Non-Compliance with Section 90(4A) & BEN-4 Notice Rules: MCA imposes Penalty

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS,
OFFICE OF REGISTRAR OF COMPANIES,
NCT OF DELHI & HARYANA
4TH FLOOR, IFCI TOWER,
61, NEHRU PLACE, NEW DELHI -110019

ORDER UNDER SECTION 90 OF THE COMPANIES ACT, 2013
IN THE MATTER OF MAJID AL FUTTAIM HYPERMARKETS PRIVATE LIMITED
(CIN: U72900HR2019FTC080634)

1. Appointment of Adjudicating Officer: –

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad. II, dated 24.03.2015 appointed Registrar of Companies, NCT of Delhi & Haryana as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter known as Act) r/w Companies (Adjudication of Penalties) Rules, 2014 (hereinafter known as “Rules”) for adjudging penalties under the provisions of this Act.

2. Company: –

Whereas the company viz. MAJID AL FUTTAIM HYPERMARKETS PRIVATE LIMITED (hereinafter known as “company” or “subject company”) has been incorporated on 30.05.2019 and it has its registered office situated at Unit Nos. 402 and 403, 4th Floor, Tower B, Unitech Cyber Park, Durga Colony, Sector 39, Gurgaon, Sadar Bazar, Haryana – 122001. The financial & other details of the subject company for F.Y.2022-23 as available on MCA-21 portal is stated as under:

S. No.	Particulars	Details
1.	Paid up capital (INR)	601.00 lakhs
2.	a. Revenue from operation (INR)	5917.27 lakhs
	b. Other Income (INR)	NIL
	c. Profit for the Period (INR)	621.15 lakhs
3.	Whether company has a Holding Company?	Yes
4.	Whether company has a Subsidiary Company?	No
5.	Whether company registered under Section 8 of the Act?	No
6.	Whether company registered under any other special Act?	No

3. The details of the proceedings: –

A. Issuance of a notice under section 206(1):

A notice was issued to the subject company under section 206(1) of the Act on 08.02.2024 to ascertain compliance of section 90 of the Act and rules made thereunder. The notice was issued for broadly ascertaining the following compliances:

i. Details of all the actions taken by the company to identify its Significant Beneficial Owner in terms of section 90 of the Companies Act, 2013.

ii. Details of the individual(s) who exercise(s) control or significant influence on the company in terms of the provisions of section 90 of the Act r/w rules made thereunder.

iii. Did the company comply with the mandatory compliance of issuing a BEN-4 notice as required in rule 2A(2) of the Companies (Significant Beneficial Owners) Rules, 2018.

iv. Details of the application moved by the company to the NCLT in terms of section 90(7) of the Act r/w rule 7 of the Companies (Significant Beneficial Owners) Rules, 2018, on the ground that no reply was received on the BEN-4 notice issued by it, or the reply that was received was unsatisfactory.

v. Provide the details of all the upstream entities right upto the ultimate holding company alongwith the details of shareholdings in respect of each layer of shareholding. Also provide the details of the individual who holds majority stake in the ultimate holding company.

B. Reply submitted by the company:

In response to the above notice a reply was received from the company on 21.02.2024, wherein it was inter alia stated as under:

i. In accordance with the Act, the requirement to make requisite filings in respect of significant beneficial owners applies if both the below conditions are fulfilled:

(a) There is any body corporate shareholder in the Company holding 10% or more of shares, voting rights in the shares, distributable dividend or right to exercise, or actually exercises, significant influence or control in any manner other than through direct-holdings alone.

(b) If there is any individual (acting alone or with other persons) in (a) above who:

(i) holds Majority Stake in the holding company.

(ii) holds Majority Stake in the ultimate holding company of the holding company.

(iii) has the right to exercise, or actually exercises, significant influence or control, in any manner over the Company, other than through shareholding.

We have enclosed the structure chart of the Company with its holding and ultimate holding company as Annexure I to this response letter. In accordance with the structure chart there is no individual in Majid Al Futtaim Hypermarkets LLC (Holding Company) or Majid Al Futtaim Capital LLC (Ultimate Holding Company) holding more than 50% of equity shares or voting rights or is not entitled to receive more than 50% of the distributable divided. Further there is no individual who exercise significant influence or control. in any manner over the Company.

Considering the aforesaid facts, there are no significant beneficial owners to the Company, and consequently no other additional actions have been taken by the Company in terms of section 90 of the Act.

ii. Pursuant to Section 90 of Act and rule 2A (2) of the Rules. Company is required to issue notice in the form BEN-4. only if Company knows or has a reasonable cause to believe that there is an existence of significant beneficial owner. Given that Company has already, collected the necessary information and group structure chart. we understand that there is no requirement to issue notice in BEN-4.

iii. As the Company has all requisite information there was no requirement to the Company to move an application to NCLT, for issue of BEN 4.

iv. The details of all the upstream entities [name of the entity, country of incorporation, registration number allotted by the respective registry] right upto the Ultimate Holding Company is provided in Annexure 2. The details of shareholders in respect of each layer of shareholding along with percentage of shares held is provided in Annexure I.

As stated in Annexure I there are no individuals who holds majority stake in the Ultimate Holding Company. Hence providing these details does not apply.

C. Details of Current Shareholding Structure of the Company as provided by the company:

D. Show Cause Notice issued under section 90 of the Act:

The reply of the subject company was found to be unsatisfactory. Accordingly, a SCN dated 28.05.2024 under section 90 was sent to the company and its officers on 29.05.2024, wherein the following issues were highlighted to suggest that the subject company had not complied with the provisions of section 90 of the Act:

i. While going through the details as furnished by the company about the upstream entities right up to the ultimate holding company, it is noticed that Majid Al Futtaim Holding LLC is one layer below the ultimate holding company. On perusal of Consolidated Financial Statement of Majid Al Futtaim Holding LLC for the Financial Year ended 31.12.2021 (publicly available on the website), it is observed that Majid Al Futtaim Holding LLC is fully owned by Majid Al Futtaim Capital LLC (parent company) and 99.6% shares of Majid Al Futtaim Capital LLC was owned by Mr. Majid Al Futtaim and remaining 0.4% shares by Mr. Tariq Al Futtaim.

ii. Further from the Consolidated Interim Financial Statement for the period ended 30.06.2022 of Majid Al Futtaim Holding LLC (publicly available on the website) it is found that in April 2022, the ownership of shares of Mr. Majid Al Futtaim held in Majid Al Futtaim Capital LLC (parent company) has been transferred to his heirs including Mr. Tariq Al Futtaim after the death of Mr. Majid Al Futtaim. Mr. Majid Al Futtaim passed away on 17.12.2021 (as per the publicly available information).

iii. It is observed that Mr. Majid Al Futtaim was significant beneficial owner before he passed away. However, it is noted no e-form BEN-2 was filed by the subject company in respect of Mr. Majid Al Futtaim.

iv. It is also seen from the Consolidated Financial Statement of Majid Al Futtaim Holding LLC for the Financial Year ended 31.12.2021 that prior to passing away of Mr. Majid Al Futtaim, the only other shareholder of Majid Al Futtaim Capital LLC was Mr. Tariq Al Futtaim who held 0.4% shares. It was seen from the reply that now Mr. Tariq Al Futtaim holds 22.19% shares in the ultimate holding company whereas the remaining shareholding is with other family members. Thus, the company was asked to clarify as to whether any other individual could be regarded as an SBO.

E. Non-receipt of reply from the company to the SCN and providing an opportunity of being heard to the company:

I. No reply was received from the subject company on the aforesaid SCN. Accordingly, a hearing was fixed on 19.08.2024 and Company’s authorized representative Mr. Sampath Kumar Rajagopalan and Mr. Vadiraja P.S. appeared on behalf of the company and its officers.

II. During the oral submissions, the Authorized Representatives (ARs) acknowledged that Mr. Majid Al Futtaim held 99.06 % shares in the ultimate holding company of the subject company till the time he passed away on 17.12.2021. It is on record that till date no e-form BEN-2 has been filed by the subject company.

III. During the course of hearing, the ARs of the company were asked to specifically state as to whether any individual can be considered to be an SBO in relation to the subject company after the passing away of Mr. Majid Al Futtaim. The ARs were also required to specify whether any of the present shareholders are acting in concert with any other shareholder.

F. Reply of the Company to the SCN issued under section 90 of the Act:

The reply was received from the Company on 02.09.2024 in response to the SCN dated 28.05.2024 issued by this office, wherein inter alia the following submissions were made:

i. We hereby confirm that Majid Holding LLC is one layer below the Ultimate Holding Company i.e. Majid Al Futtaim Capital LLC.

Mr. Majid Mohammad Al Futtaim (Mr. Majid) was the founder of the Ultimate Holding Company and held 99.60% of the shares in the Ultimate Holding Company and remaining 0.40% shares was held by Mr. Tariq Majid Mohd Al Futtaim (Mr. Tariq.) as on 17 December 2021.

ii. We hereby confirm that Mr. Majid passed away on 17 December 2021 and 100% of the stake held by Mr. Majid in the Ultimate Holding Company has been inherited by nine legal heirs. We have attached the latest Commercial License issued by the Department of Economy and Tourism; Government of Dubai, demonstrating the present shareholding of the Ultimate Holding Company.

Separately we would also like to clarify that under United Arab Emirates (UAE) Laws, mainland entities are issued Commercial License and offshore entities having registered in UAE will be issued certificate of incorporation. Given that Ultimate Holding Company is a mainland entity, the attached Commercial License serves as a proof of shareholding that captures details of such inheritance and shareholding structure of the Ultimate Parent Company after demise of Mr. Majid. We hereby confirm that there has been no change in the shareholding of the Ultimate Holding, Company since the demise of Mr. Majid.

iii. We hereby confirm that Mr. Majid held 99.60% of shares in the Ultimate Holding Company and was Significant Beneficial Owner (SBO) of the Company from the date of incorporation of the Company by virtue of holding majority stake in the share capital in the Ultimate Holding Company prior to 17 December 2021. Separately, the Companies (Significant Beneficial Owners) Amendment Rules, 2019, came into effect from 8 February 2019 and every individual who is a SBO in a reporting company, was required to file a declaration in Form No. BEN-1 to the reporting company within 90 days from commencement and every individual, who subsequently becomes a SBO or where his significant beneficial ownership undergoes any change shall file a declaration in Form No. BEN-1 to the reporting company, within 30 days of acquiring such significant beneficial ownership or any change therein.

Given that the Company was incorporated on 30 May 2019, the SBO was required to tile BEN-1 with the Company on or before 29 June 2019.

It is hereby informed that the Company did not have any employees in the first few months of its incorporation and subsequently the operations of the Company was affected due to outbreak of the Covid 19. In the absence of any supporting function the directors of the Company were not in a position to serve BEN-4 and hence the Company was not able to comply with the requirement of serving BEN-4 to the shareholders prior to demise of Mr. Majid.

Accordingly, no BEN-1 was received by the Company for the period up to 17 December 2021. Post demise of Mr. Majid on 17 December 2021, there was no way for the Company to obtain BEN-1 and accordingly no e-form BEN-2 has been filed.

Given the extraordinary circumstances, from the time of incorporation to commencing any activity wherein there was COVID, no employees for almost a year and strenous business conditions, the Company requests that a lenient view may be taken in respect of any non-compliance during the said period.

iv. We hereby submit that Mr. Tariq along with other legal heirs have inherited Mr. Majid’s estate in the Ultimate Holding Company post the demise of Mr. Majid. We further confirm that all shareholders in the Ultimate Holding Company are exercising their rights in their individual capacity and the shareholders are not acting in concert or on behalf of any other shareholder. Further, there is no individual in the Ultimate Holding Company, holding majority stake i.e., more than one half of the equity share capital or voting rights or is not entitled to receive more than one half of the distributable dividend or exercising significant influence in the Company. We further submit that Mr. Tariq is not holding any managerial position Ultimate Holding Company. Separately the affairs of the Ultimate Holding Company are managed by a body of managers as disclosed in the Commercial License.

Further the managers of the Ultimate Holding Company are not connected to the family of Mr. Majid or Mr. Tariq, and they are not a part of decision-making in the Company.

4. Determination of default:

I. In its reply, the company has admitted that Mr. Majid was its Significant Beneficial Owner till he passed away on 17^th December, 2021. It has also been admitted that no BEN-4 notice was issued prior to his demise. In this case, the position of the company is not entirely correct as the onus of serving BEN-4 notice subsisted even after passing away of Mr. Majid. The provisions of rule 2A(2) of the Companies (Significant Beneficial Owners) Rules, 2018 reads as follows:

“2A. Duty of the reporting company

……………………………

(2) Without prejudice to the generality of the steps stated in sub-rule (1), every reporting company shall in all cases where its member (other than an individual), holds not less than ten per cent of its;-

(a) shares, or

(b) voting rights, or

(c) right to receive or participate in the dividend or any other distribution payable in a financial year, give notice to such member, seeking information in accordance with sub-section (5) of Section 90, in Form No. BEN-4”

This rule is clearly mandatory in nature and thus, the subject company was required to issue the BEN-4 notice in accordance with section 90(5) of the Companies Act, 2013 to its member, which by its own admission the company has failed to do.

II. In such circumstances, while considering that the Significant Beneficial Owner of the company has passed away no action lies against the SBO. The stance of the company regarding its inability to file e-Form BEN-2 in the present circumstances considering that BEN-1 cannot be received is sustainable since as per rule 4, the requirement of filing e-Form BEN-2 is triggered after the receipt of declaration in this regard by the SBO.

III. However, the liability of the company subsists u/s 90(4A) of the Act as it failed to take necessary steps to identify its SBO and also u/s 90(5) of the Act r/w rule 2A(2) of the Companies (Significant Beneficial Owners) Rules, 2018 in so far as BEN-4 notice was not issued to its member to ascertain whether there is any SBO in relation to the company or not.

IV. The subject company and its officers are liable for action under section 90(11) of the Act for its failure to take necessary steps as per section 90(4A) of the Act to identify the SBO in relation to the company. All the officers (including the non-executive directors) are liable for this violation during the relevant period. It was noted that subsequently, the company had appointed a Whole time Director, whose liability would only arise after his appointment.

V. The subject company and its officers are liable for action under section 450 of the Act for its failure to issue BEN-4 notice as per section 90(5) of the Act r/w rule 2A(2) of the Companies (Significant Beneficial Owners) Rules, 2018. All the officers (including the non-executive directors) are liable for this violation during the relevant period. It was noted that subsequently, the company had appointed a Whole time Director, whose liability would only arise after his appointment.

5. The relevant provisions for adjudication:

Section 90 – Register of significant beneficial owners in a company are as follows:

(1) Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2, over the company (herein referred to as “significant beneficial owner”), shall make a declaration to the company, specifying the nature of his interest and other particulars, in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof, as may be prescribed:

(2) Every company shall maintain a register of the interest declared by individuals under sub-section (1) and changes therein which shall include the name of individual, his date of birth, address, details of ownership in the company and such other details as may be prescribed.

(4) Every company shall file a return of significant beneficial owners of the company and changes therein with the Registrar containing names, addresses and other details as may be prescribed within such time, in such form and manner as may be prescribed.

(4A) Every company shall take necessary steps to identify an individual who is a significant beneficial owner in relation to the company and require him to comply with the provisions of this section.

(5) A company shall give notice, in the prescribed manner, to any person (whether or not a member of the company) whom the company knows or has reasonable cause to believe–

(a) to be a significant beneficial owner of the company.

(b) to be having knowledge of the identity of a significant beneficial owner or another person likely to have such knowledge; or

(c) to have been a significant beneficial owner of the company at any time during the three years immediately preceding the date on which the notice is issued,

and who is not registered as a significant beneficial owner with the company as required under this section.

(10) If any person fails to make a declaration as required under sub-section (1), he shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one thousand rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.

(11) If a company, required to maintain register under sub-section (2) and file the information under sub-section (4) or required to take necessary steps under sub-section (4A), fails to do so or denies inspection as provided therein, the company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day, after the first during which such failure continues, subject to a maximum of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of two hundred rupees for each day, after the first during which such failure continues, subject to a maximum of one lakh rupees.

(12) If any person wilfully furnishes any false or incorrect information or suppresses any material information of which he is aware in the declaration made under this section, he shall be liable to action under section 447.

The relevant provision Companies (Significant Beneficial Owners) Rules, 2018:

Rule 2A

2A. Duty of the reporting company.-

(1) Every reporting company shall take necessary steps to find out if there is any individual who is a significant beneficial owner, as defined in clause (h) of rule 2, in relation to that reporting company, and if so, identify him and cause such individual to make a declaration in Form No. BEN-1.

(2) Without prejudice to the generality of the steps stated in sub-rule (1), every reporting company shall in all cases where its member (other than an individual), holds not less than ten per cent of its;-

(a) shares, or

(b) voting rights, or

(c) right to receive or participate in the dividend or any other distribution payable in a financial year,

give notice to such member, seeking information in accordance with subsection (5) of Section 90, in Form No. BEN-4.

Rule 3

3. Declaration of significant beneficial ownership in shares under section 90.-

(1) Every significant beneficial owner shall file a declaration in Form No. BEN-1 to the company in which he holds the significant beneficial ownership on the date of commencement of these rules within ninety days from such commencement and within thirty days in case of any change in his significant beneficial ownership.

(2) Every individual, who, after the commencement of these rules, acquires significant beneficial ownership in a company, shall file a declaration in Form No. BEN-1 to the company, within thirty days of acquiring such significant beneficial ownership or in case of any change in such ownership.

Rule 4

4. Return of significant beneficial owners in shares.-

Where any declaration under rule 3 is received by the company, it shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration, within a period of thirty days from the date of receipt of declaration by it, along with the fees as prescribed in Companies (Registration offices and fees) Rules, 2014.

6. Adjudication of penalty:

I. The subject company and its officers are liable for action under section 90(11) and section 450 of the Act for its failure to take necessary steps as per section 90(4A) and for its failure to issue BEN-4 notice as per section 90(5) of the Act respectively. All the officers (including the non-executive directors) are liable for this violation during the relevant period. It was noted that subsequently, the company had appointed a Whole time Director, whose liability would only arise after his appointment. Therefore, the period is being reckoned from 21.12.2020 or a later date if the appointment was made on a later date. The end date is being reckoned as the date of issue of SCN, i.e. 28.05.2024 or an earlier date if the cessation took place on an early date.

II. Now, in exercise of the powers conferred vide Notification dated 24th March 2015, and having considered the reply submitted and hearings held in the matter, I do hereby impose the penalty on the company and its officers in default as follows:

Table- I

Violation section	Period of default (in days)	Penalty imposed on	Calculation of penalty amount (in Rs.)	Penalty imposed as per Section 90(11) (in Rs.)
A	B	C	D	E
Section 90(4A) of the Act	1255	Majid Al Futtaim Hypermarkets Private Limited (Company)	1,00,000/-   +   (1255 x 500/-) = 7,27,500/- Subject to maximum Rs. 5,00,000/-	5,00,000/-
	1255	Neha Baid (Director)	25,000/- + (1255 x 200/-) = 2,76,000/- Subject to maximum Rs. 1,00,000/-	1,00,000/-
	275	Rahul Raj Bhandari (Director) Cessation on 21.9.2021	25,000/- + (275 x 200/-) = 80,000/- Subject to maximum Rs. 1,00,000/-	80,000/-
	466	Ali Bazeih (Director)Cessation on 31.3.2022	25,000/- + (466 x 200/-) = 1,18,200/- Subject to maximum Rs. 1,00,000/-	1,00,000/-
	359	Piotr Adam Figarski (Director) Cessation on 14.9.2022	25,000/- + (359 x 200/-) = 96,800/- Subject to maximum Rs. 1,00,000/-	96,800/-
	791	Abhishek Nalwaya (Whole-Time Director)	25,000/- + (791 x 200/-) = 1,83,200/- Subject to maximum Rs. 1,00,000/-	1,00,000/-

Table- II

Violation section	Period of default (in days)	Penalty imposed on	Calculation of penalty amount (in Rs.)	Penalty imposed as per Section 450 (in Rs.)
A	B	C	D	E
Section 90(5) of the Act r/w rule 2A(2) of the SBO Rules, 2018	1255	Majid Al Futtaim Hypermarkets Private Limited (Company)	10,000/- + (1255 x 1000/-) = 12,65,000/- Subject to maximum Rs. 2,00,000/-	2,00,000/-
	1255	Neha Baid (Director)	10,000/- + (1255 x 1000/-) = 12,65,000/- Subject to maximum Rs. 50,000/-	50,000/-
	275	Rahul Raj Bhandari (Director)	10,000/- + (275 x 1000/-) = 2,85,000/- Subject to maximum Rs. 50,000/-	50,000/-
	466	Ali Bazeih (Director)	10,000/- + (466 x 1000/-) = 4,76,000/- Subject to maximum Rs. 50,000/-	50,000/-
	359	Piotr Adam Figarski (Director)	10,000/- + (359 x 1000/-) = 3,69,000/- Subject to maximum Rs. 50,000/-	50,000/-
	791	Abhishek Nalwaya (Whole-Time Director)	10,000/- + (791 x 1000/-) = 8,01,000/- Subject to maximum Rs. 50,000/-	50,000/-

a. Names of parties as mentioned in Table I and Table II above are hereby directed to pay the penalty amount as per column no. ‘E’ therein.

b. The said amount of penalty shall be paid through online by using the website mca.gov.in (Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, within 90 days of receipt of this order and intimate this office with proof of penalty paid.

c. Appeal against this order may be filed with the Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi-110003 within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website mca.gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of the order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].

d. Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order.

(Pranay Chaturvedi, ICLS)
Registrar of Companies
NCT of Delhi & Haryana

No. ROC/D/Adj/90/Majid Al Futtaim/3651-3657

Date: 13.9.2024