Section 173 Violation: Non-Sending of Board Meeting Notice to Every Director

The case involves alleged non-sending of notices for a board meeting, raising concerns about compliance with statutory requirements.

Two complaints, one dated 02.08.2023 and another dated 18.08.2023, were filed with the Registrar of Companies, Madhya Pradesh, by directors Rakesh Jha, Pramod Jha, Mukesh Jha, Himanshu Jha, and Krishna Kant Jha. The complaints highlighted the disregard for Sections 100, 101, 102, 173, 174, 175, and other relevant provisions of the Companies Act during a board meeting on 08.07.2023.

The primary contention was the lack of proper notice for the meeting dated 26.06.2023, where Krishna Kant Jha and Himanshu Jha were appointed as directors. The complainants alleged non-compliance with Secretarial Standard No. 1 & 2, emphasizing the absence of a formal notice sent to every member.

Show cause notices were issued on 30.11.2023, and the company responded on 12.12.2023, asserting the proper dispatch of notices to all members. The company’s response included details of tracking numbers and delivery status, refuting claims of non-receipt by certain directors.

“Notices of Inquiry” were issued on 14.12.2023, and the hearing took place on 19.12.2023, where Mrs. Mamta Surange represented the company. The adjudicating officer, Mukesh Kumar Soni, considered the company’s compliance claims and decided to dispose of the adjudication proceedings against the directors.

Conclusion: In the order dated 19th December 2023, Mukesh Kumar Soni, Registrar of Companies, Madhya Pradesh, concluded that, after evaluating the company’s response, the adjudication proceedings against the directors were disposed of. The directors were deemed to have complied with the provisions of the Companies Act.

However, it’s essential to note that any person aggrieved by the order has the right to appeal to the Regional Director within 60 days. The case emphasizes the significance of adhering to statutory requirements, particularly regarding the proper issuance of notices for board meetings, to avoid penalties and legal repercussions.

The detailed analysis provides insights into the nature of the complaint, the company’s response, and the considerations leading to the disposal of adjudication proceedings. This serves as a reminder for companies to prioritize compliance and communication in corporate governance.

Government of India
Ministry of Corporate Affairs
Office of The Registrar of Companies, Madhya Pradesh
Sanjay Complex, ‘A’ Block, 3rd Floor,
Jayendraganj, Gwalior — 474009.
Email: [email protected]

Order No. ROC-G/Adj. Pen./u/s. 173(3)Hemco Engineering/3014 Dated: 26 DEC 2023,

1. M/s. Hemco Engineering Private Limited, 53-A, Industrial Area, Malanpur NA, Distt. Bhind, M.P. 477117, M.P., E-mail I.D.: [email protected]
2. Pramod Jha, director (DIN- 01248720) (from 28.11.1996 to till date)
3. Rakesh Jha, director (DIN- 02293146) (From 07.02.2003 to till date)
4. Mukesh Jha, director (DIN-02448234), (From 28.11.1996 to till date)
5. Krishana Kant Jha, director (DIN- 10214840), (From 26.06.2023 to till date)
6. Himanshu Jha, director (DIN-10214850) (From 26.06.2023 to till date)
7. Regional Director, North-Western Region, Ministry of Corporate Affairs, Ahmedabad (Gujarat).
8. E-governance cell for uploading the documents.

In the matter of Companies Act, 2013
And
In the matter of adjudication proceeding under sub-section 3 of Section 173
of the Companies Act, 2013.
And
In the matter of M/s. Hemco Engineering Private Limited
(CIN-U74210MP1996PTC011428)

Date of hearing 19th December, 2023

1. Appointment of adjudicating officer:

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Adt dated 24.03.2015 appointed undersigned as adjudicating officer in exercise of the powers conferred by Section 454 of the Companies Act, 2013 (hereinafter known as “Act” ) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudicating penalties under the provisions of this Act.

2. Company:

Whereas company Hemco Engineering Private Limited (CIN-U74210MP1996PTC011428) [herein after known as company] is a registered company with this office under the provisions of Companies Act, 2013 having its registered office situated at 53-A, Industrial Area, Malanpur NA, District Bhind, M.P. 477117 as per the MCA website.

3. Facts about the case:

4. Whereas this office has received a complaint dated 02.08.2023 from Mr. Rakesh Jha and Mr. Pramod Jha directors of the company namely Hemco Engineering Private Limited and contents of the complaint are as follows:

“On 08.07.2023 a board meeting was called by the company for allotment of share and increase of paid-up share capital by the company at the registered office of the company. In the board meeting Mr. Krishna Kant Kha who was share holder of the company and Mr. Himanshu Jha came to attend the meeting and when an objection had been raised it was informed orally that both have been appointed as a director vide meeting dated 26.06.2023, it was obligatory on the part of other shareholders to issue a proper notice in respect of meeting dated 26.06.2023. When the undersigned has cross check the MCA portal it has been found that both the persons were appointed as a director of the company in utter disregard with the provisions of Section 100, 101, 102, 173, 174, 175 and other relevant provisions of Companies Act. There was no proper compliance of requirement of both Secretarial Standard No. 1 & 2 the undersigned did not receive any notice of board of meeting and/or extraordinary general meeting about the so-called meeting dated 26.06.2023 wherein both the persons were stated to be appointed as a director. The aforesaid actions is also contrary to the averments made in the petition pending before the NCLT”.

b. Whereas this office has received another complaint dated 18.08.2023 from Mr. Mukesh Jha, Mr. Himanshu Jha and Mr. Krishna Kant Jha, directors of the company namely Hemco Engineering Private Limited and contents are as follows:

“Mr. Pramod Jha and Mr. Rakesh Jha, Directors of the company have violated the provisions of Section173 of the Companies Act, 2013. As per section 173 (3) of the Companies Act, 2013 the notice of the meeting of the board has to be given to every director of the company. However, Mr. Pramod Jha and Mr. Rakesh Jha have failed even to sent the notice of the board meeting dated 11.08.2023 and 19.08.2023 to deliberately abstaining the presence of Mr. Himanshu Jha and Mr. Krishna Kant Jha in the said meeting which is violation of the provisions of Section 173(3) of the Companies Act, 2013.

Therefore, the provisions of Section 173(3) of the Act, have been contravened and every officer of the company who is in default as the case may be have rendered themselves liable for penal provisions under Section 173(4) of the Companies Act, 2013″.

4. Subsequently this office has issued show cause notice vide No. ROC-G/Adj.Pen. /U/ s. 173(3)/ Hemco Engineering/ 2688 to 2693 dated 30.11.2023 and notices as issued to company and officer in default are delivered.

5. In response of this office notice dated 30.11.2023, the company has replied the notice vide letter dated 12.12.2023 and contents of the reply as under:

(i) That the contents of para are formal in nature and needs no

(ii) That the contents of para are matter of record and needs no comments.

(iii) That the contents of para it is stated that the EOGM of the members of the company dated 26.06.2023 was called by the requisitionists, member of the company by giving notice dated 02.06.2023 to appoint Mr. Krishna Kant Jha and Mr. Himanshu Jha on the board of directors of the company. The said notice was sent to all the members of the company vide speed post dated 02.06.2023 and were duly delivered, the details of which are tabulated as under:

Hence, the baseless contentions of the complainants Mr. Rakesh Jha and Mr. Pramod Jha of non-receipt of the notice of the EOGM has no legs to stand as the notice dated 02.06.2023 of EOGM dated 26.06.2023 has been duly sent to every members of the company and accordingly neither the Section 118 of the CA, 2013 nor the Secretarial Standards have been violated by the undersigned.

(iv) That the contents of para forms part of the complaint dated 18.08.2023 filed by the undersigned and need no comments.

(v) That, the contents of para are more reproduction of law and need no comment.

(vi) That the contents of para it is stated that the undersigned has duly complied with the provisions of Section 173 of the CA, 2013 and hence, it is prayed to the Ld. ROC to kindly abstain from initiating any penal action against the undersigned as the undersigned has duly complied with the provisions of the act as mentioned in the notice under reply.

6. Thereafter, “Notices of Inquiry” vide No. ROC-G/ Adj. Pen. /U/ s. 173(3)/Hemco Engineering/2859 to 28564 dated 14.12.2023 were issued to the company and its officers in default.

7. As per [Rule 3(3), companies (Adjudication of Penalties) Rules, 2014 and the date of hearing was fixed on 19.12.2023 at 3.30 P.M. in the office of Registrar of Companies, Madhya Pradesh, Sanjay Complex, A-Block, 3rd Floor, Jayendraganj, Gwalior.

8. On the date of hearing i.e. 19.12.2023, Mrs. Mamta Surange representative of the company has attended the hearing and she has also produced letter of authority of the company duly authorised by the company.

9. Orders:

(i) In exercise of the powers conferred vide Companies (Amendment) Act, 2020, the undersigned is entrusted to adjudicate penalties under Section 173(4) of the Companies Act, 2013, after taking into account the factors mentioned in company’s reply dated 18.12.2023, I do hereby dispose off the adjudication proceedings against the directors, keeping in view of the factual position and reporting facts that the company has complied the provisions of the Act.

(ii) Any person aggrieved by the order of adjudicating authority under Section 3 of Section 454 may prefer an appeal to the Regional Director having jurisdiction in the matter. Every appeal under sub-section 5 of section 454 shall be paid within 60 days from the date on which the copy or order made by the adjudicating authority is received by the aggrieved person and shall be in such form manner and be accompanied by such fee as may be prescribed.

10. In terms of the provisions of sub-rule 3 of the Companies (Adjudication of Penalties) Rules, 2014 copy of the order is being sent to Himanshu Engineering Private Limited 53-A, Industrial Area, Malanpur NA, Distt. Bhind, M.P., Sh. Pramod Jha, director, Sh. Rakesh Jha, Director, Sh. Mukesh Jha, Sh. Krishana Kant Jha, Sh. Himanshu Jha, NWR, Ahmedabad and will also upload on MCA website.

The adjudication notice stand disposed off with this order.

(Mukesh Soni, ICLS)
Registrar of Companies,
Madhya Pradesh, Gwalior

Signed on this 19th December, 2023.
Place: Gwalior, Madhya Pradesh.