The Registrar of Companies, Chennai passed an adjudication order under section 454 of the Companies Act, 2013, imposing penalties for violation of sections 135(5) and 135(6) relating to Corporate Social Responsibility (CSR) obligations. The company crossed the statutory threshold and was required to spend ₹27.12 lakh towards CSR for FY 2021–22 or transfer the unspent amount to a Schedule VII fund. It failed to do both within the prescribed timelines, resulting in a default under section 135(7). Although the company later voluntarily rectified the lapse by transferring the entire unspent CSR amount to the Prime Minister’s National Relief Fund before initiation of adjudication proceedings, the authority held that subsequent compliance does not erase the original contravention. Considering the facts, penalties were imposed equal to the unspent CSR amount on the company and ₹2 lakh each on the officers in default. The order reiterates that CSR spending and transfer obligations are mandatory and time-bound, and delayed compliance attracts statutory penalties notwithstanding voluntary rectification.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
ROC Chennai
Registrar Of Companies, Block No.6,B Wing 2nd Floor, Shastri Bhawan 26, Haddows Road, Chennai, Tamil Nadu, India,
600034
Phone: 044-28276652/28276654
E-mail: roc.chennai@mca.gov.in
Order ID: PO/ADJ/12-2025/CN/01242 Dated: 07/01/2026
ORDER FOR ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 (‘THE ACT’) FOR VIOLATION OF SECTION 135(7) OF THE COMPANIES ACT, 2013.
A. Appointment of Adjudicating Officer:
Ministry of Corporate Affairs vide its Gazette notification number S.O. 831(E) dated 24/03/2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 [herein after known as Act] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
B. Company details:
In the matter relating to AIRFLOA RAIL TECHNOLOGY LIMITED————
Individual details:
In the matter relating to DAKSHINAMOORTHY VENKATESAN ——–
In the matter relating to DAKSHNA MOORTHY MANIKANDAN ——–
C. Provisions of the Act:
If a company is in default in complying with the provisions of sub-section (5) or 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 Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less
D. Facts about the case:
1. Default committed by the officers in default/noticee – The Company M/s. AIRFLOA RAIL TECHNOLOGY LIMITED and its Managing Director has filed an e-form GNL-1 vide SRN N30641906 dated 08.05.2025 and also submitted an adjudication application under Section 454 of the Companies Act, 2013 for violation of Section 135(5) and (6) of the Companies Act, 2013- Provision of Section 135(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. 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: Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities: Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount 8[and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year].Provided also that if the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to spend under this sub-section for such number of succeeding financial years and in such manner, as may be prescribed.] Explanation. For the purposes of this section net profit shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198. Provision of Section 135(6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year. In view of aforesaid provisions, the Company was required to spend the requisite amount towards CSR during the financial year ended March 31, 2022. However, the company’s net profit as per the financial year 2020-21 is Rs. 5,03,58,347/- which is excess of the threshold limit as specified in provision of Section 135 of the Companies Act, 2013. Accordingly, the Company was required to contribute at least two percent of its average net profit made during the three immediately preceding financial years in respect of financial year 2021-22. Net Profit as per Sec 198 for the financial years 2018-19, 2019-20 and 2020-21 is Rs. 17,72,33,097, Rs.17,93,16,878/- and Rs. 5,03,58,347 respectively. Average net profit as per 135(5) of the Act for FY. 2018-19 to 2020-21 is Rs. 13,56,36,107/-, CSR amount to be send for FY 2021-22 (2% of Average Net profit) is Rs. 27,12,722/- and the Unspent CSR is Rs. 27,12,722/-. In this regard, the Company inadvertently failed to comply with the provisions under Section 135 of the Companies Act, 2013, by not spending the requisite amount Rs. 27,12,722/- towards CSR activities during the financial year ended March 31, 2022 , and by not transferring the unspent C mount to a fund specified in Schedule VII of the Companies Act, 2013. This resulted in a violation of Section 135(5) & (6) of the Companies Act, 2013. Accordingly the company and its Managing Director is liable under Section 135(7) of the Companies Act, 2013. Subsequently, the default has been rectified and the requisite unspent CSR amount Rs.27,12,722/- pertaining to the defaulted financial year (2021-22) has been transferred to the Prime Ministers National Relief Fund on 23/12/2024 vide payment reference no 642815647.
2. The Adjudicating authority had issued notice for e-Adjudication on 29.08.2025. The Company vide letter dated 10.09.2025 submitted that due to inadvertent oversight and operational challenges they could not spend the said amount during the Financial Year 2021-22, nor transfer it within the prescribed time and that the Company had voluntarily rectified the default by transferring the entire unspent CSR amount to the Prime Minister’s National relief Fund on 23.12.2024 prior to initiation of any Adjudication proceedings. The company further requested to take a lenient view of the matter, considering voluntary rectification and absence of mala fides and drop all further initiated proceeding initiated pursuant to the show cause notice and further requested to reduce the penalty to the minimum possible, exercising powers under section 454 of the Companies Act, 2013 and guided by the principles laid down by the Honorable Supreme court in Hindustan Steel Ltd v. State of Orissa.
Further, the Adjudicating Authority has issued notice for e-hearing on 12.11.2025 for the hearing scheduled on 18.11.2025. On 18.11.2025, neither the Directors of the Company nor their Authorized representatives have appeared. Hence as per Rule 3(8) of Companies (Adjudication of Penalties) Rules 2014, the matter is being proceeded with in the absence of such person (ex-parte).
E. Order:
1. The Company’s net profit as per the Financial year 2020-21 is Rs.5,03,58,347/- which is excess of the threshold limit as specified in provision of Section 135 of the Companies Act, 2013. The Company became liable to spend Rs.27,12,722/-towards Corporate Social Responsibility(CSR) for the Financial Year 2021-22 in terms of Section 135(5) of the Companies Act, 2013. It is noticed that the Company has inadvertently failed to spent requisite amount Rs. 27,12,722/- towards CSR activities during the Financial year 2021-22, as mandated under Section 135(5) and also failed to transfer the unspent CSR amount to a fund specified in Schedule VII of the Companies Act, 2013 as mandated under Section135(6) of the Companies act, 2013.
Further, it is noticed that the Company voluntarily rectified the default by transferring the entire unspent CSR amount of Rs. 27,12,722/- to the Prime Minister’s National Relief Fund on 23.12.2024 prior to initiation of any Adjudication proceedings. Since the Company failed to comply with the said requirement, it has thereby violated Section 135(5) and Section135 (6) of the Companies act, 2013. Accordingly, the Company and its officers in default are liable for action under Section 135(7) of the Companies Act, 2013.
2. The details of penalty imposed on the company, officers in default and others are shown in the table below:
| (A) | Name of person on whom penalty imposed (B) | Rectification of Default required
(C) |
Penalty Amount
(D) |
Additional Penalty (E) (*Per day of continuing default i.e. date of rectification of default less order issue date) | Maximum limit for Penalty (F) |
| 1 | AIRFLOA RAIL TECHNOLOGY LIMITED having CIN as U30204TN1998P LC041571 | 2712722 | 0 | 10000000 | |
| 2 | DAKSHINAMOO RTHY VENKATESAN having DIN as 00232210 | 200000 | 0 | 200000 | |
| 3 | DAKSHNA MOORTHY MANIKANDAN having DIN as 00232275 | 200000 | 0 | 200000 |
3.The notified officers in default/noticee shall rectify the default mentioned above and pay the penalty, so applicable within 90 days of receipt of the order.
4. The notified officers in default/noticee shall pay the penalty amount via ‘e-Adjudication’ facility which can be accessed through the respective login IDs on the website of Ministry of Corporate Affairs and upload the copy of paid challan / SRN of e-filing (if applicable) on the ‘e-Adjudication’ portal itself. It is also directed that the penalty so imposed upon the officers in default shall be paid from their personal sources/income.
5. Appeal against this order may be filed in writing with the Regional Director, RD Chennai within a period of sixty days from the date of receipt of this order, in Form ADJ setting for the grounds of appeal and shall be accompanied by a certified copy of this order [Section 454 (5) & 454 (6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014].
6. For penal consequences of non-payment of penalty within the prescribed time limit, please refer Section 454(8) of the Companies Act, 2013.
B SRIKUMAR,
Registrar of Companies
ROC Chennai
