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The Ministry of Corporate Affairs (MCA) issued an adjudication order for M/s. Galaxeye Space Solutions Private Limited under Section 42 of the Companies Act, 2013. The company, incorporated in Chennai, engaged in a private placement of securities without complying with required provisions, particularly failing to open a separate bank account for the funds raised. The company raised Rs. 1.05 crore through the issuance of convertible cumulative preference shares but violated Section 42(6) by using its opera-tional bank account for transactions instead of the designated account for private placement funds. Ad-ditionally, the company did not file the necessary e-form PAS-3 within the prescribed timeframe. Though the company cited oversight and lack of professional guidance for the violations, it acknowledged the breach and expressed intent to repay the funds with interest.

In response, the MCA conducted a hearing and issued a penalty order for non-compliance. The company and its directors were penalized under Section 42(10) of the Companies Act, with penalties imposed for violating private placement rules. The penalty for the company was capped at Rs. 2 lakh, in accordance with the provisions for small companies under Section 446B of the Act. The company’s paid-up capital of Rs. 2.45 crore and turnover of zero for FY 2023 qualified it as a small company, thus reducing the penalty burden by 50%. The company and directors have been instructed to pay the penalties, and the shareholders involved, including M/s. Seraphim Space Enterprise, have provided a no-objection letter for the non-receipt of refund money, further influencing the final penalty decision.

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/GALAXEYE SPACE/ADJ/S.42/2024 DATE : 24 SEP 2024

ADJUDICATION ORDER UNDER SECTION 42 OF THE COMPANIES ACT, 2013

IN THE MATTER OF WS GALAXEYE SPACE SOLUTIONS 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. Galaxeye Space Solutions Private Limited with CIN: U30304TN2021PTC143654 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the Companies Act, 2013 having its registered office as per MCA21 Registry at Aadinath Apartments, Flat no. 401, 4th Floor, #66 Jermiah Road, Vepery, Chennai, Tamil Nadu, 600007. The financial & other details of the subject company as available on MCA-21 portal is stated as under:

S. No. Particulars Information
1. Company’s Status Active
2. Filing Status Financial Statement: up to 31.03.2023

Annual Return: up to
31.03.2023

3. Paid up Capital Rs.2,45,55,694/-
a. Revenue from Operation Nil
b. Other Income Rs.1,200,000/-
c. Profit/Loss for the Period (Rs.35,683,100/-)
4. Whether it is a Holding Company No
5. Whether it is a Subsidiary Company No
6. Whether company registered under Section 8 of the Act? No
7. Whether company registered under any other special Act? No

3. Directors during the period of violation:

S. No. Name of Director Default Designation Date of Appointment Date of Cessation
1. Mr. Ganapathy Subramaniam Director 28.12.2022 …..
2. Mr. Suyash Singh Director 21.05.2021
3. Mr. Denil Chawda Director 21.05.2021

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

Section 42 of the Companies Act, 2013 – Offer or Invitation fir Subscription of Securities on Private Placement.

(1) A company may, subject to the provisions of this section, make a private placement of securities.

(2) A private placement shall be made only to a select group of per-sons who have been identified by the Board (herein referred to as “identified persons”), whose number shall not exceed fifty or such higher number as may be prescribed [excluding the qualified institutional buyers and employees of the company being offered securities under a scheme of employees stock option in terms of provisions of clause (b) of sub-section (1) of section 62], in a fi-nancial year subject to such conditions as may be prescribed.

(3) A company making private placement shall issue private place-ment offer and application in such form and manner as may be prescribed to identified persons, whose names and addresses are recorded by the company in such manner as may be prescribed:

(4) Every identified person willing to subscribe to the private placement issue shall apply in the private placement and application issued to such person along with subscription money paid either by cheque or demand draft or other banking channel and not by cash:

(5) No fresh offer or invitation under this section shall be made un-less the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the company:

(6) A company making an offer or invitation under this section shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the expiry of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with in-terest at the rate of twelve per cent. per annum from the expiry of the sixtieth day:

(7) No company issuing securities under this section shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an issue.

(8) A company making any allotment of securities under this sec-tion, shall file with the Registrar a return of allotment within fifteen days from the date of the allotment in such manner as may be prescribed, including a complete list of all allottees, with their full names, ad-dresses, number of securities allotted and such other relevant information as may be pre-scribed

(9) If a company defaults in filing the return of allotment within the period prescribed under sub-section (8), the company, its promoters and Directors shall be liable to a penalty for each default of one thousand rupees for each day during which such default continues but not exceeding twenty-five lakh rupees.

(10) Subject to sub-section (11), if a company makes an offer or accepts monies in contravention of this section, the company, its promoters and Directors shall be liable for a penalty which may extend to the amount raised through the private placement or two crore ru-pees, whichever is lower, and the company shall also refund all monies with interest as specified in sub-section (6) to subscribers within a period of thirty days of the order imposing the penalty.

(11) Notwithstanding anything contained in sub-section (9) and sub-section (10), any private placement issue not made in compliance of the provisions of sub-section (2) shall be deemed to be a public offer and all the provisions of this Act and the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 shall be applica-ble.

5. Facts of the case

The Company M/s. Galaxeye Space Solutions Private Limited and directors have suo-moto filed Adjudi-cation application GNL-1 vide SRN F96668330 dated 05.07.2024 and also submitted Physical Applica-tion for violation of Section 42 of the Companies Act, 2013. The applicants submitted that the Extra Or-dinary General Meeting held on March 13, 2024, approved the offer for issuance of 144 Pre-Series A Convertible Cumulative Preference Shares (CCPS) at Rs.10 each, with a premium of Rs.73,314/- per share, aggregating Rs. 1,05,58,656/- on Private Placement to M/s. Seraphim Space Enterprise, United Kingdom. However, the applicant did not open a separate bank account for the private placement funds, as required under Section 42(6) of the Companies Act, 2013 instead it had operated its existing the ex-isting bank account which was used for the business operation and completed the allotment of securi-ties. Further, submitted that the funds were utilized before filing e-form PAS-3 vide SRN AA7548315 on April 19, 2024. The applicant claims that the non-compliance with section 42(4) and 42(6) was due to oversight, lack of awareness and Professional guidance. The company took steps for repaying the mon-ey with the interest as per Section 42(10) of the Companies Act,2013.

M/s. Seraphin Space Enterprise has provided a “No Objection” letter regarding the non-receipt of the money along with interest.

6. Adjudication Hearing:

On receipt of the Adjudication application, the Adjudicating Authority had issued Notice to applicants on 06.08.2024 by fixing the hearing on 20.08.2024 at 11.10 A.M. Pursuant to hearing notice dated 06.08.2024. Ms. Abirami Balasubramanian and Mr. H P Nitesh – PCS , Company Sec-retary in Practice authorized representative applicants appeared before the Adjudicating Authority and made submissions that, “the said violation may be adjudicated and accepted to pay the penalty as prescribed under section 42(9) and (10) of the Companies Act, 2013. The penalty that may be imposed on the Company and Directors for the above may be kept as minimum as the company is a small com-pany’:

Further Section 446 B of the Companies Act, 2013 states that ” if penalty is payable for non-compliance of any of the provisions of this Act by a One person Company, Small Company, Start-up company or Producer Company or by any of its Officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be shall be liable to a penalty which shall not be more than one half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an Officer who is in default or any other person, as the case may bey’.

As per clause 85 of Section 2 of the Companies Act, 2013, small company means a company whose paid up capital and turn over shall not exceed four crore and rupees forty crore respectively. As per MCA portal paid up capital of the company is Rs.2,45,55,694/-and turnover Nil as per the MGT 7A filed by the company for the Financial Year ending 31.03.2023. Therefore, the benefits of small company are extended to this company while adjudicating the penalty.

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

As per the PAS-3 filed by the company vide SRN AA7548315 on 19.04.2024 the details are as follows:

Sl.No No of shares allotted Date of Shareholders Resolution Date of Allotment Face Value/ Share (in Rs.) Premium/Share (in Rs.) Amount raised by way of Private Placement (in Rs.)
1. 144 13.03.2024 12.04.2024 Rs.10/- Rs.73,314/- Rs.105,58,656/-

The amount raised by the company by way of Private Placement is Rs.1,05,58,656/-and the company admitted that the amounts were received in the existing bank account of the company instead of receiv-ing the money in separate bank account as prescribed under Section 42(6) of the Companies Act, 2013. Hence, there is a violation of Section 42 of the Companies Act,2013.

As far as returning to the subscribers under Section 42(6) is concerned, Seraphim Space Enterprise LLP has submitted a No Objection Letter on 26.06.2024 wherein stated that “being the investor, and share-holder having 144 shares of Rs.10/- each at a premium of Rs.73,314 per share in M/s. Galaxeye Space Solutions Private Limited and intent to stay in the company as shareholder and request the company not process the ” Refund” of share application money including interest”.

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 42 of the Companies Act, 2013 and the com-pany and Officers in default are liable for penalty as prescribed under Section 42(10) of the Companies Act,2013.

Accordingly, I am inclined to impose a penalty on the company and the directors as prescribed under Sub-Section 10 of Section 42 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:

Name of person on whom penalty im-posed Penalty for default (Rs) Penalty Maxim Limit for penalty (Rs)- being mall company U/s. 446(B) (Rs.) Final Penalty imposed – 50% being small company U/s. 446(B) (Rs.)
M/s. Galaxeye Space Solutions Private
Limited
Amount raised through the private placement or two crore rupees, whichever is lower Rs. 1,05,58,656/- (Amount raised through the
private
placement)
Rs.2,00,000/-

 

 

Rs.2,00,000/-
Mr. Ganapathy Subramaniam Amount raised through the private placement or two crore rupees,
whichever is lower
Rs. 1,05,58,656 1-(Amount raised through the
private
placement)
Rs.1,00,000/- Rs.1,00,000/-
Mr. Suyash Singh Amount raised through the private placement or two crore rupees,
whichever is lower
Rs. 1,05,58,656 1-(Amount raised through the
private
placement)
Rs.1,00,000/- Rs.1,00,000/-
Mr. Denil Chawda Amount raised through the private placement or two crore rupees,
whichever is lower
Rs. 1,05,58,656 I – (Amount raised through the
private
placement)
Rs.1,00,000/- Rs.1,00,000/-

Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.2,00,000/-(Rupees Two lakhs) is imposed on the Company and Rs.1,00,000/- (Rupees One lakh) is imposed on each director. Totally Rs. 5,00,000/- (Rupees Five lakhs) as penalty amount for violation of Section 42(6) of the Companies Act, 2013.

9. Whereas sub-section (5) of section 454 of the Companies Act,2013 provides that any person ag-grieved 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 impris-onment 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

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