Penalty Imposed on Ingeteam India Pvt Ltd for CSR Violation

Ministry of Corporate Affairs issued an adjudication order against M/s. Ingeteam India Private Limited for violating Section 135 of the Companies Act, 2013. The company, which crossed the profit threshold requiring CSR expenditure, failed to meet the CSR obligation for the financial year 2022. The CSR amount of Rs.5,09,148 was not spent within the required timeline, and the unspent amount was not transferred to the specified fund within six months. The company made the payment in April 2024, but with a delay of 292 days. Despite efforts to comply, the violation resulted in the imposition of a penalty, which could be up to twice the unspent amount or a maximum of Rs.10,18,296. This penalty reflects the seriousness of non-compliance with CSR regulations.

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/INGETEAM/ADJ/S.135/2024 DATE: 03 OCT 2024

ADJUDICATION ORDER UNDER SECTION 135 OF THE COMPANIES ACT, 2013
IN THE MATTER OF M/S. INGETEAM INDIA PRIVATE LIMITED

1. Appointment of Adjudicating Officer: –

The Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 has appointed Registrar of Companies, Chennai as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter referred as Act or Companies Act, 2013) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company: –

Whereas the company viz M/s. Ingeteam India Private Limited with CIN: U31908TN2012FTC145995 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the Companies Act, 1956 having its registered office as per MCA21 Registry at No.111-1,2,3,5,6,7 Village No.155, Bangalore Main Road, Sriperumpudhur Taluk, Kancheepuram, Mambakkam Village, Tamil Nadu, 602106.

The financial & other details of the subject company as available on MCA-21 portal is stated as under:

3. Directors/KMP during the period of violation:

4. Section and Penal Provision as per Companies Act, 2013

Sectiom135 of the Companies Act -: Corporate Social Responsibility

(1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more Directors, out of which at least one director shall be an independent director.

(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 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.

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.

(7) If a company is in default in complying with the provisions of sub-section (5) or sub­section (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.

5. Facts of the case

The Company M/s. Ingeteam India Private Limited and directors have filed Adjudication application by Suo-motu in GNL-1 vide SRN F96958897 dated 24.07.2024 and also submitted Physical Application u/s 454 of the Companies Act, 2013 for violation of Section 135 of the Companies Act, 2013. The applicants submitted that the company surpassed the threshold of net profit of Rs.5 Crores as indicated in its audited financial Statement for the year ended 31st December 2021, consequently required to incur expenditure pertaining to Corporate Social Responsibility under Section 135 of the Companies Act,2013. Accordingly, the company was required to spend an amount equivalent to at least 2% of its average net profits made during the three immediately preceding financial years, during the financial year ended 31st December 2022.However, the Company inadvertently missed to spent the requisite amount pursuant to CSR during the financial year ended 31 December 2022 and transfer of unspent CSR amount to a fund specified in Schedule VII of the Companies Act,2013.

The applicants further submitted that the total CSR obligation during the financial year ended on 31.12.2022 is Rs.5,09,148/-. Since the CSR amount remained unspent during the financial year ended 31st December 2022, the company was required to transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year i.e. by 30th June 2023.

Subsequently, the default has now been made good by transferring the requite unspent CSR to the funds specified in Schedule VII of the Companies Act, 2013 on 17.04.2024 & 18.04.2024 with a delay of 292 days and the company also filed e-form CSR-2 in this regard.

6. Adjudication Hearing:

On basis of the Adjudication Application, this Adjudicating Authority had issued Adjudication Hearing Notice to the Company and its Officers in default on 13.08.2024 fixing the hearing date as 20.08.2024 at 01.40 P.M. In Pursuant to hearing notice issued on 13.08.2024, Shri. Komal Bhola -PCS , authorized representative for the company and the officers in default has appeared before the Adjudicating Authority and made submissions that, ” the company had made all possible efforts in complying with the provisions of Section 135 of the Companies Act,2013″ and the fault was absolutely unintentional .Therefore, adjudicate the default made under Section 135 of the Companies Act,2013 and also pass such order as it may deem fit”.

7. Analysis of Non-compliance of Section 135 of the Companies Act, 2013:

As per the e-form CSR-2 (Report on Corporate Social Responsibility) filed by the company vide SRN: F94744562 dt 24.04.2024, net profit of the company for the preceding 3 FYs as follows:

Here the company failed to spend the amount of Rs.5,09,148/- during the FY ended on 31.12.2022 and also failed to transfer the unspent amount within 6 months of the expiry of the financial year i.e. by 30th June 2023.The company by contribution of Rs.2,00,000/-to Clean Ganga Fund of Union Government,Rs.1,00,000/- to PM Cares fund and Rs.2,09,148/- to Swachh Bharat Kosh of Union Government spent Rs.5,09,148/- on 17th April 2024 & 18th April 2024 respectively. There is a delay of 292 days (from 01.07.2023 to 18.04.2024) from the company to spent CSR amount which led to violation of Section 135(5) of the Companies Act, 2013.Therefore, the company and its Officers in default are liable for penalty under Section 135(7) of the Companies Act, 2013.

The company being a subsidiary of foreign company M/s. Ingeteam Power Technology SA and does not fall under the definition of small company as per provision of Section 2(85) of the companies Act, 2013. Therefore, imposing the provision lesser penalty as per section 446(b) shall not be applicable in this case.

Further, the application in GNL-1 was received prior to 16th day of September 2024, effective date of the Companies (Adjudication of Penalties) Amendment Rules, 2014.

8. Decision

Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that company has violated Section 135(5) of the Companies Act, 2013 and the company and Officers in default are liable for penalty as prescribed under Section 135(7) of the Act.

Accordingly, I am inclined to impose a penalty as prescribed under Sub-section 7 of Section 135 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:

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 of Rs.10,18,296/- (Rupees Ten lakhs eighteen thousand two hundred and ninety six) to the company and Rs.50,915/- (Rupees Fifty thousand nine hundred and fifteen) is imposed on each director for violation of Section 135 of the Companies Act, 2013 .

9. 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.

10. 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.

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