Related Party Transactions not disclosed (Section 134(3)(h) Violated): MCA Imposes penalty of ₹24 Lakh
The Ministry of Corporate Affairs (MCA) has recently imposed a significant penalty on M/s. Lions Co-ordination Committee of India Association and its directors for non-disclosure of related party transactions as mandated under Section 134(3)(h) of the Companies Act, 2013. This violation, pertaining to the financial years 2018-19 and 2019-20, underscores the importance of compliance with regulatory reporting requirements.
The adjudication order issued by the Registrar of Companies, Chennai, under Section 134(3)(h) of the Companies Act, 2013, reveals that M/s. Lions Co-ordination Committee of India Association failed to attach Form AOC-2, detailing contracts or arrangements with related parties, to its Board’s report for the aforementioned financial years. Despite declaring compliance in its reports, the company’s omission led to penalties amounting to ₹24 lakh.
The inquiry highlighted that the company’s directors, including Vazhappully Padmanabhan Nandakumar and others, were found in default for the non-compliance. The adjudication process included notices and hearings, where only partial responses were received, leading to ex-parte proceedings against some directors.
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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/ADJ/LIONS CO/ S.134(3)(h)/2024 Date: 25 JUN 2024
ADJUDICATION ORDER UNDER SECTION 134(3)(h) OF THE COMPANIES ACT, 2013
IN THE MATTER OF WS LIONS CO-ORDINATION COMMITTEE OF INDIA
ASSOCIATION
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.Lions Co-ordination Committee of India Association with CIN: U74999TN2016NPL110455 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the provisions of section 7 of the Companies Act, 2013 having its registered office as per MCA21 Registry at 96, Govindan Street, Collectorate Colony, Aminjikarai, Chennat Tamil Nadu 600029. 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. | Number of Members | 38 |
| 4. | Whether it is a Holding Company | NA |
| 5. | Whether it is a Subsidiary Company | NA |
| 6 | Whether company registered under Section 8 of the Act? | Yes |
| 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. | VAZHAPPULLY PADMANABHAN NANDAKUMAR | Director | 13.09.2019 | 13.11.2020 |
| 2 | ROHITBHAI CHINUBHAI MEHTA | Director | 18.05.2016 | 17.09.2020 |
| 3. | PRAVINKUMAR CHHAJER | Director | 04.07.2017 | 22.09.2022 |
| 4. | SANJEEV MALCHAND CHHAJER | Director | 13.09.2019 | 09.09.2021 |
| 5. | SNANANDA SANKAR | Director | 18.05.2016 | ….. |
| 6. | SUSHIEL KUMAR AGRAWAL | Director | 04.07.2017 | 13.03.2020 |
| 7. | PREM RATAN LAHOTY | Director | 18.05.2016 | 29.09.2022 |
| 8. | VENUMBAKA VENKATA
KRISHNA REDDY |
Director | 18.05.2016 | 30.09.2022 |
| 9. | RAJU VIJAYKUMAR MANWANI | Director | 04.07.2017 | 01.09.2022 |
| 0. | MURUGAN RATNASWAMY | Director | 18.05.2016 | 30.09.2020 |
| 1. | SUNIL KUMAR RUMALLA | Director | 18.05.2016 | 29.09.2022 |
| 2. | JAGDISH KUMAR GULATI | Director | 18.05.2016 | 29.09.2022 |
| 3. | SANGEETA JATIA | Director | 04.07.2017 | 25.09.2022 |
| 4. | JATINDER PAL SINGH | Director | 04.07.2018 ‘ | 10.09.2022 |
| 5. | SUNIL DHARNIDHAR VORA | Director | 13.09.2019 | 09.09.2021 |
| 6. | NARENDRA SHANTILAL BHANDARI | Director | 04.07.2017 | 29.09.2022 |
| 7. | RANGANATHAN SAMPATH | Director | 13.09.2019 | ….. |
| 8. | VIJAYA KUMAR RAJU VEGESNA | Director | 27.07.2016 | ….. |
| 9. | GURCHARAN SINGH HORA | Director | 18.05.2016 | 06.11.2020 |
| 10. | KUPPUSAMY DHANABALAN _ | Director | 04.07.2017 | 29.09.2022 |
| 11. | NAWAL MALU | Director | 19.03.2019 | 29.09.2022 |
4. Section and Penal Provision as per Companies Act, 2013
Section 134. Financial Statement, Board’s Report, etc.
(3) There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include—
(h) particulars of contracts or arrangements with related parties referred to in subsection (1) of section 188 in the prescribed form;
(8) If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees
Rule 8 of the Companies (Accounts) Rules,2014: Matters to be Included in Board’s Report —
(2) The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form AOC-2
Section 188. Related party transactions:
(1) Except with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may be prescribed, no company shall enter into any contract or arrangement with a related party with respect to—
(a) sale, purchase or supply of any goods or materials; b) selling or otherwise disposing of; or buying, property of any kind;d) leasing of property of any kind;(d) availing or rendering of any services; e) appointment of any agent for purchase or sale of goods, materials, services or property; (f) such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company; and(g) underwriting the subscription of any securities or derivatives thereof; of the company:
5. Issue of Adjudication Notice:
An Inquiry was conducted in the matter of M/s. Lions Co-ordination Committee of India Association under Section 206(4) of the Companies Act, 2013 by an Officer authorized by the Central Government wherein the observations of the Inquiry Officer are as follows:
“The company for the Financial year 2018-19 and 2019-20 in its Board Report stated that ” All transactions with the related parties are in compliance with Section 188 of the Companies Act, 2013″ under Particulars of Contracts or Arrangements with Related Parties. However, no annexure (i.e. Form AOC-2) relating to the particulars of contracts or arrangements with Related parties forming part of the Board report have been attached. Hence, the company has not complied with the provision of Section 134(3)(h) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 and the company and its directors are liable for penal action under Section 134(8) of the Companies Act, 2013.
Accordingly, on submission of the Inquiry Report by the Officer, the Regional Director, Ministry of Corporate Affairs, Chennai has directed to initiate necessary action against the defaulters as per the provisions of the Companies Act, 2013.
The Adjudicating Authority had issued notice No.ROC/CHN/110455/S.134(3)(h)/P.3 /INQUIRY FOLLOW UP/2022 dt 08.09.2023 to the company and its directors.
6. Reply of Company and Directors for Adjudication Notice issued:
Pursuant to Adjudication Notice dt 08.09.2023, Shri. Vazhappully Padmanabhan Nandakumar, one of the directors of the company have filed Adjudication application in GNL-1 vide SRN: F83664789 dt 25.11.2023. After that, the Adjudicating Authority imposed penalty on Shri. Vazhappully Padmanabhan Nandakumar for the violation of Section 134(3)(h) of the Companies Act, 2013. Since no reply/information has been received from the company and other directors, it is decided to fix a final hearing to complete the adjudication proceedings.
7. Adjudication Hearing:
The Adjudicating Authority had issued notice of hearing dt 28.03.2024 to the company and directors except Shri. Vazhappully Padmanabhan Nandakumar by fixing the hearing on 08.04.2024. Pursuant to the notice dated 28.03.2024, Shri. P. Praveen Kumar, ACS appeared before the Adjudicating Authority on behalf of the company and directors namely Mr. Virinder Kumar Luthra, Mr. Jatinder Pal Singh, Mr. Nawal Jugal Kishor Malu and Mr.Ranganathan Sampath and made submissions that the violation may be adjudicated. Neither the other directors nor their representatives appeared before the Adjudicating Authority on the said date. Hence, as per Rule 3(8), Companies (Adjudication of Penalties) Rules 2014, the matter is being proceeded with in the absence of such persons (ex-parte).
(ii) The company is registered under Section 8 of the Companies Act,2013, therefore, 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.
8. Analysis of non-compliance of Section 134(3)(h) of the Companies Act, 2013
It is observed that the company for the financial year 2018-19 and 2019-20 in its Board Report stated that “All transactions with the related parties are in compliance with Section 188 of the Companies Act, 2013” under Particulars of Contracts or Arrangements with Related Parties. But the company has not attached form AOC-2 along with Board’s report. Hence, the company and its directors have violated Section 134(3)(h) of the Companies Act, 2013 r/w Rule 8 of the Companies (Accounts) Rules, 2014 for the financial years 2018-19 & 2019-20 and the company and its directors are liable for penalty under Section 134(8) of the Companies Act, 2013.
9. Decision:
Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that the company has violated Section 134(3)(h) of the Companies Act, 2013 for the FYs 2018-19 & 2019-20. Accordingly, I am inclined to impose a penalty on the company and its Officers in default as prescribed under Section 134(8) of the Companies Act, 2013. The details of the penalty imposed on the company and its directors is given below:
I. FY 2018-19
| S.No | Company and Directors | Penalty for default (Rs.) |
Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.) |
| 1. | M/s. LIONS CO-ORDINATION COMMITTEE OF INDIA ASSOCIATION | Rs.3,00,000/- | Rs.3,00,000/- | Rs.3,00,000/- |
| 2. | ROHITBHAI CHINUBHAI MEHTA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 3. | PRAVINKUMAR CHHAJER | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 4. | SANJEEV MALCHAND CHHAJER | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 5. | SWANANDA SANKAR | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 6. | SUSHIEL , KUMAR AGRAWAL | Rs.50,000/- | Rs.50,000/- | Rs.50,000/-– |
| 7. | PREM RATAN LAHOTY | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 8. | VENUMBAKA VENKATA KRISHNA REDDY | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 9. | RAW VIJAYKUMAR MANWANI | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 10. | MURUGAN RATNASWAMY |
Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 11. | SUNIL KUMAR RUMALLA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 12. | JAGDISH KUMAR GULATI | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 13. | SANGEETA JATIA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 14. | JATINDER PAL SINGH | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 15. | SUNIL DHARNIDHAR VORA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 16. | NARENDRA SHANTILAL BHANDARI | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 17. | RANGANATHAN SAMPATH |
Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 18. | VIJAYA KUMAR RAN VEGESNA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 19. | GURCHARAN SINGH HORA’ | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 20. | KUPPUSAMY DHANABALAN | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 21. | NAWAL MALU | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
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, penalty of Rs.3,00,000/- (Rupees Three lakhs) is imposed on the Company, Rs.50,000/- (Rupees Fifty Thousand) is imposed on each of the directors as mentioned above. Totally Rs.13,00,000/-(Rupees Thirteen lakhs) is imposed for violation of Section 134(3)(b) of the Companies Act, for the FY 2018-19.
II. FY 2019-20
| S.No | Company and Directors | Penalty for default (Rs.) |
Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.) |
| 1. | M/s. LIONS CO- ORDINATION COMMHTEE OF INDIA ASSOCIATION | Rs.3,00,000/- | Rs.3,00,000/- | Rs.3,00,000/- |
| 2 | PRAVINKUMAR CHHAJER |
Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 3. | SANJEEV MALCHAND CHHAJER | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 4 | SIVANANDA SANKAR | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 5. | PREM RATAN LAHOTY | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 6. | VENUMBAKA VENKATA KRISHNA REDDY | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 7, | RAJU VIJAYKUMAR MANWANI | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 8. | SUNIL KUMAR RUMALLA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 9. | JAGDISH KUMAR GULATI | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 12. | SANGEETA JATIA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 13. | JATINDER PAL SINGH | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 14. | SUNIL DHARNIDHAR VORA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 15. | NARENDRA SHANTILAL BHANDARI | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 16. | RANGANATHAN SAMPATH |
Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 17. | VIJAYA KUMAR RAJU VEGESNA | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 18. | KUPPUSAMY DHANABALAN | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
| 19. | NAWAL MALU | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
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, penalty of Rs.3,00,000/- (Rupees Three lakhs) is imposed on the Company, Rs.50,000/- (Rupees Fifty Thousand) is imposed on each of the directors as mentioned above. Totally Rs.11,00,000/-(Rupees Eleven lakhs) is imposed for violation of Section 134(3)(b) of the Companies Act, for the FY 2019-20.
10. The said amount of penalty shall be paid through online by using the website www.mca.gov.in (Misc. head) within 90 days of receipt of this order, and intimate this office with proof of penalty paid.
11. Whereas Appeal against this order may be filed with the Regional Director (SR), Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26 Haddows Road, Chennai-600006, Tamil Nadu within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website mca.gov.in] setting forth 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 (Adjudicating of Penalties) Rules, 2014].
12. Your attention is also invited to section 454(8) of the Act in the event of noncompliance of this order, “(8)(i) Where company fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be 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 or any other person who is in default fails to comply with the order .made under sub-section (3) or sub-section (7), as the case may be 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
