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In a recent development, the Ministry of Corporate Affairs (MCA) has issued an order imposing penalties on Mawana Foods Private Limited and its directors for violations under Section 203 of the Companies Act, 2013. The penalties were adjudicated by the Registrar of Companies, NCT of Delhi & Haryana, acting as the Adjudicating Officer.

Background: Mawana Foods Private Limited, incorporated on January 3, 2006, failed to comply with the provisions related to the appointment of Key Managerial Personnel (KMP) within the stipulated time frame. The company was required to appoint a Managing Director, Chief Executive Officer, or Manager by April 21, 2022, following the resignation of its Managing Director. However, the appointment was delayed until December 26, 2022, resulting in a delay of 249 days.

Violations and Penalties Imposed: The relevant provision under Section 203 of the Companies Act, 2013, mandates the appointment of KMP and stipulates penalties for non-compliance. Mawana Foods Private Limited and its directors were found in violation of this provision, leading to the imposition of penalties as follows:

  • Mawana Foods Private Limited (Company): Penalty of Rs. 5,00,000/-
  • Directors:
    • Ashwani Kumar Mehra: Penalty of Rs. 2,99,000/-
    • Rajesh Tara: Penalty of Rs. 2,99,000/-
    • Arun Kumar Kaul: Penalty of Rs. 2,99,000/-
    • Gobind Ram Arora: Penalty of Rs. 2,99,000/-
    • Sachin Sharma (for the period from April 22, 2022, to October 5, 2022): Penalty of Rs. 2,17,000/-

249 days delay in KMP appointment MCA Imposes Penalty of Rs. 19.13 Lakh

Compliance and Appeals: The parties are directed to pay the respective penalty amounts within 90 days from the receipt of the order. The penalties should be paid online through the MCA website, and proof of payment must be provided to the Registrar of Companies, NCT of Delhi & Haryana. Additionally, an appeal against the order can be filed with the Regional Director (NR), Ministry of Corporate Affairs, within 60 days from the date of receipt of the order.

Conclusion: The order underscores the importance of timely compliance with statutory requirements concerning the appointment of Key Managerial Personnel. It serves as a reminder to companies and directors to adhere to the provisions of the Companies Act, 2013, to avoid penalties and legal consequences. Mawana Foods Private Limited and its directors are urged to promptly settle the imposed penalties and ensure future compliance with regulatory obligations. Failure to comply with the order may lead to further consequences as per the provisions of the Companies Act, 2013.

******

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 OF PENALTY PURSUANT TO SECTION 203 OF THE COMPANIES ACT, 2013 IN THE MATTER OF MAWANA FOODS PRIVATE LIMITED

(U74899DL2006PTC144412)

1. Appointment of Adjudicating Officer : –

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.11, 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 for adjudging penalties under the provisions of this Act.

2. Company: –

Whereas the company MAWANA FOODS PRIVATE LIMITED (herein after known as ‘company’) has been incorporated on 03.01.2006 and having its registered office as per MCA21 Register address at 5th Floor Kirti Mahal 19,Rajendra Place, New Delhi, Central Delhi, Delhi,110008,lndia. The financial & other details of the subject company for immediately preceding F.Y 2022-23. as available on MCA-21 portal is stated as under:

S. No. Particulars Details
1. Paid up capital (in lakhs of INR) 2,003.69
2. a. Revenue from operation (in lakhs of INR) 3,247.19
a. Other Income (in lakhs of INR) 18.78
b. Profit for the Period (in lakhs of INR) -95.93
3. Holding Company YES
4. 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. Facts about the Case:

i. This office is in receipt of application on 22.06.2023 (GNL-1 F61389623) from the company for adjudication of penalties for default u/s 203 of the Act.

(ii) As per application the provisions related to “Appointment of KMP” as provided u/s 203 of the Act is applicable on the company. The erstwhile Managing Director of the company had resigned w.e.f. 22nd October, 2021 and accordingly company ought to have a managing director, or Chief Executive Officer or manager and in their absence, a whole-time director on or before 21st April, 2022. However, the Company at a meeting of the board which was held on 26th December, 2022 appointed Mr. Anurag Mishra as Manager (w.e.f. 20th April, 2022).

(iii) An SCN in the matter was issued on 15.09.2023 and in response to which company submitted a reply on 26.09.2023 wherein all the applicants have admitted the default and requested remission of penalty amount.

(iv) In view of submissions made in reply and further request made vide email dated 28.12.2023, a healing in the matter was scheduled for oral submissions on 16.01.2024, Sh. Ranjeet Pandey, PCS and Sh. Alok Tripathi, PCS authorized representatives of the company appeared in the matter. They have submitted the reply sought from them regarding show cause notice issued to company. It was reiterated that there is default of 249 days in appointing Manager in the company and requested for lenient view while levying penalty.

(v) Thus, as per submission made by the company, it is evident that company was required to appoint KMP on or before 21.04.2022 but Manager in the company was appointed on 26.12.2022 with a delay of 249 days.

4. The relevant provision of Section 203 (Appointment of Key Managerial Personnel)

203(1) “Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,–

(i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director,.

(ii) company secretary; and

(iii) Chief Financial Officer :

203(4)”if the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.”

203(5) “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 lakh rupees”

5. Adjudication of penalty : –

i. The default with regard to delay of 249 days in appointment of KMP has already been admitted.

ii. As regard the submission regarding remission in the penalty amount, it is stated that the law provides for a fix penalty on the company and its officers in default.

iii. Now the parties on which penalties would be imposed is required to be decided. For this, reference is made to section 203(4) which very clearly says that the onus of filling up the vacancy in the office of whole time KMP is on the Board of the company. On the other hand, section 203(5) provides for a penalty on every director and KMP who is in default in case of default. The scope of KMP is wider, as it covers officers other than the directors of the company. But section 203(4) clearly casts the obligation for appointment of a KMP in timely manner on the Board only. Thus, a KMP who is not part of the Board is not under an obligation under section 203(4) as no onus is cast upon him to ensure the appointment is made as per the said provision. Now, as per the harmonious interpretation of the section 203 (4) and section 203(5), the entire Board of the company is liable for the period in which the default occurred. Other KMPs of the company who are not part of Board are not liable. In the present case, penalty is leviable on the Board of the company, while Company Secretary & CFO who are KM Ps but not part of Board are not liable for penalty.

iv. The subject company does not get covered under the purview of small company as defined u/s 2(85) of the Act. Hence, the benefit of section 446B would not be applicable on the company.

v. Now in exercise of the powers conferred on me vide Notification dated 24th March, 2015 and having considered the reply of the noticee (s) in response to the notice issued on 15.09.2023 and reply submitted on 26.09.2023 as well as hearing held in the matter on 16.01.2024, I do hereby impose the penalty on the company and its Directors for violation of section 203 of the Act:

Violation section

Penalty imposed
on company/
director(s)
No of
days
default
Calculation for penalty amount as per Section 203 (in Rs.) Penalty
imposed
(in Rs.)
A B C D E
u/s 203 of the Companies Act, 2013 MAWANA FOODS PRIVATE LIMITED (company) 249 5,00,000 5,00,000
ASHWANI KUMAR MEHRA (director) 249 50000+(1000×249) = 2,99,000 subject to maximum 5,00,000 2,99,000
RAJESH TARA (director) 249 50000+(1000×249) = 2,99,000 subject to maximum 5,00,000 2,99,000
ARUN KUMAR KAUL (director) 249 50000+(1000×249) = 2,99,000 subject to maximum 5,00,000 2,99,000
GOBIND RAM ARORA (director) 249 50000+(1000×249) = 2,99,000 subject to maximum 5,00,000 2,99,000
SACHIN SHARMA (director) from 22nd April, 2022 till cessation i.e. 05th October, 2022) 167 50000+(1000×167) = 2,17,000 subject to maximum 5,00,000 2,17,000

6. Order:

a. Names of parties as mentioned in the table above are hereby directed to pay the penalty amount as per column no. ‘E’ therein. In case of parties other than company, such amount is required to be paid out of their own funds.

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 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].

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

(Pranay Chaturvedi, ICLS
(Adjudication Officer)
Register Of Companies
NCT of Delhi & Haryana

No. ROC/D/Adj/Order/203/ Mawana/1510-1518

dated: 19/03/2024

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