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Non-mention of Related Party Contracts or Arrangements in AOC-2: MCA Imposes Penalty of ₹4.5 Lakh

The Ministry of Corporate Affairs (MCA) recently imposed a significant penalty of ₹4.5 lakh on Bluemax Capital Solution Private Limited for non-compliance with Section 134(3)(h) of the Companies Act, 2013. This section mandates the disclosure of related party transactions in the AOC-2 form as part of the Board of Directors’ report.

Bluemax Capital Solution Private Limited, a registered company under the Companies Act, 2013, failed to disclose related party transactions in the prescribed form AOC-2 for the financial years ending 31st March 2016, 2017, and 2018. An inspection of the company’s books revealed dues to directors and others, which should have been reported as related party transactions under Section 188 of the Act.

During the inspection, it was found that the Board of Directors’ report incorrectly stated that no related party transactions occurred during the specified financial years, thus avoiding the necessity of submitting Form AOC-2. However, financial statements indicated dues amounting to substantial sums owed to directors, which qualified as related party transactions.

Section 134(3)(h) of the Companies Act, 2013, along with Rule 8(2) of the Companies (Accounts) Rules 2014, requires companies to include particulars of contracts or arrangements with related parties in the Board’s report. Failure to comply results in penalties as stipulated in Section 134(8) of the Act.

The Registrar of Companies (ROC), Chennai, appointed as the adjudicating officer, issued a show-cause notice to Bluemax and its directors. Despite being granted time to respond, the company failed to furnish a satisfactory reply. Consequently, the ROC conducted an adjudication hearing, during which the company’s representative acknowledged the violation.

The ROC imposed a penalty of ₹3 lakh on Bluemax Capital Solution Private Limited and ₹50,000 each on the three directors for each financial year from 2015-16 to 2017-18. The total penalty amounted to ₹4.5 lakh. The penalty was levied under Section 454 of the Companies Act, 2013, which empowers the ROC to adjudicate and impose fines for such violations.

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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES, TAMIL NADU, ANDAMAN & NICOBAR ISLANDS, CHENNAI
II FLOOR, C- WING, SHASTRI BHAVAN, 26, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI- 6

F.NO.ROC/CHN/BLUEMAX /ADJ/S. 134/2024   

DATE: 30 APR 2024

ADJUDICATION ORDER UNDER SECTION 134(3)(h) OF THE COMPANIES ACT, 2013 IN THE MATTER OF WS BLUEMAX CAPITAL SOLUTION PRIVATE LIMITED

1. Appointment of Adjudicating Officer:‑

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

2. Company: –

Whereas the company viz M/s. Bluemax Capital Solution Private Limited with CIN: U74999TN2014PTC096625 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the Companies Act, 2013 having its registered office as per MCA21 Registry at No.26, Raja Rajeswari Nagar,1st Street, Opp. New Bus Stand, Tirunelveli, Palayamkottai, Tamil Nadu 627007. The financial & other details of the subject company as available on MCA-21 portal is stated as under:

S.No. Particulars Details
1. Company’s Status Active
2. Filing Position Financial Statement: up to 31.03.2018 Annual Return: Up to 31.03.2018
3. Paid up Capital Rs.1,00,000/-
a. Revenue from Operation Rs.84,18,371.5/-
b. Other Income Rs.16,000/-
c. Profit for the Period Rs.4,00,000/-
4. Whether it is a Holding Company No
5. Whether it is a Subsidiary Company No
6. Whether company registered under Section 8 of the Act? No
7. Whether company registered under any other special Act? No

3. Directors during the period of violation:

S.No. Name of Director Default Designation Date of Appointment Date of Cessation
1. Shri. Rajkumar
Aravinth
Director 23.07.2014 …..
2. Shri.Bharathraj Director 23.07.2014 …..
3. Shri.Subramanian Gopalakrishnan Director 23.07.2014 …..

4. Section and Penal Provision as per Companies Act, 2013

Section 134 of the Companies Act, 2013- Financial Statement, Board’s Report, etc.

(3) There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include

(h) particulars of contracts or arrangements with related parties referred to in sub-section

(1) of section 188 in the prescribed form;

Rule 8(2) of the Companies (Accounts) Rules 2014 provides :

(2) The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form A0C-2

Section 188. Related party transactions :

(1) Except with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may be prescribed, no company shall enter into any contract or arrangement with a related party with respect to

(a) sale, purchase or supply of any goods or materials;(b) selling or otherwise disposing of; or buying, property of any kind;(c) leasing of property of any kind;(d) availing or rendering of any services; (e) appointment of any agent for purchase or sale of goods, materials, services or property; (f) such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company; and(g) underwriting the subscription of any securities or derivatives thereof; of the company:

Section 134 (8) provides

If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifiy thousand rupees.

5. Issue of Adjudication Notice:

An Inspection of Books and accounts of the company M/s. Bluemax Capital Solutions Private Limited was carried out by an Officer authorised by the Central Government U/s. 206(5) of the Companies Act, 2013 wherein the observations of the Inspecting Officer are as follows:

5.1 “During the Inspection it is observed that , as per the requirements of section 134(3) (h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules 2014 particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 has to be mentioned in form AOC-2. But in the Board of Directors report for the financial years ended on 31.03.2016, 31.03.2017 and 31.03.2018, it is stated that ‘The Company did not make any related party transaction during the financial year, So Form AOC- 2 is not applicable to the Company” and consequently no particulars in form AOC-2 are furnished.

It is observed from the Balance Sheet Note 4- “Other Long-Term Liabilities” for the Financial Year 2015-16, 2016-17 and 2017-18 ‘Dues to Directors and others’ amounting to Rs.19,20,291.30/-, Rs.32,23,697.46/- and Rs.32,63,015.30/- respectively are mentioned. The company had transactions falling under section 188(1) of the Companies Act, 2013 during the financial years ended 31.03.2016, 31.03.2017, and 31.03.2018. Hence, the Board of directors have violated the provisions of section 134(3) (h) of the Companies Act, 2013 for the aforesaid financial years.

Accordingly, on submission of the Inspection Report, the Regional Director, Ministry of Corporate Affairs, Chennai has directed this office to initiate necessary action against the defaulters as per the provisions of the Companies Act, 2013.

After this office has issued Show Cause Notice for Adjudication under Section 134 of the Companies Act vide Notice No. 91/Roc/Chn/096625/BLUEMAX/S.134/P.22/Inspn fol.up/2022 dated 13.06.2023

6. Reply of Company and Directors for Adjudication Notice issued:

Shri. Rajkumar Aravinth vide letter dated 29.06.2023 requested time to furnish the reply to the notice. After that no reply has been received from the company and its directors.

7. Adjudication Hearing:

(i)  Since no reply has been received from the company and its directors for the Adjudication notice, this office had issued Adjudication Hearing Notice to the subject company and its directors on 16.01.2024 by fixing the hearing date as on 23.01.2024 at 11:30 AM. Pursuant to the hearing notice Shri. I.B. Harikrishna, CS has appeared on behalf of the company and its directors before the Adjudicating Authority on 23.01.2024 made submission that the violation may be adjudicated.

8.Decision

Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that the company and directors mentioned in Para 3 have violated Section 134(3)(h) of the Companies Act, 2013 and liable for penalty as prescribed under Section 134(8) of the Act for the FYs 2015-16, 2016-17 and 2017-18.

Accordingly, I am inclined to impose a penalty as prescribed under Sub-section 8 of Section 134 of the Companies Act, 2013. The details of the penalty imposed on the company and Officer in default are given in the table given below:

I. FY 2015-16

Name of Company/ person on whom penalty imposed Penalty for default (Rs) Maximum Limit for penalty (Rs) Penalty Imposed (Rs)
M/s. Bluemax Capital Solution Private Limited Rs.3,00,000/- Rs.3,00,000/- Rs.3,00,000/-
Shri. Rajkumar Aravinth Rs.50,000/- Rs.50,000/- Rs.50,000/-
Shri.Bharathraj Rs.50,000/- Rs.50,000/- Rs.50,000/-
Shri.Subramanian Gopalakrishnan Rs.50,000/- Rs.50,000/- Rs.50,000/-

Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.3,00,000/- (Rupees Three laid’s) is imposed on the Company and Rs.50,000/- (Rupees Fifty thousand) is imposed on each Officers in default. Totally Rs. 4,50,000/- (Rupees Four lakhs fifty) as penalty amount for violation of Section 134 (3)(h) of the Companies Act, 2013 for the FY 2015-16

II. FY 2016-17

,Name of Company/ person on whom penalty imposed Penalty for default (Rs) Maximum Limit for penalty (Rs) Penalty Imposed (Rs)
-M/s. Bluemax Capital Solution Private Limited Rs.3,00,000/- Rs.3,00,000/- Rs.3,00,000/-
Shri. Rajkumar Aravinth Rs.50,000/- Rs.50,000/- Rs.50,000/-
Shri.Bharathraj Rs.50,000/- Rs.50,000/- Rs.50,000/-
s Shri.Subramanian Gopalakrishnan Rs.50,000/- Rs.50,000/- Rs.50,000/-

Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.3,00,000/- (Rupees Three lakhs) is imposed on the Company and Rs.50,000/- (Rupees Fifty thousand) is imposed on each Officers in default. Totally Rs. 4,50,000/- (Rupees Four lakhs fifty) as penalty amount for violation of Section 134(3)(h) of the Companies Act, 2013 for the FY 2016-17.

III. FY 2017-18

Name of Company/ person on whom penalty imposed Penalty for default (Rs) Maximum Limit for penalty (Rs) Penalty Imposed (Rs)
M/s. Bluemax Capital Solution Private Limited Rs.3,00,000/- Rs.3,00,000/- Rs.3,00,000/-
Shri. Rajkumar Aravinth Rs.50,000/- Rs.50,000/- Rs.50,000/-
“Sliri.Bharathraj Rs.50,000/- Rs.50,000/- Rs.50,000/-
Shri.Subramanian Gopalakrishnan Rs.50,000/- Rs.50,000/- Rs.50,000/-

Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.3,00,000/- (Rupees Three lakhs) is imposed on the Company and Rs.50,000/,. (Rupees Fifty thousand) is imposed on each Officers in default. Totally Rs. 4,50,000/- (Rupees Four lakhs fifty) as penalty amount for violation of Section 134 (3)(h) of the Companies Act, 2013 for the FY 2017-18.

9. The said amount of penalty shall be paid through online by using the website mca.gov.in(Misc. head) within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

10. Whereas Appeal against this order may be filed with the Regional Director (SR), Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26 Haddows Road, Chennai-600006, Tamil Nadu within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website www.mca.gov.in] 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 (Adjudicating of Penalties) Rules, 2014].

11. Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order, “(8)0 Where company fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be within a period of ninety days from the date of the receipt of the copy of the order, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees.

(ii) Where an officer of a company or any other person who is in default fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.”

(B. SRIKUMAR, ICLS)
REGISTRAR OF COMPANIES
TAMILNADU, CHENNAI.
ADJUDICATING OFFICER

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