In a recent adjudication, the Ministry of Corporate Affairs (MCA) imposed penalties on the directors of CMB India Nidhi Limited for failing to mention their Director Identification Numbers (DIN) on the company’s financial statements. This oversight violated Section 158 of the Companies Act, 2013, resulting in legal consequences.
The Ministry of Corporate Affairs (MCA) initiated an inquiry into CMB India Nidhi Limited, a company registered under the Companies Act on November 24, 2015, with its registered office in Allahabad, Uttar Pradesh. The inquiry revealed that the company’s financial statement for the fiscal year 2017-18 lacked the required DINs under the directors’ signatures. This non-compliance with Section 158 of the Companies Act, 2013, triggered a series of legal proceedings.
Appointment of Adjudicating Officer
The MCA, through its gazette notification, appointed the Registrar of Companies (ROC), Uttar Pradesh, as the Adjudicating Officer under Section 454 of the Companies Act, 2013, and the Companies (Adjudication of Penalties) Rules, 2014. The ROC conducted an in-depth examination following directives to scrutinize Nidhi companies, resulting in the identification of non-compliance by CMB India Nidhi Limited.
Show Cause Notice and Hearings
A Show Cause Notice was issued to the company’s officers in default under Section 158. The company’s response led to a hearing where the authorized representative failed to present essential documents. Subsequent hearings saw no representation from the defaulting directors, reinforcing the case of non-compliance.
Legal Provisions and Penalties
Section 158 mandates that every return, information, or particulars furnished under the Act must include the DIN if it pertains to directors. Section 172 outlines penalties for defaulting companies and officers, with fines reaching up to ₹3 lakh for companies and ₹1 lakh for officers. However, Section 446B provides relief for small companies, capping the penalty at half the specified amount.
Penalty Imposition
The ROC adjudicated that the directors Pradeep Kumar Maurya and Shambhavi failed to comply with Section 158. Consequently, a penalty of ₹50,000 was imposed on each, considering the continuous default since August 30, 2018, with an additional daily penalty. The final penalty was capped at ₹50,000 for each director, aligning with the provisions for small companies under Section 446B.
Compliance and Appeals
The company and its officers were directed to pay the penalties through the MCA21 portal within 90 days and file Form INC-28 with the adjudication order and payment receipts. They were also informed about the right to appeal to the Regional Director (Northern Region) within 60 days, as per Section 454(5) & (6) of the Act.
Conclusion
The case of CMB India Nidhi Limited underscores the critical importance of adhering to statutory requirements in corporate governance. Non-compliance with provisions like the inclusion of DINs in financial statements can lead to significant penalties and legal repercussions. This adjudication serves as a cautionary tale for companies to ensure meticulous compliance with the Companies Act, 2013, safeguarding against potential penalties and upholding corporate integrity.
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GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF
COMPANIES,
UTTAR PRADESH,
37/17, Westcott Building, The Mall,
Kanpur — 208001 (LP.)
Phone 0512 — 2310323/2310443
Order NO.07/01/ADJ-158/ CMB INDIA/1316 to 1318 DATED 31/05/2024.
ORDER FOR VIOLATION OF SECTION 158 OF COMAPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES 2014 & COMPANIES (AMENDMENT) ACT, 2020
IN THE MATTER OF ” CMB INDIA NIDHI LIMITED”
Appointment of Adjudicating Officer: –
1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-AD 11 dated 03.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules,2014 under the provisions of this Act.
Company: –
2. Whereas the Company “CMB INDIA NIDHI LIMITED “has been registered under the provisions of Companies Act on 24.11.2015 and is having its registered office situated at 14-C, CHAK DAUD NAGAR, NAINI, Allahabad, Uttar Pradesh,211008. The authorized capital of the company is Rs. 25,00,000/-
3. Whereas one of the meetings where Regional Directors were directed to conduct an in-depth examination and submit a report on the surge of Nidhi Companies in Kanpur, Jaipur and Patna by the Secretary of Corporate Affairs vide minutes dated 10.04.2020. This being one of the Nidhi Company identified by ROC, Kanpur on suo-moto basis consequent upon the discussions in the ROC Review workshops with reference to Nidhi Companies. The Inquiry Officer (I0) has observed that the Company has filed a financial statement for the financial year 2017-18 in which directors have not mentioned their DIN under their signatures. Hence there is violation of section 158 of the Companies Act, 2013. Accordingly, the Inquiry officer has reported the said violation in the Inquiry Report dated 02.11.2022. The Regional Director vide letter Inq/206(4)/CMB India/RD(NR)/2022/889 dated 04.05.2023 has accorded the penal action for said noncompliance. Thus, it is evident that the company and its Directors have failed to comply with the provisions of section 158 of the Companies Act, 2013, in filing the financial statement mentioning their DIN under their signatures by the directors of the company. And are thus liable for penal provisions.
4. Accordingly, a Show Cause Notice No. 07/01/Adj-158 / CMB INDIA /6709 to 6713 dated 01.2024 was issued to its officer in default under section 158 by this office. This office has not received the said letter undelivered also.
5. The Company furnished a reply received in this office on 12.02.2024 to the said Show Cause Notice, hence a hearing was fixed in this matter on 14.03.2024. The hearing in the matter was concluded on 14.03.2024 in the presence of authorized representative of the company Shri Shivansh Tiwari, Practicing Company Secretary. The authorized representative did not carry the ,original copy of the authorization and relevant documents in support of the submission. Accordingly, the next hearing date was fixed on 10.04. 2024. Further, neither the defaulting director nor any representative of the director has either furnished his reply or has appeared on the date of hearing before the undersigned which has further strengthened the apprehension that the Director of the company has failed to comply with the provisions of Section 158 of the Companies Act, 2013 thereby attracting the penal provisions mentioned under Section 172 of the Act.
6. The date of default in the matter has been taken as 30.08.2018 i.e. upto which financial statements shall be approved by the Board of Directors before they are signed on behalf of the board for submission to the auditor for his report thoron.
Provisions of the Act: –
7. Section 158 of the Companies Act, 2013 provides that: ‑
“Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director”.
Section 158 read with 172 of the Companies Act, 2013 provides that
“The company and every officer of the company who is in default shall be liable to be a penalty of fifty thousand rupees, and in case of continuing failure, with a further penalty off five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default.”
8. As per provisions of section 446B of the Companies Act, 2013 provides that “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 persons, as the case maybe 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 ropes in case of a company one lakh rupees in case of an officer who is in default or any other person, as the case may be”.
9. Order:
Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose penalty as prescribed under section 158 read with 172 of the Act. The default of the penalty imposed on the company (Being Small Company as per section 2(85) of the Act) and officers in default are shown in the table below:
| Nature of default Sections | Relevant section under the Co. Act. 2 013 (penalty provision) | Name of persons on whom penalty imposed | Initial Penalty as per Section 172 (Rs.) | No. of days of default | Per day penal ty for default
(Rs.) |
Total default amount (Rs.) | Maximum Penalty (Rs.) | Final Penalty Impose d as per Sec.446 B (Rs.) |
| Non mention of DIN F/y 2017-18 | 158 | PRADEEP KU MAR MAURYA | 50000 | 2085 | 500 | 1042500 +50000= 1092500 | 100000 | 50000 |
| SHAMBHA VI | 50000 | 2085 | 500 | 1042500 +50000– 1092500 | 100000 | 50000 |
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the notice(s).
10. The Noticee shall pay the amount of penalty so imposed through MCA21 portal only as per rule 3(14) of Companies (Adjudication of Penalties) 2014. within 90 days receipt of this order. The company needs to file 1nC-28 as per the provisions of the act, attaching a copy of adjudication order alongwith payment challans.
11. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454(5) & 454(6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014].
12. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of noncompliance of this order. In Case appeal is made 0/o Registrar of Companies, U.P. maybe informed alongwith the penalty imposed & the payments made.
(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur
No. 07/01/ADJ-158/CMB INDIA/1316 to 1318
DATED…/05/2024.
