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Introduction: The Ministry of Corporate Affairs, Government of India, has recently adjudicated a penalty against the Lions Co-ordination Committee of India Association for non-compliance with Section 134(3)(h) of the Companies Act, 2013. This article provides an overview of the case, the violations identified, and the penalties imposed.

Detailed Analysis: The adjudication process was initiated following an inquiry into the affairs of Lions Co-ordination Committee of India Association by an officer authorized by the Central Government. The company was issued a Show Cause Notice for violation of Section 134(3)(h) of the Companies Act, 2013, which requires the attachment of particulars of contracts or arrangements with related parties in the prescribed form to the statements laid before a company in a general meeting.

The violation stemmed from the company’s failure to attach the required annexure (Form AOC-2) relating to the particulars of contracts or arrangements with related parties, despite stating compliance with Section 188 of the Companies Act, 2013, in its Board Report for the financial years 2018-19 and 2019-20. Consequently, the company and its officers in default were found liable for penal action under Section 134(8) of the Companies Act, 2013.

Upon receipt of directions from the Regional Director, Chennai, necessary action was initiated against the defaulters, and an Adjudication Notice was issued to the company and its directors. One of the directors, Shri Vazhappully Padmanabhan Nandakumar, admitted to the violation and filed for adjudication of the offense under Section 454 of the Companies Act, 2013.

Following the adjudication process, penalties were imposed on the director for each financial year of the violation, totaling Rs. 1,00,000, in accordance with the provisions of Section 134(8) of the Companies Act, 2013.

Conclusion: The imposition of penalties on Lions Co-ordination Committee of India Association underscores the significance of compliance with regulatory requirements outlined in the Companies Act, 2013. It serves as a reminder to companies and their officers of the repercussions of non-compliance and the importance of adhering to statutory obligations concerning financial disclosures and related-party transactions.

Furthermore, the case highlights the enforcement mechanisms in place to ensure accountability and transparency in corporate governance. Companies are urged to prioritize compliance with legal provisions to avoid penalties and potential legal ramifications.

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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/110455/ADJ/S.134(3)(h)/P.3/2023  Date: 8 FEB 2024

IN THE MATER OF M/S LIONS CO-ORDINATION COMMTI I EE OF INDIA ASSOCIATION

ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALITES) RULES 2014 FOR VIOLATION OF SECTION 134(3)(H) OF THE COMPANIES ACT, 2013

1. In the matter of M/s LIONS CO-ORDINATION COMMITTEE OF INDIA ASSOCIATION with CIN U74999TN2016NPL110455 incorporated on 18.05.2016 under the jurisdiction of Registrar of Companies, Chennai with the registered office situated at 96 Govindan Street, Collectorate Colony, Aminjikarai, Tamil Nadu, 600029, India.

2. Whereas the company was taken up for Inquiry by an Officer authorized by the Central Government and this office had issued Show Cause Notice vide letter dated 08.09.2023 for violation of Section 134(3)(h) of the Companies Act, 2013.

3. Whereas as per Sub Section 3(h) pursuant to Section 134 of the Companies Act, 2013 which states that , “(3) There shall be attached to statements laid before a company Aki general meeting, a report by its Board of Directors, which shall include—

(h) particulars of contracts or arrangements with related parties referred to in sub­section (1) of section 188 in the prescribed form;”

Penalty for not attaching Board Report on Related Party Contracts in Form AOC-2 

4. Whereas the company for the Financial Year 2018-19 and 2019-20 in its Board Report stated that “All transactions with the related parties are in compliance with section 188 of the Companies Act, 2013” under Particulars of Contracts or Arrangements with Related Parties. However, no annexure (i.e., Form AOC-2) relating to the particulars of contracts or arrangement with Related parties forming part of the Board Report have been attached. Hence, the company has not complied with the provision of Section 134(3)(h) of the Companies Act, 2013 read with Rule 8 of the (Companies (Accounts) Rules, 2014. Hence, the company and officers in default are liable for penal action under Section 134(8) of the Companies Act, 2013.

5. Whereas Regional Director, (SR), Chennai issued directions to initiate necessary action against the defaulters of the provisions of the Companies Act, 2013 and this office have issued a Adjudication Notice to Company and its directors who liable for violation of Section 134(3)(h) of the Companies Act, 2013.

6. In Pursuant to Adjudication Notice 08.09.2023, Shri Vazhappully Padmanabhan Nandakumar one the director of the subject Company have admitted the violation and also filed GNL-1 vide SRN F83664789 dated 25.11.2023 for adjudicate the offence u/s. 454 of the Companies Act, 2013. Hence the undersigned 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 director Shri Vazhappully Padmanabhan Nandakumar on 17.01.2024 fixing the hearing date as 25.01.2024 .

7. In Pursuant to hearing notice issued on 17.01.2024, Shri. K. Janakiraman -PCS , authorized representative for director Shri Vazhappully Padmanabhan Nandakumar has appeared before the undersigned and made submissions that, “the said violation may be adjudicated and accepted to pay the penalty as prescribed under section 134(8) of the Companies Act, 2013”

8. Whereas as per section 134(8) of the Companies Act, 2013, which read as under:-

“(8) 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 fifty thousand rupees.”

9. Shri K. Janakiraman -PCS, Authorized Representative admitted the violation and hence following penalty referred to in Para No.8 is imposed on director Shri Vazhappully Padmanabhan Nandakumar for the violation of Section 134(3)(h) of the Companies Act, 2013.

S. No Offence Period Total Penalty Imposed
1.  2018-2019 Rs. 50,000/-
2. 2019-2020 Rs. 50,000/-

Therefore in view of the above said violation, the undersigned in exercise of the powers vested to him under Section 454(1) & (3) of the Companies Act, 2013, hereby impose a penalty Rs. 50,000/- each financial year to the director Shri Vazhappully Padmanabhan Nandakumar (Totaling Rs. 1,00,000/- as penalty amount).

10. Whereas sub-section (5) of section 454 of the Companies Act,2013 provides that any person aggrieved by an order made by the adjudicating officer under sub-section(3) may prefer an appeal to the Regional Director having jurisdiction in the matter and further sub-section(6) provides that every appeal under sub-section(5) shall be filed within sixty days form the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form, manner and be accompanied by such fees as may be prescribed.

11. Please note that as per Section 454(8) (i) of the Companies Act, 2013, Where company does not pay the penalty imposed by the adjudicating officer or the Regional Director 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 who is in default does not pay the penalty 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.

In case of default in payment of penalty, prosecution will be filed under section 454(8) (i) and (ii) of the Companies Act, 2013 at your own costs without any further notice along with the penalty to be imposed and the same should be submitted.

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

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