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No penalty for failure to include word Limited in Advertisement due to typographical error by the Advertising Agency : MCA

This analysis delves into a significant adjudication order concerning the Utkal Chamber of Commerce and Industry Limited and its inadvertent failure to include the word “Limited” in a published advertisement, a requirement under Section 12(3)(c) of the Companies Act, 2013. The Ministry of Corporate Affairs (MCA) initially sought to impose penalties for this oversight, highlighting the stringent enforcement of statutory requirements for company representations in public communications. This situation presents a unique insight into the regulatory expectations, the adjudication process, and the leniency considerations under specific circumstances.

Overview of the Case

The case revolves around an advertisement published without the mandatory inclusion of “Limited” in the company’s name, reported as a willful violation of the Companies Act by a member of the Utkal Chamber of Commerce and Industry Limited. The Registrar of Companies (ROC), Odisha, initiated proceedings under Section 454 of the Act, read with the Companies (Adjudication of Penalties) Rules, 2014, to address this non-compliance.

Legal Framework and Compliance Requirements

Section 12(3)(c) mandates companies to include their full registered name, address, and Corporate Identity Number in all official publications, emphasizing transparency and clear identification in public representations. The initial action sought to penalize the company and its directors for the oversight, underscoring the seriousness with which the MCA views any deviation from statutory compliance.

Adjudication Process and Findings

The adjudication process involved a detailed examination of the circumstances leading to the publication error, including submissions from the company and its directors. Notably, the company argued that the omission was unintentional, attributing the error to the advertising agency responsible for the publication. Further, it was established that the company did not authorize the advertisement directly nor incurred any expenses for its publication.

Decision and Rationale

The Adjudicating Officer (AO), upon review of the additional documents and considerations, concluded that the error was a typographical mistake by the advertising agency, not a willful violation by the company. This decision highlights several important considerations in regulatory enforcement:

  • Intent and Direct Involvement: The absence of direct instructions from the company for the advertisement’s publication was a key factor in dropping the proceedings. The AO recognized that the error did not stem from a deliberate attempt to circumvent legal requirements.
  • Financial Implications: The fact that the company did not bear any costs for the advertisement further supported the decision, suggesting that the company did not gain any undue advantage from the oversight.
  • Agency Error: The role of the advertising agency as the source of the typographical error underscored the importance of companies ensuring their agents’ compliance with statutory requirements, even though the ultimate responsibility lies with the company.

Implications and Lessons Learned

This case serves as a reminder of the critical importance of strict compliance with all statutory representations of a company’s identity. It also illustrates the MCA’s willingness to consider the context and specifics of each case, including the intent behind non-compliance and the direct involvement of the company in the error.

For companies, this underscores the need for vigilant oversight of all communications and representations made on their behalf, ensuring that external partners, such as advertising agencies, fully understand and adhere to statutory requirements. Additionally, it highlights the potential for leniency in enforcement when companies can clearly demonstrate unintentional errors and lack of direct fault.

Conclusion

The adjudication order in the case of the Utkal Chamber of Commerce and Industry Limited reflects a balanced approach to statutory enforcement, where inadvertent errors, absent direct involvement or financial implications for the company, may not necessarily lead to penalties. This outcome emphasizes the need for companies to maintain rigorous compliance measures while also offering reassurance that regulatory bodies may consider the full context of violations when determining appropriate actions. 

*****

BEFORE THE ADJUDICATING OFFICER
ROC -cum- OL, ODISHA, CUTTACK

(ADJUDICATION ORDER NO. ROC/CTC/A0/12/000468/2024/1230(9)

ORDER

UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014

UTKAL CHAMBER OF COMMERCE AND INDUSTRY LIMITED
CIN: U91110R1964GAP000468

Appointment of Adjudicating Officer :-

01. The Ministry of Corporate Affairs vide its Gazette Notification No. A­42011/112/ 2014-Ad. II dated 24.03.2015 appointed the undersigned as Adjudicating Officer (hereinafter referred to as “the A.0”) in exercise of the powers conferred under Section 454 of the Companies Act, 2013 (herein after known as The Act) read with Companies (Adjudication of Penalties) Rules, 2014.

Company : –

02 Utkal Chamber of Commerce and Industry Limited (herein after known as the Company) CIN U91110R1964GAP000468 is a company registered with the office of the ROC -aim- OL, Odisha and having its registered office address at At : N 6, IRC Village, Nayapalli, Bhubaneswar : 751 015, Odisha, India; as per the records maintained by this office in online registry.

03. Provisions of the Companies Act, 2013 :

Sub-Section (3)(c) of Section 12 of the Act provides, “get its name, address of its registered office and the Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses if any, printed in all its business letters, billheads, letter papers and in all its notices and other official publications.”

Show Cause Notice, Reply and Personal Hearing :

04. On the basis of allegation made by Shri Ashok Agrawalla, Member of Utkal Chamber of Commerce and Industry Limited ( UCCIL) that “the company ‘Utkal Chamber of Commerce and Industry Limited’ along with another organization has issued a joint appeal in a full front page advertisement in the ‘Times of India’, Bhubaneswar edition on 06.09.2021. Further, in the said appeal advertisement, the company’s name has been given as ‘Utkal Chamber of Commerce and Industry’ without using the word ‘Limited’ in the name of the company which is wilful violation of the Companies Act by the present Directors of the UCCIL”.

05. That the matter was brought to the notice of the Directorate and on perusal of this office report, the Directorate instructed to initiate action for violation of Sect-ion 12(3)(c) of the Companies Act, 2013. Accordingly, Show Cause Notice under Sub-Rule (2) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014 for contravention of the provisions of Section 12(3)(c) of the Act have been issued to the company and its directors vide this office letter No. ROC/Sec.454/ 000468/ 2020/ 1214(9) dated 12.10.2021.

06. That, in response to this office Show Cause Notice, the company vide its reply dated 18.10.2021 admitted that a joint appeal by the “Utkal Camber of Commerce and Industry Limited, Bhubaneswar” and “Orissa Sponge Iron Manufacturers’ Association, Bhubaneswar” was in fact published in Times of India, Bhubaneswar edition on 06.09.2021. The above-mentioned joint appeal was published thereby appealing to reserve minimum 50% Iron Ore for State based Steel Industries under the Pre-Emption Scheme. That after perusing the complaint and subsequently cross checking the above-mentioned joint appeal, it was discovered that the company’s name was indeed published without the word “Limited” in the name of the Company.

07. That, in response to this office Show Cause Notice dated 12.10.2021, one of the director viz. Shri Dhiren Kumar Dhal furnished his reply dated 25.10.2021 stating that he was never consulted about the issue of the said advertisement. The matter was never brought before the Board of Directors for discussion for which he should not be responsible for any violation committed in the publication of the said advertisement and should be exempted from the purview of any enquiry and any further prosecution for alleged violation of the relevant provision of the Companies Act.

08. That, apart from the above, the other directors also furnished their reply and after going through the replies, the Adjudicating Officer issued Show Cause Notice bearing No. ROC/Sec.454/ 12/ 000468/ 2021/1355(9) dated 08.11.2021 under Sub-Rule (2) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014 for contravention of Section 12 of the Companies Act, 2013 to the Company and its directors/ officer-in-default pursuant to Rule (3) of Companies (Adjudication of Penalties) Rules, 2014 to the Company and Officers/ Directors (Noticee) calling upon them to appear personally or through authorized representative under Rule 3(3) of the Companies (Adjudication of Penalties) Rules, 2014 on 22.11.2021 at 3.00 PM.

09. On the fixed date i.e. on 11.2021, Shri Brahmananda Mishra (DIN 02068154), President alongwith Shri Binod Dash (DIN 01826362), VC, Shri Dhiren Dhal (DIN 00982923), Secretary, Shri Narayan Kumar (DIN 02673664), Joint Treasurer along with Advocate Shri A. C. Swain representing Shri Giridhari Sharma (DIN 00737119), Shri Dipak S Rathor (DIN 00896509), Shri Akshay Khandelwal (DIN 01919993), Shri Ashok Kumar Sharda (DIN 02583655) appeared before the Adjudicating Officer. The President appraised the facts and circumstance under which the offence has arose unintentionally to violate the provisions of the Companies Act in good spirit. The entity to whom they have given a verbal consent for the said advertisement has inadvertently published it without the word “Limited” without understanding the legal implication, though the same was not known to anybody immediately after publication and the same was discussed during the last AGM wherein President explained to the AGM regarding the omission in advertisement and rectification thereof. Further, Shri Dhiren Kumar Dhal (DIN 00982923) also furnished a letter dated 22.11.2021 stating that there was no discussion taken up by the company in any of the meetings of the Board nor of the Shareholders for the issue of such advertisement with wrong name of the company. As there was no scope for me to know about the mistake.

10. Having considered the facts, circumstances and documentary evidence of the case, and after taking into account of the factors above, the A.O. is took a view that the company has violated the provisions of Section 12(3) (c) of the Act and liable for penal action with effect from 06.09.2021 (date of publication of advertisement in the “Times of India”, Bhubaneswar edition) to 22.11.2021 (date of hearing of the matter). Hence, the A.O imposed penalty upon the Company and its Directors/Officer-in-Default (except Shri Dhiren Kumar Dhal (DIN 00982923) for violating the provisions of Section 12 of the Companies Act, 2013 vide this order No. ROC/ CTC/ AO/ 12/ 000468/ 2021 dated 14.01.2022.

11. Aggrieved with the order of this office, the company and its directors preferred appeal before the Appellate Authority i.e. Regional Director (Eastern Region), Kolkata, against the penalty order dated 14.01.2022.

12. Upon hearing the appeal application on 03.06.2022 the Directorate vide order No. Application No. RD/ ER/ 02/Appea1/21/ 3268 dated 29.06.2022, decided that: “the matter is remitted back to Registrar of Companies, Odisha for taking appropriate steps for disposal of said matter on the ground some additional documents were not available before ROC, Odisha at the time of Adjudication of the offence”.

13. Upon the direction of the Directorate this office issue show cause notice vide this office notice No. ROC/Sec.454/000468/ 2020/1168(8) dated 06.02.2024 to the company and its defaulting directors.

14. In response to this office show cause notice the company and its defaulting directors replied on 13.02.2024 enclosing the Auditor Certificate in respect of no expenses has been incurred by M/s. The Utkal Chamber of Commerce and Industry Limited; the certificate of the organization who has published the publication in the newspaper and the undertaking of the Advertising Agency that neither any expenses was charged nor any amount was paid by The Utkal Chamber of Commerce and Industry Limited for advertisement published in Times of India, Bhubaneswar Edition on 06.09.2021.

ORDER

15. Having considered the facts, circumstances and documentary evidence of the case, and after taking into account of the above factors, the A.O. is of the considered view that the inadvertent mistake was just a typographical error by the Advertising Agency and is not constructed as “wilful violation” by the company. Also the advertisement was not published upon direct instructions of the company and the company has not booked any cost in its books of account against this publication. Hence, I am not inclined to impose any penalty and therefore adjudication proceeding is hereby dropped. However, the company is warned to be more careful in future compliance of the provisions of the Act and requirement of the regulators from time to time.

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