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In a significant development that provides relief to companies across India, the Ministry of Corporate Affairs (MCA) has issued an adjudication order that brings a sigh of relief for businesses concerning the submission of their financial statements. This move is aimed at easing the regulatory burden on companies and ensuring that businesses can rectify their compliance status without the fear of hefty penalties. This article delves into the details of the MCA’s order, its implications, and how companies can navigate this new provision effectively.

Understanding the MCA’s Recent Order

The Office of the Registrar of Companies, Maharashtra, Pune, under the Ministry of Corporate Affairs, Government of India, has recently issued an adjudication order stating that no penalty will be imposed on companies for the delay in submitting their financial statements if they manage to do so within thirty days of receiving a notice from the MCA. This order is grounded in the provisions of Section 137 of the Companies Act, 2013, read with Section 454(3), offering companies a grace period to comply with their financial statement submission requirements without facing penalties.

The Legal Framework

The Companies Act, 2013, mandates companies to file their financial statements, including consolidated financial statements, with the Registrar of Companies (ROC) within thirty days of their Annual General Meeting (AGM). Failure to comply with this requirement subjects companies to a penalty of ten thousand rupees, with an additional penalty of one hundred rupees for each day of continuing failure, subject to a maximum of two lakh rupees. This stringent regulation aims to ensure timely compliance and transparency in the corporate sector.

However, with the recent adjudication order, the MCA has provided a reprieve for companies that miss this deadline but manage to submit their financial statements within thirty days of the issuance of a notice by the adjudicating officer. This decision acknowledges the practical challenges businesses may face and promotes a more forgiving regulatory environment for inadvertent delays.

Implications for Businesses

This amendment is a welcome change for the business community, offering several implications:

  • Reduced Financial Burden: Companies can now avoid the financial penalties associated with late submission, provided they act promptly upon receiving the notice.
  • Encouragement for Compliance: This move encourages businesses to rectify their filing status within the stipulated time, promoting compliance.
  • Operational Flexibility: Recognizing the challenges businesses may face, this provision offers operational flexibility, allowing companies to focus on compliance without the immediate pressure of penalties.

Steps to Compliance

To benefit from this provision, companies must take the following steps:

  • Monitor Communication: Keep a vigilant eye on communications from the MCA or ROC to ensure that any notice issued is promptly addressed.
  • Ensure Timely Submission: Upon receiving a notice, companies should act swiftly to compile and submit their financial statements within the thirty-day window.
  • Seek Professional Advice: Engaging with legal or financial advisors can help ensure that the submission meets all regulatory requirements and is done efficiently.
  • Maintain Records: Keeping meticulous records of communications, submissions, and compliance efforts is crucial for potential future reference or verification.

Conclusion

The MCA’s recent order marks a significant step towards a more lenient regulatory approach, acknowledging the practical difficulties businesses may encounter. By allowing a grace period for the submission of financial statements following the issuance of a notice, the MCA is fostering a business-friendly environment that prioritizes compliance while offering relief from penalties. Companies should leverage this opportunity to ensure their financial compliance is up to date, thus avoiding penalties and contributing to the transparency and integrity of the corporate sector in India.

This move by the MCA reflects an understanding of the dynamic challenges faced by businesses and represents a balancing act between regulatory compliance and operational flexibility. As companies navigate these regulations, staying informed and proactive in compliance efforts will be key to leveraging the benefits of this order and maintaining a healthy corporate governance framework.

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

RoCP/ADJ/ order/Sec-137 /22-23/ B/2999 to 3002

Date:20 FEB 2024

SPEED POST

ADJUDICATION ORDER

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Adjudication Order of penalties in the matter of Gagan Narang Sports Promotion Foundation having
CIN- U92412PN2011NPL138832 under Section 454(3) read  with section 137 of the Companies Act, 2013

Please Read:

  • Companies (Adjudication Of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019 (G.S.R.131(E) ).
  • Provisions of Sub-section (1) and (3) of Section 137 of the Companies Act, 2013.
  • Gazette Notification of Ministry of Corporate Affairs vide No. A­42011/ 112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015)
  • General Circular No. 1/2020 dated 02.03.2020.
  • Companies (Amendment) Act, 2019, w.e.f. 02.11.2018
  • Companies (Amendment) Act, 2020, w.e.f. 21.12.2020

In respect of:

WHEREAS GAGAN NARANG SPORTS PROMOTION FOUNDATION having CIN U92412PN2011NPL138832 is a company governed by the provisions Act and registered with this office having its office at- B/ 1004, 10th Floor, Pristine Prolife Mumbai Bangalore Highway, Next Sayaji Hotel, Wakad Pune 411057, Pune, Maharashtra, India.

1. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its Gazette Notification No. A- 42011/112/2014-Ad.11, 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, 2019 is entrusted to adjudicate penalties under section 92 of the Companies ACT, 2013 with effect from 02.11.2018.

2. Company:

GAGAN NARANG SPORTS PROMOTION FOUNDATION having CIN U92412PN2011NPL138832 (herein after referred as Company) is a registered company with this office under the provisions of section 8 of the Companies Act, 1956 having its registered office as per MCA21 Registry at address “at- B/ 1004, 10th Floor, Pristine Prolife Mumbai Bangalore Highway, Next Sayaji Hotel, Wakad Pune 411057, Pune, Maharashtra, India.”

3. Relevant provisions of the Companies Act, 2013:

As per provision of Section 137(1) of Companies Act, 2013 “(1) a copy of financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the Annual General Meeting of the Company, shall be filed with the Registrar within thirty days of the date of AGM in such manner, with such fees or additional fees as may be prescribed.”

As per provision of Section 137(3) of Companies Act, 2013 If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified therein, the company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the Directors of the company, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees.;

4. Facts about the Case:

a) In terms provisions of section 92(4) Companies Act, 2013, “(1) a copy of financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the Annual General Meeting of the Company, shall be filed with the Registrar within thirty days of the date of AGM in such manner, with such fees or additional fees as may be prescribed.”

b) In terms of the provisions of section 92(5) of the Act, If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified therein, the company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the Directors of the company, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees.;

c) An Inquiry was conducted by the JO and during the Inquiry and examination of records it has been observed that, the MCA portal, that the Company has not filed Financial Statement in E-form AOC-4 for the F.Y. 2019-20. Thus, the company and officers have violated Section 137 and are liable for penal action u/s 137(3) of the Companies Act.

A reasonable opportunity was given to the company and its directors vide order under section 206(4) of the Companies Act, 2013 vide letter no. ROCP/INQ/2022/1263 to 1266 dated 30.09.2022. However, the reply submitted by the Company was not satisfactory and the competent authority has directed to adjudicate the matter.

d) Accordingly, the adjudication officer has issued adjudication notice vide ROCP/ADJ/Sec-137/22-23/867-870 dated 04.07.2023 (herein after referred as Adjudication Notice) under Section 454(4) read with 137 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, b 8s c” above;

e) A reply to the Adjudication notice has been received on 21.07.2023 from the company and its Directors stating that “The Company hereby state that the Company has conducted the Annual General meeting within the prescribed timeline for the financial year 2019-20 but failed to file the necessary forms with the Registrar of Companies within the prescribed time. Further , now the company has complied and filed the necessary forms with the Hon’ble Registrar of Companies for the financial year 2019-20 vide SRN F59268623 dated 01/03/2023. We further confirm that Company is a law-abiding entity and have complied with all the requisite compliances as per the provisions of the Companies Act, 1956/ Companies Act, 2013.

f) Further, under section 454(4) of the Act read with Rule 3(2) of the Companies (Adjudication Of Penalties) Rules, 2014, Noticee(s) were given an opportunity to submit a reply by issuing an Adjudication Notice vide ROCP/ADJ/ Sec-137/22-23/867-870 dated 04.07.2023 (herein after referred as Adjudication Notice) to why the penalty should not be imposed under the provisions of 92(5) of the Act against the Company and its officers in default for the above stated violations.

g) Hence, as the said violation has already been concluded by I0 during the course of Inquiry :- no further hearing in physical is required to ascertain the violation of the said section.

5. ORDER:

After considering the submission made in the application and 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 137(1) of the Act and made the offence good on 01.03.2023. Further taking into the consideration the proviso of sub-section (3) of section 454 of the Companies Act, 2013 which inter alia provides that in case the default related to non-compliance of section 137 has been rectified either prior to, or within thirty days of the issue of the notice by the adjudicating officer, no penalty be imposed in this regard and all proceedings under this section in respect of such default shall be deemed to be concluded.

Having considering the facts and circumstances of the case and after taking into the account the provisions mentioned in the relevant Rules followed by amendments in section 454(3) of the Companies Act 2013, I am of the opinion that no penalty shall be imposed for the default related to non­compliance of section 137 of the Act as the said default has been rectified by filing its balance sheet for the financial year ended 31-03-2020 on 01.03.2023 prior to issue of notice by Adjudicating officer. Accordingly, the company is directed to file e-form INC-28 with the office of ROC, Pune.

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

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