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The Ministry of Corporate Affairs (MCA) has recently reduced the penalty for non-filing of MGT-14 form. This article explains the details of the case, the reasons behind the penalty reduction, and the implications for companies.

What is MGT-14?

MGT-14 is a form that companies are required to file with the MCA whenever certain resolutions are passed. These resolutions include those related to changes in the company’s capital structure, appointment or remuneration of directors, etc.

Case Background

In this specific case, a company named Aerostructures Assemblies India Private Limited failed to file MGT-14 forms for three resolutions passed by the company. The Registrar of Companies (ROC) imposed a penalty of ₹10,74,700 on the company and its officers.

Reasons for Penalty Reduction

The company appealed the penalty, arguing that the non-filing was due to oversight and disruptions caused by the COVID-19 pandemic. The MCA, while acknowledging the company’s default, took into account the reasons provided and reduced the penalty to ₹2,14,940.

Implications for Companies

This case highlights the importance of timely filing of MGT-14 forms. Companies should ensure that they are aware of the resolutions that require filing this form and comply with the deadlines. While the MCA may consider reducing penalties in certain cases, it is essential to avoid non-filing altogether to prevent any potential penalties and legal complications.

Additional Points

  • The specific details of this case may not apply to all situations. Companies are advised to consult with a professional for guidance on their specific circumstances.
  • The MCA regularly issues notifications and clarifications on various corporate governance matters. Companies should stay updated with the latest developments to ensure compliance.

Conclusion

The MCA’s decision to reduce the penalty in this case provides some relief to companies that have unintentionally failed to file MGT-14 forms. However, it is crucial for companies to prioritize timely filing and adhere to the relevant regulations.

***

F.No:9/14/ADJ/Sec.203 of 2013/Karnataka/RD(SER)/2024
Before the Regional Director, South East Region
Ministry of Corporate Affairs, Hyderabad
In the Matter of Companies Act, 2013/6921

In the Matter of Aerostructures Assemblies India Private Limited

1. M/s. Stanley Lifestyles Limited
2. Shubha Sunil, Whole time Director
3. Sunil Suresh, Managing Director
4. Akash Shetty, Company Secretary
5. Pradeep Kumar, CFO(KMP)
6. Jitesh Bansal, Company Secretary

Appellants

Date of hearing : 01.02.2024
Present : Mr. Had Babu Pothapu, PCS

ORDER

This is an appeal filed under section 454(5) of the Companies Act, 2013 by the above appellants in e-form ADJ vide SRN F91430918 dated 31.01.2024 against the adjudication order F No. ROC (B)/Adj.Ord.454-117(1)/ Stanley Lifestyles / Co.No.044090 /2023 dated 28.12.2023 under section 454 passed by the Registrar of Companies, Karnataka for violation of provisions of Section 117(1) of the Companies Act, 2013.

2. Registrar of Companies in his order of adjudication has stated that the Company has filed three suo-motu adjudications on 07.09.2023 wherein it was submitted by the company that three resolutions were passed by the company which ought to have been filed in e-form MGT-14 as per the provisions of Section 117(1) of the Act which have been missed out inadvertently.

S.No Event Section Date of Passing
resolution
1 Borrowing power of the Board (Kotak Mahindra Bank) 179(3)(d) 20.05.2019
2 Variation in terms of appointment i.e. remuneration of a managing director 117(3)(c) 16.12.2019
3 Borrowing power of the Board HDFC Bank) 179(3)(d) 27.09.2021

Hearing was held before Registrar of Companies on 05.12.2023 and after hearing the authorized representative had levied a penalty of Rs. 3,95,700/- on the Company and Rs.1,50,000/- each for 3 officers i.e., Shubha Sunil, Sunil Suresh and Akash Shetty and Rs. 1,29,000/- for Pradeep Kumar and Rs.1,00,000/- for Jitesh Bonsai (total aggregating to Rs.10,74,700/-).

3. An opportunity of being heard was given to the Appellants on 01.02.2024. The authorized representative Mr. Had Babu Pothapu, Practicing Company Secretary appeared on behalf of the appellants and reiterated the submissions made in the appeal and from the appeal filed it is observed that:

(a) The company had failed to file form MGT-14 for the resolution passed for exercising the borrowing monies power of the Board (availing credit card facility for online payments upto Rs.5,00,000/- from Kotak Mahindra Bank) vide resolution dated 05.2019 as required under section 117(1) and 117(3)(g) read section 179(3)(d) of the Companies Act, 2013. The form MGT-14 was filed on 13/10/2023 vide SRN A A 5846094.

(b) The company has failed to file form MGT-14 for variation in terms of appointment e. remuneration of a managing directors (reduction in remuneration payable to Appellant 2 and Appellant 3) resolution dated 16/12/2019 as required under section 117(1) and 117(3)(c) of the Companies Act, 2013. The form MGT-14 was filed on 13/10/2023 vide SRN AA5839827.

(c) The company has failed to file form MGT-14 for exercising the borrowing monies, power of the Board (for availing auto loan of Rs.75,00,000/- from HDFC Bank) resolution dated 27/09/2021 as required under section 117(1) and 117(3)(g) read section 179(3)(d) of the Companies Act, 2013. The form MGT-14 was filed on 13/10/2023 vide SRN AA5844698.

(d) The company has failed to file the aforementioned form MGT-14 s within due date for the above-mentioned resolutions. However, the company had filed resolution on 13/10/2023 with the additional fee as per the Companies (The Registration Offices and Fees) Rules, 2014.

(e) Due to over sightedness and the disruptions caused by covid-19 pandemic, the Company’s business was affected and the main focus of the Company was to maintain its existing turnover and profits of the Company. Further the staff of the Company were working from home, which had its limitations.

(f) Imposing maximum penalty by the Registrar of Companies, on the Company, its Managing Director, Whole-Time Director, CFO, CSs (including Ex-CS), is harsh, burdensome on the Company.

4. Though there is a default committed, there is a ground in interfering with the impugned adjudication order of Registrar of Companies to the extent of reducing the quantum of penalty due to reasons as stated at para 3 above. Hence, taking into consideration the facts of the appeal and submissions made by the authorized representative. I deem it would meet the end of justice if the penalty imposed by Registrar of Companies is reduced to 20% i.e., for the Company amounting to 79,140/- and for 3 officers i.e., Shubha Sunil, Sunil Suresh and Akash Shetty amounting to Rs.30,000/- each and for Pradeep Kumar amounting to Rs.25,800/- and for Jitesh Bansal amounting to Rs.20,000/- (total aggregating to Rs.2,14,940/-). The appellants are directed to comply with this order and also provisions of Section 454(8) of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014.

5. Accordingly, penalty was paid by the Company amounting to Rs.79,140/- and by 3 officers i.e., Shubha Sunil, Sunil Suresh and Akash Shetty amounting to Rs.30,000/- each and by Pradeep Kumar amounting to Rs.25,800/- and by Jitesh Bansal amounting to Rs.20,000/- (total aggregating to Rs.2,14,940/-) vide SRN’s X66043696, X66043704, X66044074, X66044082, X66044231 and X66043365 dated 02.02.2024 Accordingly, this order is issued to the Appellants with a copy to Registrar of Companies, Karnataka and Joint Secretary, E-Governance Cell, Ministry of Corporate Affairs, New Delhi for information and necessary action.

Issued under my hand and seal on this the 19th day of February 2024.

(DR.AJ SINGH)
REGIONAL DIRECTOR (SER)
HYDERABAD

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