The Regional Director for the Western Region, Ministry of Corporate Affairs, has upheld a substantial penalty of Rs. 17.25 lakh against Khed Developers Limited and its key personnel for non-compliance with the Companies Act, 2013. This decision follows an appeal filed by the company and its directors challenging an adjudication order from the Registrar of Companies (ROC), Pune. The penalty arises from the company’s failure to appoint a Whole-Time Key Managerial Personnel (KMP) between February 3, 2020, and August 16, 2020, despite a clear mandate under Section 203 of the Act. The company did not appoint a new Company Secretary following the departure of the previous appointee on August 3, 2019, which resulted in the contravention of legal requirements.
In their appeal, Khed Developers and its directors argued that the COVID-19 pandemic created significant operational challenges, including restrictions on movement and financial difficulties exacerbated by the lack of revenue and the involvement of farmer-shareholders who could not afford the penalty. They contended that the default was not continuing at the time of the appeal and highlighted the difficulty in appointing a suitable candidate for the KMP role due to reasons beyond their control. Additionally, the appellants requested a waiver of the penalty, citing the financial strain on both the company and its directors, some of whom are senior citizens or retired individuals with limited financial resources.
Despite these arguments, the Regional Director found no defect in the ROC’s adjudication order dated December 19, 2023. The ROC had imposed penalties in accordance with Section 203(5) of the Companies Act, 2013, which includes a fixed fine for default and an additional daily penalty for ongoing defaults. The order stipulated that the penalty for the company amounted to Rs. 5 lakh, while each director faced an individual penalty of Rs. 2.45 lakh, totaling Rs. 17.25 lakh for the entire period of non-compliance. The Regional Director’s review upheld the adjudication order, emphasizing that the penalties were correctly applied per the legal provisions and that no substantial defense was presented to overturn the decision.
The Regional Director has directed Khed Developers Limited and its directors to pay the imposed penalty within 90 days from the order’s date. Failure to comply with this directive will result in further legal action, including prosecution under Section 454(8) of the Companies Act, 2013. This decision highlights the stringent enforcement of corporate compliance regulations and serves as a reminder of the significant financial repercussions for failing to adhere to statutory requirements.
BEFORE THE REGIONAL DIRECTOR, WESTERN REGION
MINISTRY OF CORPORATE AFFAIRS, MUMBAI
Order No. Khed Developers/203(1)/F91647990/2023-24/4725 Dated: 11 JUN 2024
APPEAL UNDER 454(5) OF COMPANIES ACT, 2013 AGAINST ORDER PASSED FOR OFFENCES COMMITTED UNDER SECTION 203 OF THE COMPANIES ACT, 2013 READ WITH RULE 8A OF COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014.
In the matter of KHED DEVELOPERS LIMITED & ORS
| 1. | Khed Developers Limited. | Company |
| 2. | Praful Pramod Chepe | CEO |
| 3. | Rajeev Gopinath Shende | Director |
| 4. | Chandrakant Sonaba Bhalekar | Director |
| 5. | Bhalchandra Shankar Mitkari | Director |
| 6. | Sadhana Pradeep Naik | Director |
…Appellants
Through: Vishal N. Salunke, Practicing Company Secretary.
HON’BLE REGIONAL DIRECTOR (WESTERN REGION)
ORDER
Appeal under sub-Section (5) of Section 454 of the Companies Act, 2013 (Act) r/w the Companies (Adjudication of Penalties) Rules, 2014 (Rules) have been filed by Khed Developers Limited (Company) having CIN U70102PN2008PI,C131478 and, its Directors and Key Managerial Personnel, against Order No. RoCP/ADJ/ 203/23-24/KHED/B/6/2291 dated 19/12/2023 (ROC Order) of Registrar of Companies, Pune for violating provisions of sub-Section (1) and (4), (5) of Section 203 of the Act.
2. The appeal lies within the jurisdiction of the Regional Director, Western Region, Ministry of Corporate Affairs, Government of India.
3. The Registrar of Companies, Pune (Roc: Pune) vide Adjudication Order dated 19/12/2023 held the Company, its Directors and Key Managerial Personnel, who have defaulted, liable for penalty under Section 203(5) of the Act from 03/02/2020 to 16/08/2020 for non-appointment of Whole-Time Key Managerial Personnel as under:
| Penalty imposed on Company / Director (s) | No. of days of default | First default (In Rs.) | Default continues (in Rs.) | Total / maximum penalty (In Rs.) |
| Khed Developers Limited. | 195 | 5,00,000 | 5,00,000 | 5,00,000 |
| Praful Pramod Chepe | 195 | 50,000 | 1000*195 = 1,95,000 | 2,45,000 |
| Rajeev Gopinath Shende | 195 | 50,000 | 1000*195 = 1,95,000 | 2,45,000 |
| Sadhana Pradeep Naik | 195 | 50,000 | 1000*195 = 1,95,000 | 2,45,000 |
| Chandrakant Sonaba Bhalekar | 195 | 50,000 | 1000*195 = 1,95,000 | 2,45,000 |
| Bhalchandra Shankar Mitkari | 195 | 50,000 | 1000*195 = 1,95,000 | 2,45,000 |
| TOTAL | 17,25,000 | |||
Period of Default from 03/02/2020 to 16/08/2020.
4. Appellants have filed Form-ADJ vide SRN F91647990 dt. 03/02/2024. As per provisions of sub-Section (6) of Section 454, every appeal under sub-section (5) shall be filed within sixty (60) days from the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person. On examination of the application/appeal, it is seen that the said application/appeal has been filed within 60 days from the date of passing of the adjudication order.
5. Grounds of Appeal & Relief sought:
a) COVID Pandemic created restrictions on movements of the company personnel which created the delay.
b) 900 farmers are involved, and company is not have any revenue.
c) The default is not continuing as on the date of this Appeal and the Appellants have adhered to the provisions of Section 203 of the Act.
d) The company was not able to find the appropriate candidate due to reasons beyond the control of the company.
e) The shareholders being the farmer, mobilizing any financial assistance is not possible to meet this kind of penalty.
f) Some of the Directors and Key Managerial Personnel are senior citizens / retired from the services having no financial resources to meet any kind of penalty.
g) That the order passed by Adjudicating Officer may set aside.
h) Waive of the penalty imposed on the company and its directors.
6. The matter was posted for hearing as per Section 454(5) r/w Section 454(7) of the Act on 05/06/2024. Vishal N. Salunke, Practicing Company Secretary appeared on behalf of Appellants as their authorized representative. The authorized representative reiterated the submission made by the applicants in their application and have admitted the contravention of Section 203 of the Companies Act, 2013. The Authorized Representative further stated that he did not find any defect in ROC Adjudication Order dt. 19/12/ 2023.
7. Facts of the Case:
a) In terms of the provisions of Section 203(4) of the Act, if the office of any Whole-Time Key Managerial Personnel is vacated, the resulting vacancy shall be filled-up by the Board within a period of six months from the date of such vacancy.
b) In the instant case the company has not appointed the Company Secretary since 03/02/2020 to 16/08/2020 despite the last appointed Company Secretary vacating the office on 03/08/2019. The company and its officers/directors have therefore violated provisions of Section 203 of the Act.
8. That the punishment for contravention of section 203(1) is prescribed under section 203(5) of the Companies Act, 2013 which states that “If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lalch rupees”. As such, the order of ROC Pune dt.19/12/2023 is in accordance with the provision qua the appellants.
9. RoC, Pune had also joined the proceedings virtually. He confirmed that he has imposed penalty as per Section 203(5) of the Act and the company and directors have not taken any such defence in reply to Adjudication notice and filed appeal before Regional Director (WR).
10. Taking into consideration the Adjudication Order of the Registrar of Companies, Pune, submissions made by the Appellants in their application and, oral submissions of the authorized representative and RoC during the hearing, it is observed that:
a) There is no inherent defect in the Adjudication Order dt. 19/12/2023.
b) ROC, Pune has imposed penalty as per Section 203(5) of Companies Act, 2013.
11. In view of above, RoC’s Adjudication Order dt. 19/12/2023 is confirmed with directions to the appellants to pay the penalty imposed by the RoC within 90 days, failing which, Registrar of Companies, Pune, is directed to file prosecution under Section 454(8) of the Companies Act, 2013 against the company and every director and Key Managerial Personnel in default.
A copy of this order shall be published on the website of the Ministry of Corporate Affairs as per Rules.
Signed and sealed on 11th day of June 2024.
(SANTOSH KUMAR)
REGIONAL DIRECTOR
WESTERN REGION, MUMBAI
