Penalty for delay in Transfer of Unspent CSR Amount – MCA levied penalty

In this case M/s. Navayuga Quazigund Expressway Private Limited failed to transfer the unspent amount of Rs. 11,79,701 to the funds specified in Schedule VII within the prescribed time, which constituted a violation of Section 135(5) of the Companies Act, 2013. Consequently, the company was directed to pay a penalty of Rs. 23,59,402 and the officers in default, including Mr. Divakara Rao Behata, were directed to pay penalties of Rs. 1,17,970 each.

Please note Section 135(5) of the Companies Act, 2013 states that the Board of every company covered under this section must ensure that the company spends, in every financial year, at least two percent of its average net profits made during the preceding three financial years or since its incorporation, if it has not completed three financial years, in accordance with its Corporate Social Responsibility (CSR) Policy.

Violation of Section 135(5) occurs when a company fails to comply with this requirement by not spending the prescribed amount on CSR activities within the stipulated time frame. This violation can result in penalties and liabilities for the company and its officers in default as specified in Section 135(7) of the Act. The penalties can include a fine of twice the amount required to be transferred to the specified fund or the unspent CSR account, whichever is less, and can also extend to one crore rupees. Additionally, the officers of the company who are in default may be liable for a penalty of one-tenth of the required amount or up to two lakh rupees, whichever is less. It is important for companies to adhere to the provisions of Section 135(5) to fulfill their CSR obligations and avoid legal consequences.

F.NO./U45203TG201OPTC068532/TELANGANA/135 OF 2013/2022
BEFORE THE REGISTRAR OF COMPANIES, HYDERABAD
FOR THE STATE OF TELANGANA
2ND FLOOR, CORPORATE BHAWAN, THATTIANNARAM, G.S.I. POST, BANDLAGUDA, NAGOLE,
HYDERABAD-500 068

PETITION NO. ADJ. 135/1 OF 2022
IN THE MATTER OF SECTION —135 OF COMPANIES ACT 2013
AND
IN THE MATTER OF
M/S. NAVAYUGA QUAZIGUND EXPRESSWAY PRIVATE LIMITED

A Company incorporated under the Companies Act, 1956, CIN: U45203TG2010PTC068532, having its Registered office situated at H.No.8-2-293/82/A1379 & 379/A, 1st Floor Plot No. 379, Road No.10, Jubilee Hills, Hyderabad – 500033, Telangana, India.

ORDER UNDER SECTION 454 READ WITH SECTION 135
OF COMPANIES ACT 2013
FOR THE VIOLATION OF SECTION 135(5) OF COMPANIES ACT 2013

1. Whereas M/s. NAVAYUGA QUAZIGUND EXPRESSWAY PRIVATE LIMITED (hereinafter referred as ‘Company’) is registered in the State of Telangana vide CIN No: U45203TG2010PTC068532 on 21.05.2010, having its registered office address at H.No.8-2-293/82/A1379 & 379/A, 1st Floor Plot No. 379, Road No.10, Jubilee Hills, Hyderabad – 500033, Telangana, has filed an application along with its officer I default u/s 135(7) for adjudication of violation of section 135(5) r/w section 454 of the Companies Act, 2013 (the Act) seeking necessary orders.

2. It is submitted by the Applicants that the applicant company pursuant to second proviso of section 135(5) of the Act, the company was required to transfer the unspent amount of Rs. 11,79,701/- (Rupees Eleven Lakhs Seventy-Nine Thousand Seven Hundred One Only) to the funds as specified in Schedule VII of the Act, within a period of six months of the expiry of the financial year i.e., on or before 30th September 2021. However, the company has not transferred the unspent amount to a fund specified in Schedule VII, within a period of six months of the expiry of the financial year i.e., on or before 30th September 2021 which is violation of Section 135(5) of the Companies Act, 2013 and liable under Section 135(7).

3. The applicant company has submitted that it has made payment of unspent amount of Rs. 11,79,107/-to PM CARES Fund on 08/12/2021 and provided copy of bank statement indicating the payment. Since the company has made good the offence by making payment of the unspent CSR amount to one of the funds specified in Schedule VII of the Act, the adjudication request is considered. The company shall however, file necessary receipt at the time of filing copy of this order in e-form INC-28.

4. Whereas as per Section 135(5) of the Companies Act, 2013 states the following:

“The Board of every company referred to in sub section (1), shall ensure that the company spends, in every financial year, at least two percent of the average net profits of the company made during the three immediately preceding financial years, or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:”

5. Whereas Section 135(7) of the Companies Act, 2013 contemplates the following:

“if a company is in default in complying with the provisions of sub section (5) of sub section (6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the fund specified in Schedule VII or the unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such fund specified in the Schedule VII, or the unspent Corporate Social Responsibility Account, as the case may be, or to two lakh rupees, whichever is less”.

6. After considering the submission made in the application made by the company and the facts of the case it is proved beyond doubt that the company and the officers of the company have defaulted in complying the provisions under Section 135(5) of the Act. In this regard, the company, and its officers in default (within the meaning of section 2(60) of the Companies Act, 2013) are hereby directed to pay the following penalty from their own sources.

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The penalty as indicated above, shall be paid within 30 days from the date of issue of this order by the defaulters (out of their own resources) and file e-Form INC-28, with the office of RoC, Hyderabad with copies of challan in proof of payment.

7. In this regard your attention is also drawn to the provisions of Section 454(5) and (6) which contemplates that:

“(5) 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.

(6) Every appeal under sub-section (5) shall be filed within sixty days from 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.”

8. In this regard your attention is also drawn to the provisions of Section 454(8) (i) and (ii) of the Companies Act, 2013 which read as follows:

(i) 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.

Issued under my hand and seal on this the 29^th of April 2022.

(JOSEKUTTY V.E.)
REGISTRAR OF COMPANIES, HYDERABAD
FOR THE STATE OF TELANGANA