The Registrar of Companies, Mumbai passed an adjudication order under Section 454 of the Companies Act, 2013 imposing penalties for violations of Section 42 relating to private placement of securities. The company had issued and allotted equity shares through private placement in January 2020 but committed multiple procedural lapses, including failure to open a separate bank account for application money, issuing the private placement offer before filing the required special resolution, and utilising funds prior to filing the return of allotment. Although the company contended that the lapses were inadvertent, attributable to its start-up status, lack of professional support, and absence of mala fide intent, the adjudicating authority held that Section 42(10) mandates strict compliance. The benefit of reduced penalties under Section 446B was denied, as it was not applicable at the relevant time. Considering mitigating factors, a collective penalty of ₹17.5 lakh was imposed, apportioned equally between the company and its directors, reinforcing that private placement norms are substantive safeguards, not mere technical formalities.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
ROC Mumbai
Registrar Of Companies, 100, Everest, Marine Drive, Mumbai, Maharashtra, India, 400002
Phone: 022-22812627,022-22812645
E-mail: roc.mumbai@mca.gov.in
Order ID: PO/ADJ/12-2025/MB/01142 Dated: 17/12/2025
ORDER FOR ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 (‘THE ACT’) FOR VIOLATION OF SECTION 42(10) 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 PURPLE STYLE LABS LIMITED [herein after known as Company] bearing CIN U18204MH2015PLC267215, is a company registered with this office under the Provisions of the Companies Act, 2013/1956 having its registered office situated at CTS NO.1081, PLOT NO.110, TPS VILLAGE,SERVICE ROAD WESTERN EXPRESS HIGHWAY, VILE PARLE (EAS T) NA MUMBAI MUMBAI CITY MAHARASHTRA INDIA 400057
Individual details:
In the matter relating to ABHINAV AGARWAL ——-
In the matter relating to ABHISHEK AGARWAL ——-
In the matter relating to ANANTHA RAJARAM RAMAN ——
C. Provisions of the Act:
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 rupees, 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.
D. Facts about the case:
1. Default committed by the officers in default/noticee – Whereas the Registrar of Companies, Mumbai (hereinafter referred to as the ROC) received a suo-motu Adjudication Application dated 17.09.2025 filed by the Company, Mr Abhishek Agarwal, Whole time Director and CEO (DIN: 07237807) Mr Abhinav Agarwal, Whole-time Director (DIN: 07178846) (hereinafter referred to as the Applicants) under section 454 read with Section 42(10) for various defaults made under Section 42 of the Act Whereas the Applicants have stated that the Board of Directors and Members of the Company approved issuance of 100 equity shares of face value of Rs.10 each at issue price of Rs. 57000/- through private placement on 14.01.2020. The Company issued the offer letter to investors on 14.01.2020. Subsequently, the Company allotted 88 equity shares at Rs. 57,000/- each, aggregating to Rs.50,16,000/-, to an identified investor on 17.01.2020.Whereas the Company had made various defaults under provisions of Section 42 of the Act related to the aforementioned private placement made on 14.01.2020, which are mentioned as under:
i. The Company failed to open of separate bank account for receiving application money in contravention of Section 42(6) of the Act.
ii. The Company filed E-form MGT-14 vide SRN R32954612 for submission of Special Resolution on 13.02.2020. However, the Private Placement offer cum application letter was issued on 14.01.2020. Thus, the Company failed to file the special resolution with the Registrar before issuing Private Placement offer cum application letter and thus contravened the Section 42(3) of the Act read with Rule 14(8) of Companies (Prospectus and Allotment of Securities) Rules, 2014 (hereinafter referred to as the Rules).
iii. The Company utilized money raised through private placement on 17.01.2020 and the return of allotment in e-form PAS-3 was filed with the Registrar on 19.02.2020 in contravention of the provisions of Section 42(4) of the Act.
Whereas Section 42 of the Act read with Rule 14(8) of Companies (Prospectus and Allotment of Securities) Rules, 2014 (hereinafter referred to as the Rules) read as follows: XXX(3) A company making private placement shall issue private placement 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: Provided that the private placement offer and application shall not carry any right of renunciation.
Explanation I.-“private placement” means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application, which satisfies the conditions specified in this section.
Explanation II.-“qualified institutional buyer” means the qualified institutional buyer as defined in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time, made under the Securities and Exchange Board of India Act, 1992.
Explanation III.-If a company, listed or unlisted, makes an offer to allot or invites subscription, or allots, or enters into an agreement to allot, securities to more than the prescribed number of persons, whether the payment for the securities has been received or not or whether the company intends to list its securities or not on any recognized stock exchange in or outside India, the same shall be deemed to be an offer to the public and shall accordingly be governed by the provisions of Part I of this Chapter.
(4) Every identified person willing to subscribe to the private placement issue shall apply in the private placement and application issued to such person alongwith subscription money paid either by cheque or demand draft or other banking channel and not by cash:*Provided that a company shall not utilize monies raised through private placement unless allotment is made and the return of allotment is filed with the Registrar in accor ce with sb-section (8).
XXX(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 interest at the rate of twelve per cent. per annum from the expiry of the sixtieth day:
*Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilized for any purpose other than (a) for adjustment against allotment of securities; or(b) for the repayment of monies where the company is unable to allot securities.
XXX (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 rupees, 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.
XXX Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014.(8) A company shall issue private placement offer cum application letter only after the relevant special resolution or Board resolution has been filed in the Registry: Provided that private companies shall file with the Registry copy of the Board resolution or special resolution with respect to approval under clause (c) of subsection (3) of section 179.
Whereas the Applicants have further stated that the said procedural lapses occurred as the Company was a Start-up which was incurring losses during its initial period and such losses limited its ability to appoint qualified professionals. Now therefore, the Company is directed to submit the documentary proof regarding its status as a Start-up Company including Certificate of registration issued by Department for Promotion of Industry and Internal Trade along with web link for verification of certificate issued by Department for Promotion of Industry and Internal Trade .
2. The Applicants requested for an E- hearing. Accordingly, an opportunity of being heard was granted to them by the Adjudicating Officer under the provisions of Section 454(4) of the Act on 09.12.2025 at 04:17 PM (IST).
E. Order:
1. A.A Show Cause notice bearing ID: SCN/ADJ/10-2025/MB/02898 dated 17.11.2025 was issued to the Applicants under section 454 read with Section 42(8) of the Act with respect to under section 454 read with Section 42(10) for various defaults made under Section 42 of the Act.
B. The Applicants replied on the E-adjudication portal on 27.11.2025 and submitted as under:
i. The procedural lapses occurred given that the Company was a start-up and a private company at the time of the offer and allotment. The Company’s focus was directed towards nurturing its business and ensuring continued operations. As a start-up incurring losses, the Company resources were constrained, limiting its ability to appoint a professionals.
ii. Management lacked detailed awareness of compliance requirements.
iii. The non-compliance was not intended to deceive stakeholders and was purely technical and inadvertent in nature, without any mala fide intention; the procedural violations did not result in any harm to any shareholder, creditor, investor, stakeholder, creditor or any public at large as a result of the said lapse.
C. The Applicants requested for an E- hearing. Accordingly, an opportunity of being heard was granted to them by the Adjudicating Officer under the provisions of Section 454(4) of the Act on 09.12.2025 at 04:17 PM (IST). In this regard, a notice bearing ID: EH/ADJ/12-2025/MB/00948 dated 03.12.2025 was issued.
D. Mr. Manish Ghia, Practicing Company Secretary attended the scheduled E-Hearing and admitted the default on behalf of the Noticees and submitted as under:
i. The Company made allotment of Rs. 50,16,000/- to a single allottee during the private placement offer.
ii. Due to lack of awareness and non-appointment of professional, the procedural lapses occurred as the Company was a start-up and a private company at the time of the offer and allotment.
iii. The non-compliance was not intended to deceive stakeholders and was purely technical and inadvertent in nature, without any mala fide intention; the procedural violations did not result in any harm to any shareholder, creditor, investor, stakeholder, creditor or any public at large as a result of the said lapse.
E. On perusal of the suo motu adjudication application, it is observed that the Board of Directors and Members of the Company approved issuance of 100 equity shares of face value of Rs.10 each at issue price of Rs. 57000/- through private placement on 14.01.2020. Subsequently, the Company allotted 88 equity shares at Rs. 57,000/- each, aggregating to Rs.50,16,000/-, to an identified investor on 17.01.2020. However, the Company had made various defaults under provisions of Section 42 of the Act related to the said private placement as mentioned in para D of this order.
F. Whereas Section 42(10) of the Act stipulates that: 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 rupees, 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.
G. Unlike the other penal provisions such as Section 92(5) and 137(3) of the Act, penalty under Section 42(9) of the Act is not fastened on each Director/officer in default but on the Company, its Directors and Promoters collectively. However, the E-adjudication portal is designed in such a manner that it does not allow collective imposition of penalty. Since the penalty amount has to be imposed collectively on the Company, its Promoters and Directors, for sake of clarity, the amount to be imposed shall be proportionally apportioned between the Company, its Promoters and Directors, so that personal liability of Directors become determinable and Director(s) pay from their own funds. Accordingly, the Company, its Dir ors and Promoters have been held liable.
H. Default under Section 42 of the Act is with respect to offer and acceptance of money through Private Placement. Accordingly, the period of offer for the Private Placement and period of acceptance thereof is the period of default. In the instant case, the default commenced on 14.01.2020 that is the date of issue of Private Placement Offer and in absence of any remedial rectification, it continued till 18.02.2020. On the date of commencement of the default, the Applicant Company stated that it was a start up Company. However, on such date, Section 446B of the Act was not applicable to the Sections other than 92(5), 117(2) and 137(3) of the Act. I am constrained not to extend the benefit a benevolent provision of Section 446B to the noticees on account of their sheer negligence.
I. I have carefully examined the facts of the case, applicable laws thereon and thought through the mitigating circumstances adverting to Rule 3(12) of the Companies Adjudication of Penalties Rules, 2014 for levying the penalty for the aforesaid default. Factoring in the mitigating circumstances and Rule 3(12) the Companies Adjudication of Penalties Rules, 2014, I am of the view that a collective penalty amount of Rs.17,50,000 /-(Rupees Seventeen Lakhs Fifty Thousands only) shall be commensurate to the nature of default.
J. Now, in exercise of the powers conferred on the Adjudicating Officer vide Notification dated 24th March 2015, having considered the facts and circumstances of the case, I hereby impose penalty of Rs.4,37,500 /-(Rupees Four Lakhs Thirty Seven Thousands Five Hundred only) each on the Company and Mr ABHINAV AGARWAL (Whole Time Director), Mr ABHISHEK AGARWAL (Whole Time Director) and Mr ANANTHA RAJARAM RAMAN (Director) under Section 42(10) for default under Section 42(3) read with Rule 14(8) of the Rules, Section 42(4) and Section 42(6) of the Act.
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 | PURPLE STYLE LABS LIMITED having CIN as U18204MH2015P LC267215 | NA | 437500 | 0 | 20000000 |
| 2 | ABHINAV AGARWAL having DIN as 07178846 |
NA | 437500 | 0 | 20000000 |
| 3 | ABHISHEK AGARWAL having DIN as 07237807 |
NA | 437500 | 0 | 20000000 |
| 4 | ANANTHA RAJARAM RAMAN having DIN as 07583284 | NA | 437500 | 0 | 20000000 |
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 Mumbai 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.
Chandan Kumar,
Registrar of Companies
ROC Mumbai
