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Introduction: The Office of the Registrar of Companies, Maharashtra, Pune, has imposed a penalty of Rs. 20 Lakh on Kudos Finance And Investments Private Limited and its Directors for violating Section 188(1)(f) of the Companies Act, 2013. The penalty is a result of the company’s failure to hold a board meeting to approve a related party transaction.

Detailed Analysis:

1. Appointment of Adjudicating Officer: The Ministry of Corporate Affairs appointed an Adjudicating Officer to adjudicate penalties under Section 188 of the Companies Act, 2013.

2. Company Details: Kudos Finance And Investments Private Limited, a registered company, is charged under Section 188(1)(f) for not complying with related party transaction approval requirements.

3. Relevant Provisions: Section 188(1)(f) prohibits companies from entering into any contract or arrangement with a related party regarding their appointment to any office or place of profit without the Board’s consent.

4. Facts about the Case: An inquiry revealed that the company, in violation of Section 188(1)(f), engaged in a related party transaction without specifying the date of the board meeting approving it.

5. Adjudication Process: A detailed adjudication process, including the issuance of notices and replies, was carried out. The company and its officers were given an opportunity to respond.

6. Director’s Response: The company’s directors claimed ignorance of legal provisions, stating that they were unaware of the need for a board meeting. They assured future compliance.

7. Conclusion of Violation: The violation was concluded during the Inquiry, and no further physical hearing was required to ascertain the breach.

Conclusion: The Adjudicating Officer, considering all factors, imposed penalties on the directors involved in the related party transaction. Each director, including Pavitra Walvekar (CEO), Swati Jindal, Naresh Vigh, and Audumbar Dattatray Raut, faces individual penalties. The penalty amount is deemed commensurate with the failure committed by the notice(s).

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OFFICE OF THE
REGISTRAR OF COMPANIES
MAHARASTRA, PUNE
MINISRTY OF CORPORATE AFFAIRS
GOVERNMENT ENT OF INDIA
PCNTDA Green Building BLOCK A,
1st & 2st Floor, Near Akurdi Railway Station Pune- 411044
Phone: 020-27651375/78 E-mail: roc.pune@mca.gov.in

Order No. RoCP/ADJ/ 188/23-24/KUDOS/8(i)/B/2846 to 2851 Date: 9 FEB 2024

SPEED POST

ADJUDICATION ORDER

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Adjudication Order of penalties in the matter of Kudos Finance And Investments Private Limited (U65910PN2009PTC148795) under Section 454(3) read with section 188 of the Companies Act, 2013 of the Companies Act, 2013

Please Read:

In respect of:

Whereas KUDOS FINANCE AND INVESTMENTS PRIVATE LIMITED having CIN-(U65910PN2009PTC148795) & having its registered office as per MCA21 Registry at address “C/o, EFC Limited, 7th Floor, East Wing, Marisoft-3, Marigold Premises, Kalyani Nagar, Pune, Maharashtra,411014,India.” and its directors/ KMPs.

1. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015) appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (herein after known as Act) r/w Rule 3(1) of Companies (Adjudication Of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act. The undersigned vide Companies (Amendment) Act, 2020 is entrusted to adjudicate penalties under section 188 of the Companies ACT, 2013 with effect from 21.12.2020.

2. Company:

KUDOS FINANCE AND INVESTMENTS PRIVATE LIMITED (U65910PN2009PTC148795) (herein after referred as Company) is a registered company with this office under the provisions of section 3(1)(iii) of the Companies Act, 1956 having its registered office as per MCA21 Registry at address “C/o, EFC Limited, 7th Floor, East Wing, Marisoft-3, Marigold Premises, Kalyani Nagar, Pune, Maharashtra, 411014, India.”

3. Relevant provisions of the Companies Act, 2013:

Section 188(1)(r) of the Act provides that “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”.

(I) such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company;

Section 188(5) of the Act provides that “Any director or any other employee of a company, who had entered into or authorized the contract or arrangement in violation of the provisions of this section shall, —

(i) in case of listed company, be liable to a penalty of twenty-five lakh rupees and

(ii) in case of any other company, be liable to a penalty of five lakh rupees.;

4. Facts about the Case:

a) In terms provisions of section 188(1)(f) Companies Act, 2013, “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”.

(f) such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company;

b) In terms of the provisions of section 188(5) of the Act, Any director or any other employee of a company, who had entered into or authorized the contract or arrangement in violation of the provisions of this section shall,

(i) in case of listed company, be liable to a penalty of twenty-five lakh rupees

and

(ii) in case of any other company, be liable to a penalty of five lakh rupees.

c) That an inquiry u/s 206(4) of the Act into the affairs of the company was conducted by this office and during the course of the inquiry it was seen that as per Annexure to Director’s Report for F.Y.2020-21 contains AOC-2, which mentions related party transaction with Pavitra Walvekar (CEO). However, the date of board meeting approving such transaction is not mentioned. Hence, the company has violated Section 188(1)(f) and is liable for action under section 188(5) of the Companies Act, 2013.

A reasonable opportunity was given to company and its directors vide order under section 206(4) of the Companies Act, 2013 vide letter no. ROCP/INQ/2021/2045 to 2051 dated 18.02.2022. However, reply submitted by the Company was not satisfactory and the competent authority has now directed to adjudicate the matter.

d) Accordingly, the adjudication officer has issued adjudication notice vide ROCP/ADJ/Sec-188(1)(a)/23-24/722 to 727 dated 23.06.2023 (herein, after referred as Adjudication Notice) under Section 454(4) read with 188 of the Companies Act, 2013 read with Rule 3(2) Of Companies (Adjudication of Penalties), 2014 as amended in Amendment Rules, 2019, to the company and its officers in default for the violation of the provisions of the act as mentioned in para “a 86 b” above;

e) A reply to the Adjudication notice has been received on 28.07.2023 from the company and its Directors stating that the directors and the company were not aware of the legal provisions regarding Section 188(1)(f) of the Companies Act, 2013 and thus no board meetings was held approving transaction with related party and accordingly, no date is specified in Form AOC-2. The company assures to take care of this provision and comply the same in future and also request to exonerate the company for such noncompliance. Accordingly, no penalty should be imposed under the provisions of Section 188(5) of the Act against the company and its officers in default.

f) Thus, it is clearly established that the contract was entered into by the company with Pavitra Walvekar (CEO) without approval of the Board.

g) Hence, as the said violation has already been concluded by JO during the course of Inquiry :- no further hearing in physical is required to ascertain the violation of the said section.

Furthermore, the Noticee(s) are at liberty to file appeal against this order as per Para. 5.(e) of this order. Hence the Order-

5. ORDER:

a. The Pavitra Walvekar (CEO), Swati Jindal 8s Naresh Vigh, are the directors who have defaulted the provisions of section 188(1)(f) of the Act for not holding board meeting for approving transaction with related party. Thus, no date of board meeting is specified in Form AOC-2 which mentions related party transaction with Pavitra Walvekar (CEO).

b. In exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and after taking into account the factors mentioned herein above, I do hereby impose the penalty on Directors/Employees as stated above pursuant to Rule 3(12) of Companies (Adjudication Of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication Of Penalties) Rules, 2014 as per table below for violation of section 188(1)(f) of the Act:-

Sl. No. Penalty imposed on company/ director(s) Penalty Impose (In Rs)
1 Pavitra Pradip Walvekar (CEO) ₹5,00,000/-
2 Swati Jindal ₹5,00,000/-
3 Naresh Vigh ₹5,00,000/-
4 Audumbar Dattatray Raut ₹25,00,000/-

c. I am of the opinion that penalty so imposed is commensurate with the aforesaid failure committed by the notice(s).

d. The Directors/ Employees shall pay the amount of penalty individually and shall also file form No INC-28 of e payment (available on Ministry Website mca.gov.in) under “Pay miscellaneous fees” category in MCA fee and payment Service within 90 (ninety) days of this order and the Challan/SRN generated after payment of penalty through online mode shall be forwarded to this office along with the copy of form No INC- 28.

e. Appeal if any, against this order may be filed under section 454(5) of the Act, in writing with the Regional Director (Western Region), Ministry of Corporate Affairs 100, Everest, 5th Floor, Netaji Subhash Road, Marine Drive, Mumbai-400002, 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 of the Act read with Companies (Adjudication of Penalties) Rules, 2014 as emended by Companies (Adjudication of Penalties) Amendment Rules, 2019.

f. Your attention is also invited to section 454(8)(ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order in terms of the provisions of section 454(8)(i) of the Act.

g. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to KUDOS FINANCE AND INVESTMENTS PRIVATE LIMITED and director/ employee mentioned herein above and also to Office of the Regional Director (Western Region) and Ministry of Corporate Affairs at New Delhi.

(Mangesh Jadhav, ICLS)
Adjudicating Officer
Registrar of Companies
Maharashtra, Pune

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