Penalty Imposed on Director for Non-Disclosure of Interest

Registrar of Companies, Uttar Pradesh, imposed a penalty of ₹1,00,000 on Mr. Mohammad Usman, a director of Watai Electronics Private Limited, for failing to disclose his interest in YTL Manufacturing Private Limited as required under Section 184(1) of the Companies Act, 2013. While Mr. Usman disclosed his interests in two companies in November 2018, he omitted YTL Manufacturing, where he had been a director since October 2018. The omission was attributed to oversight and delays in finalizing his terms of appointment at YTL. A show cause notice was issued in June 2024, and after considering his reply and the circumstances, the penalty was deemed appropriate. Mr. Usman must pay the fine within 90 days and can appeal to the Regional Director (Northern Region) within 60 days. Non-compliance may invoke further action under Section 454(8) of the Companies Act, 2013. This case highlights the importance of accurate and timely disclosure of directors’ interests to comply with corporate governance norms.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF
COMPANIES, Uttar Pradesh
37/17, Westcott Building, The Mall,
Kanpur — 208001 (U.P.)
Phone : 0512 — 2310443/2310227

ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 FOR VIOLATION OF PROVISONS OF SECTION 184 OF THE COMPANIES ACT, 2013 .

IN THE MATTER OF WATAI ELECTRONICS PRIVATE LIMITED

1. The Ministry of Corporate Affairs vide its Gazette notification no A-42011/112/2014-Ad.II dated 24.3.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Whereas the Company WATAI ELECTRONICS PRIVATE LIMITED (CIN-U31909UP2018PTC109513) has been registered under the provisions of the Companies Act, on 23.10.2018 and is having its registered office situated at PLOT NO. B-49, SECTOR 83,PHASE 2,NOIDA,Gautam Buddha Nagar, Uttar Pradesh,201306,India. The authorized capital of the Company is Rs. 20,000,000.00 /-

3. During the Inquiry it was observed that the director namely Mr. Mohanunad Usman (DIN: 07585431) had provided incomplete disclosure of his interest in the companies to the board of company as per section 184 (1) of the Companies Act, 2013. i.e. he has disclosed his interest in two Companies i.e Szb Machines Private Limited & Chindi Medi43 Consultants Private Limited as on 12.11.2018 however at the same time he was also the directors in YTL Manufacturing Private Limited. w.e.f. 09.10.2018. Hence, the director has violated the provision of section 184 (1) of the companies Act, 2013 & is liable for penalty u/s 184(4) of the Companies Act, 2013 for the financial year 2018-19.

4. Section 184 of the Companies Act, 2013 provides that:-

(1) Every director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholding, in such manner as may be prescribed.

1, 2&3[(2) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into—

(a) with a body corporate in which such director or such director in association with any other director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate; or

(b) with a firm or other entity in which, such director is a partner, owner or member, as the case may be,

shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting:

Provided that where any director who is not so concerned or interested at the time of entering into such contract or arrangement, he shall, if he becomes concerned or interested after the contract or arrangement is entered into, disclose his concern or interest forthwith when he becomes concerned or interested or at the first meeting of the Board held after he becomes so concerned or interested.]

(3) A contract or arrangement entered into by the company without disclosure under sub-section (2) or with participation by a director who is concerned or interested in any way, directly or indirectly, in the contract or arrangement, shall be voidable at the option of the company.

Section 184(4) of the Companies Act, 2013 provides that —

“(4) If a director of the company contravenes the provisions of sub-section (1) or subsection (2), such director shall be 6[liable to a penalty of one lakh rupees].”

5. Accordingly, a Show Cause Notice No.07/01/Adj/2024/Watai/1457 to 1460 dated 04.06.2024 was issued to the company and its officers in default under section under Section 184(1) of the Companies Act, 2013, read with Companies (Adjudication of Penalties) Rules, 2014 by this office for non-compliance of the section 184 of the Companies Act, 2013.

6. Reply was received from Mohd Usman , director of the company vide letter dated 13.07.2024 .stating that due to oversight he forgot to mention the name of YTL manufacturing Private Limited (YTL) in the disclosure of interest given to the company under section 184(1) of the Companies act,2013 on 12.11.2018.This was because at that time my terms and conditions for appointment as director of YTL were not settled. However on finalization of his terms of appointment , YTL appointed him with retrospective effect from 09.10.2018. YTL never sent him any notice for board meeting or for annual general meeting after his appointment w.e.f. 09.10.2018.Thereafter he resigned from the management of YTL on 07.10.2020.

7. Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose a penalty of 1,00,000/- on Mohammad Usman , director of the company for failure to make compliance of section 184(1) of the Companies Act, 2013. It is of this opinion that penalty is commensurate with the aforesaid failure committed by the Noticee —

Penalty for non -disclosure of interest —

8. The Noticee shall pay the amount of penalty by way of e-payment [available on Ministry website mca.gov.in] under “Pay miscellaneous fees” category in MCA fee and payment Services within 90 days of receipt of this order and intimate this office with proof of penalty paid .

9. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form

10. In Case appeal is made O/o Registrar of Companies, U.P maybe informed alongwith the penalty imposed & the payments made, Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of non-compliance of this order.

(Seema Rath) 
Registrar of Companies & Adjustication Officer 
Uttar Pradesh, Kanpur. 

No.07/01/Adj/2024/Watai/5676 to 5077

Dated: 26/12/2024