In a recent adjudication order under Section 179(3)(f) of the Companies Act, 2013, the Ministry of Corporate Affairs (MCA) imposed penalties on M/s Shri Mahalakshmi Metal and Scrap Processing Private Limited for failing to submit board resolutions for loans and investments.
The inspection of M/s Shri Mahalakshmi Metal and Scrap Processing Private Limited revealed that the company had engaged in loan and investment activities without obtaining the necessary board resolutions, as mandated by Section 179(3)(f) of the Companies Act, 2013. Despite receiving notices and opportunities to respond, the company and its directors failed to provide satisfactory explanations or evidence of compliance.
The company’s claim of having obtained board approval was refuted by the absence of documented resolutions for the transactions in question. This failure to comply with regulatory provisions led to the imposition of penalties under Section 450 of the Companies Act, 2013. The penalties were imposed on both the company and its directors, reflecting the shared responsibility for ensuring compliance with statutory requirements.
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
Order No. F.NO.ROC/CHN/SHRI MAHALAKSHMI/ADJ/S.179/2023 DATE: 25 MAR 2024
ADJUDICATION ORDER UNDER SECTION SECTION 179 (3)(f) OF THE COMPANIESACT, 2013 IN THE MATTER OF M/S SHRI MAHALAKSHMI METAL AND SCRAP PROCESSING 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, 2014 for adjudging penalties under the provisions of this Act.
2. Company: –
Whereas the company viz M/s. Shri Mahalakshmi Metal And Scrap Processing Private Limited with CIN U27104TN1986PTC012639 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the provisions of section 7 of the Companies Act, 2013 having its registered office as per MCA21 Registry at address No. 403, D, Thiruvettiyur High Rd, Chennai, Tamil Nadu, 600019, India. The financial & other details of the subject company as available on MCA-21 portal is stated as under:
| S.No. | Particulars | Details as on F.Y. 2022-23 |
| 1. | Paid up Capital | Rs. 45,00,000/- |
| 2. | a. Revenue from Operation | – |
| b. Other Income | – | |
| c. Profit for the Period | (Rs. 2,17,000/-) | |
| 3. | Whether it is a Holding Company | Yes |
| 4. | Whether it is 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. Directors
| S.No. | Name of Director Default | Designation | Date of Appointment | Date of Cessation |
| 1. | Shri. Arun Kumar Sharma | Director | 29.05.1995 | 01.04.2016 |
| 20.01.2017 | ||||
| 2 | Shri. Anil Kumar Ojha Anil Kumar | Director | 31.03.2012 | |
| 3 | Shri. Sharma Rakesh Kumar | Director | 02.03.2011 | 15.03.2022 |
4. Section and Penal Provision as per Companies Act, 2013
Section 179: Powers of Board
i) Whereas pursuant to sub-section 3(f) of Section 179 of the Companies Act 2013, which read as under:
“179(3) The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board namely:
(f) to grant loans or give guarantee or provide security in respect of loans:”
Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of Directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, the
principal officer of the branch office, the powers specified in clauses (d) to (f) on such conditions as it may specify:
(ii) Whereas as per the Section 450 of the Companies Act, 2013 penalty imposed to the Company and officer in default which read as under:
“if a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person
5. Issue of Adjudication Notice:
Whereas the company was taken up for Inspection under Section 206(5) read with Section 207 of the Companies Act, 2013 by an Officer authorized by the Central Government, wherein the observations of the Inspecting Officer are as follows:
, “the subject company is not having any business operations in the last three years. But it is seen from the Balance Sheet of the subject company that it is arranging loans and advances to other companies including to its own group companies. In the instant case, Shri Mahalakshmi Metal and Scrap Processing private Limited had transferred Rs. 128.10 crores to M/s S.L.O. Industries Limited, to enable M/s S.L.O. Industries Limited to make payment of the LC amount to the lender bank namely Corporation Bank. These funds of Rs. 128.10 crores were essentially received by this Company from M/s. Core Indo Inspat Private Limited towards financing transactions.
During the inspection of books of accounts of M/s. Shri Mahalakshmi Metal and Scrap Processing private Limited that the subject Company is taking loan and advances from M/s. Core Indo Ispat Private Limited as financial accommodation transactions. During 2015-16, the Company had debit and credit transactions of Rs.88.67 crores and Rs. 132.80 crores, respectively with M/s. Core Indo Ispat (P) Limited without there being any purchase and sale transactions. Hence, this Company is running a loan and investment business and not as mentioned in its objects clause. However, the Company did not produce any Board resolutions for all these borrowings and lending operations resulting in violation of Section 179 (3) (a) and Section 179 (3) (I) of the Companies Act, 2013.
Whereas Regional Director, (SR), Chennai vide letter dated 31.07.2019 issued directions to initiate necessary action against the defaulters of the provisions of the Companies Act, 2013 and this office has issued Show Cause notice to subject company and directors vide Letter No. F.No. Roc/Chn/12639/p.18/Inspn/2020 dated 21.10.2020, for violation of Section 179(3)(f) of the Companies Act, 2013. As per the Companies (Amendment) Act, 2020, Section 450 is amended from fine to penalty w.e.f 11.02.2020. Hence this office had issued Adjudication Notice vide letter dated 07.09.2023 for violation of same Section 179(3)(f) of the Companies Act, 2013.
6. Reply of Company and Directors for Adjudication Notice issued:
a. Company’s Reply
Whereas Subject Company has submitted its reply vide letter dated 19.10.2023 states that, “the company has obtained the requisite approval of the Board under Section 179 of the Companies Act, 2013 for lending of amount to various group companies. The Extract of the proceedings of the meeting of the board of directors of the company held at the registered office of the company on 1706.2014 at 10.00 A.M have mentioned below:
Resolved that,. pursuant to the provision of section 179 of the Companies Act, 2013 (as amended or re-enacted from time to time), the consent of the board be and are hereby accorded to grant loans for an amounts(s) not exceeding Rs. 150,00,00,000/- to the following Companies on such terms and conditions as may be decided by the Board time to time.
| S.No | Name of the Company | Loan Amount |
| 1. | SLO INDUSTRIES LTD | Approx Rs.100 Crores |
| 2. | SLO STEEL INDUSTIRES LTD | Approx Rs. 25 Crores |
| 3. | SLO STEELS LTD | Approx Rs. 25 Crores |
| 4. | CORE INDO ISPAT PVT LTD | Approx Rs. 50 Crores |
| 5. | MURUGESAN IMPEX PVT LTD | Approx Rs. 50 Crores |
b. Reply of Director Shri. Arun Kumar Sharma
Whereas one the director of subject company has submitted its reply vide letter dated 19.10.2023 stated that, “I hereby inform you that the Non-Compliance informed by your good office pertaining to the financial year 2015-16 only. You have issued notice to me, but I have joined in the board of M/s. Shri Mahalakshmi Metal and Scrap Processing Private Limited on 20.01.2017. Hence request your good office to withdraw the notice for adjudication u/s 454 of the Companies Act, 2013 against me”
7. Adjudication Hearing:
(i) The Adjudicating Authority has reasonable cause to believe that the aforesaid provisions of the Act have not been complied with, and accordingly this office had issued Adjudication Hearing Notice to the subject company and directors on 12.10.2023 fixing the hearing date as 19.10.2023 at 12.00 Noon. In Pursuant to hearing notice issued on 12.10.2023, Shri. ANIL KUMAR OJHA one of the Director, who is liable is appeared before the Adjudicating Authority on 19.10.2023 and represent Company and other directors and made submissions that, “the said violation may be adjudicated and accepted to pay the penalty as prescribed u/s 450 of the Companies Act, 2013.”
8. Decision
Whereas Shri. ANIL KUMAR OJHA — Director admitted the violation and hence following penalty referred to in Para No.4(ii) is imposed on Company and Director for the violation of Section 179(3)(f) of the Companies Act, 2013.
| S.No | Company and Officers in default | Penalty for default | Penalty Imposed |
| 1. | M/s. Shri Mahalakshmi Metal and Scrap Processing Private Limited | Rs. 10,000/- | Rs. 10,000/- |
| 2. | Shri Sharma Rakesh Kumar – Director | Rs. 10,000/- | Rs. 10,000/- |
| 3. | Shri. Arun Kumar Sharma – Director | Rs. 10,000/- | Rs. 10,000/- |
| 4. | Shri. Anil Kumar Ojha Anil Kumar – Director | Rs. 10,000/- | Rs. 10,000/- |
Therefore, in view of the above said violation of the undersigned in exercise of the powers vested to him under Section 454(1) & (3) of the Companies Act, 2013.Hereby impose a penalty of Rs.10,000- to Company and Rs.10,000/- to each of directors. Totally Rs.40,000/- (Rupees. Fouty Thousand) as penalty amount for violation of Sec 179 of the Companies Act, 2013.
9. The said amount of penalty shall be paid through online by using the website www.mca.gov.in(Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs payable at Chennai, 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 (NR), 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 the 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)(i) Where company fails to comply with the order made under subsection (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
