section 454 of the Companies Act, 2013, and the Companies (Adjudication Of Penalties) Rules, 2014, to oversee penalties under the Act.
2. Company Background: My Wheels Private Limited, a registered company under the Companies Act, 2013, is located at 6-7, Malviya Nagar, Bhopal 462001, M.P.
3. Violation of Section 42(6): The violation under scrutiny occurred during an inspection that revealed My Wheels Private Limited had allotted shares to allottees but failed to receive the allotment money in accordance with Section 42(6) of the Act. Instead, the company accepted cheques but did not credit the funds to its account. This contravention led to the application of Section 42(10) penalties.
4. Show Cause Notice: The Registrar of Companies (ROC) issued a show cause notice under Section 42(6) to the company and its defaulting officers via letter No. ROC-G/Adj.Pen./u/s. 42(6)/My Wheels/ 1690 to 1692 dated 28.07.2023. The company responded to this notice in a letter dated 10.09.2023.
5. Inquiry Notice: Subsequently, an inquiry notice under Section 42(6) was sent to the company and its officers in default via letter No. ROC-G/Adj.Pen./u/ s. 42(6)/My Wheels/2016 to 2018 dated 11.09.2023. The response to the inquiry was received in the ROC’s office on 22.09.2023. The hearing date was scheduled for 21.09.2023, but no representative attended.
6. Penalty Imposition: Section 42(6) of the Companies Act, 2013, mandates companies to allot securities within 60 days of receiving application money. This money must be kept in a separate bank account in a scheduled bank. Given the contravention, penalties were imposed under Section 42(10) of the Act.
7. Penalty Details: In line with Section 42(10) of the Act, a company, its promoters, and directors may face a penalty, which could extend to the amount involved in the offer or invitation or two crore rupees, whichever is lower. The company is also obligated to refund the monies to subscribers within 30 days of the order imposing the penalty.
8. Penalty Imposition: Consequently, the adjudicating officer imposed a penalty as prescribed under Section 10 of Section 42 of the Act. The details of the penalty imposed are as follows:
- My Wheels Private Limited: ₹2,00,00,000/-
9. Additional Directives: The company is directed to refund all monies to the complainants with interest at a rate of twelve percent per annum, in accordance with the provisions of Section 42(6) of the Act. This refund must be executed within 30 days from the date of the order as per the provisions of Section 42(10) of the Act.
The penalty amount is to be remitted by the company through the MCA-21 portal within 60 days from the date of the order. The company is required to file INC-28 as per the Act, attaching a copy of the adjudication order along with the payment challan.
10. Appeals and Penalties for Non-Compliance:
- An appeal can be filed with the Regional Director having jurisdiction in the matter against the order of the adjudicating authority under sub-section (3) of Section 454.
- Every appeal under sub-section (5) of Section 454 should be filed within 60 days from the date of receiving the order, accompanied by the prescribed fee.
- Section 454(8)(i) outlines that a company failing to comply with the order made within 90 days may face fines ranging from twenty-five thousand to five lakh rupees.
- Officers of a company or any other person in default who fail to comply with the order within 90 days may face imprisonment of up to six months or a fine ranging from twenty-five thousand to one lakh rupees, or both.
11. Future Actions: It is important to note that this order does not preclude the right of the ROC’s office to initiate further actions, including penal actions, for related, incidental, or continuing contraventions.
12. Reasons for Delay: The delay in issuing the order, if any, is attributed to the complexity of the case and the time taken by respondents to submit their replies and for the examination of the issues involved.
Conclusion: The penalty imposed by the Ministry of Corporate Affairs on My Wheels Private Limited serves as a reminder of the critical importance of adhering to statutory regulations and the prudent handling of share allotment funds. It underscores the seriousness of non-compliance and the need for strict adherence to the provisions of the Companies Act.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
Office of The Registrar of Companies, Madhya Pradesh,
Sanjay Complex, ‘A’ Block, 3rd Floor
Jayendraganj, Gwalior —474009.
Email: roc.gwalior@mca.gov.in
Order No. ROC-G/Adj. Pen./u/s.42(6)/)/My Wheels/2233 Dated: 11/10/2023
In the matter of Companies Act, 2013
And
In the matter of adjudication proceeding under sub-section (6) of Section 42 of
the Companies Act, 2013
And
In the matter of M/s. My Wheels Private Limited
(CIN- U50100MP2015PTC034842)
Date of hearing 21.09.2023
Appointment of adjudicating officer:
1. Ministry of Corporate Affairs vide its Gazette Notification No. A42011/ 112/2014-Ad.II dated 24.03.2015 appointed undersigned as adjudicating officer in exercise of the powers conferred by Section 454 of the Companies Act, 2013 (hereinafter known as “Act” ) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudicating penalties under the provisions of this Act.
Company:
2. Whereas company (CIN- U50100MP2015PTCO34842) hereinafter known as company) is a registered company with this office under the provisions of the Companies Act, 2013 having its registered office situated at 6-7, Malviya Nagar, Bhopal 462001, M.P. as per the MCA website.
| Si. No. | Particulars | Details |
| 1. | Paid-up capital (F.Y. 2016-17) | 4,00,00,000 |
| 2. | Turnover (F.Y. 2016-17) | 99,88,740 |
| e. Revenue from operation | 63,08,472 | |
| f. Other income | 36,80,268 | |
| 3. | Holding company | Oss |
| 4. | Subsidiary company | 0 |
| 5. | Whether company registered under Section 8 |
0 |
| 6. | Whether company registered under any other Special Act |
0 |
Facts about the case:
3. Whereas inspection u/ s. 206(5) of the Companies Act, 2013 conducted by the M. During the inspection that company has allotted shares to allottees on 10.03.2016 as under:
| SI. No. | Name of allottee | No. of shares allotted at Rs. 10/-each | Amount |
| 01. | Saurabh Garg | 975000 | 97,50,000/‑ |
| 02. | Manju Garg | 936000 | 93,60,000/‑ |
| 03. | Rishab Garg | 1989000 | 1,98,90,000/‑ |
| Total | 3,90,00,000/- |
However, from the books of accounts of these allottees, it was found that allotment money was not received and not kept in the separate account rather only cheques from these parties were taken and not endorsed with bank. Hence, allotment money were never credited in company’s account and only cheques were taken which were never realized. Hence, this is a violation of Section 42(6) of the Act, which attracted penal provisions of Section 42(10) of the Companies Act, 2013.
4. Subsequently this office had issued show cause notice u/s. 42(6) of the Act to the company and its officers in default vide No. ROC-G/Adj.Pen./u/s. 42(6)/My Wheels/ 1690 to 1692 dated 28.07.2023. In response of this office letter dated 28.07.2023, reply of the said notice was received from the company vide dated 10.09.2023.
5. Thereafter, notice of inquiry vide No. ROC-G/Adj.Pen./u/ s. 42(6)/My Wheels/2016 to 2018 dated 11.09.2023 were issued to the company and its officers in default. The reply of the inquiry was received in this office vide letter dated 22.09.2023. As per (Rule 3(3), Companies (Adjudication of Penalties) Rules, 2014 and the date of hearing was fixed on 21.09.2023 at 30 P.M. in the office of Registrar of Companies, Madhya Pradesh, Sanjay Complex, A Block, 3rd Floor, Jayendraganj, Gwalior. But no representative has been attended the hearing.
6. As per section 42(6) of the Companies Act, 2013, any company making an offer or invitation under this section shall allot its securities within 60 days from the date of receipt of the application money for such securities provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank.
7. Order:
Having considered the facts and circumstances of the case and after taking into account and factors above, it is concluded that the company and its officers in default are liable for penalty as prescribed under Section 42(10) of the Act for default is made in complying with the requirements of Section 42(6) of the Act of the company viz. My Wheels Private Limited.
8. As per provisions of Section 42(10) of the Act, 2013 if a company makes an offer or accepts monies in contravention of this section, the company, its promoters and directors shall be liable for a penalty which may extend to the amount involved in the offer or invitation or two crore rupees, whichever is lower and the company shall also refund all monies to subscribers within a period of thirty days of the order imposing the penalty.
9. Accordingly, I am inclined to impose a penalty as prescribed under Section 10 of Section 42 of the Act. The details of the penalty imposed on the company and officers in default are shown in the table below.
| Si. No. | Name of the company/ director | Amount of penalty |
| 01. | M/s. My Wheels Private Limited | Rs. 2,00,00,000/- |
(a) The company is directed to refund all the monies to the complainants alongwith interest at the rate of twelve percent per annum as per the provisions of Section 42(6) of the Act, within 30 days from the date of order as per the provisions of Section 42(10) of the Act.
(b) The penalty amount shall be remitted by the company through MCA-21 portal within 60 days from the date of order. The company needs to file INC-28 as per provisions of the act, attaching the copy of adjudication order alongwith payment challan.
(c) Any person aggrieved by the order of adjudicating authority under subsection(3) of Section 454 may prefer an appeal to the Regional Director having jurisdiction in the matter.
(d) Every appeal under sub-section (5) of Section 454 shall be filed within 60 days from the date on which the copy of order may be the adjudicating authority is received by the aggrieved person and shall be in such form, manner and be accompanied by such fee as may be prescribed.
(e) As per section 454(8) (i) where a company fails to comply with the order made under sub-section (3) and sub-section (7) as the case may be within a period of 90 days from the date of receipt of the copy for the order, the company shall be punishable with fine which shall not be less than twenty five thousands, but which may extend to five lakh rupees.
(f) Where an officer of a company or any other person who is in defaults fails to comply with the order made under sub-section (3) or sub-section (7) as the came may be within a period 90 days from the date of receipt of the order, such officer shall be punishable with imprisonment which may extend to six months or with the fine which shall not be less than twenty five thousands rupees but which may extend to one lakh or with both.
(g) This order is without prejudice to the rights available to this office to initiate separate actions including but not limited to the penal actions for contraventions of related, incidental and/or continuing offence/ contraventions.
(h) The delay for issuance of the order if any is due to complexity of the issue and time taken by the respondents to submit their replies and examinations of the issues involved.
10. In terms of the provisions of sub-rule 3 of the Companies (Adjudication of Penalties), Rules, 2014 copy of the order is being sent to My Wheels Private Limited 6,7, Malviya Nagar, Bhopal 462001, M.P., Sh. Rishab Garg, 7/88, Arera Colony, Shahpura, R.S. Nagar, Bhopal 462016, M.P., Manju Garg, 7/88, SBI Society Arera Colony, Near Sai Baba Board, RS Nagar, Huzur, Bhopal 462016, M.P.
The adjudication notice stand disposed off with this order.
(Mukesh Kumar Soni)
Officer/Registrar of Companies,
Madhya Pradesh, Gwalior.
Order reserved on 21.09.2023
Order pronounced on 04.10.2023
Place: Gwalior, Madhya Pradesh.
