Introduction: The Ministry of Corporate Affairs (MCA) has recently imposed a significant penalty of ₹6 lakh on Banaras Beads Limited for delaying the filing of E-Form BEN-2. This penalty underscores the critical importance of timely compliance with the reporting requirements under Section 90(4) of the Companies Act, 2013.
Background of the Case: Banaras Beads Limited, a listed entity incorporated under the Companies Act, 1956, failed to file E-Form BEN-2 within the stipulated timeframe. The form is required to declare the significant beneficial owners (SBOs) of a company. The delay spanned over 1131 days, from 21st December 2020 to 25th January 2024.
Legal Provisions Involved: Section 90 of the Companies Act, 2013 mandates that every individual holding a beneficial interest of not less than 25% in shares of a company must declare such interest to the company, which in turn must file the declaration with the Registrar of Companies (ROC). E-Form BEN-2 is the prescribed form for this declaration.
Findings of the Registrar: Upon examination, the Registrar of Companies (ROC), Uttar Pradesh, found that Banaras Beads Limited had delayed the filing of E-Form BEN-2. The company had received declarations (BEN-1) from the SBOs on 1st July 2019 but only filed the BEN-2 forms on 25th January 2024. Consequently, a notice was issued to the company and its officers under Section 206(1) of the Act.
Company’s Response: The company, represented by its Company Secretary, Mr. R.K. Singh, acknowledged the delay and cited various reasons, including compliance with the RBI’s Know Your Customer (KYC) directions and internal procedural delays. Despite the explanations, the ROC determined that the company had violated Section 90(4) of the Companies Act, 2013, and imposed penalties accordingly.
Penalties Imposed: The ROC adjudicated a penalty of ₹6 lakh, calculated as follows:
- ₹5 lakh on Banaras Beads Limited for the delay in filing E-Form BEN-2.
- ₹1 lakh on Mr. Ramesh Kumar Singh, the Company Secretary and Key Managerial Personnel (KMP), held responsible as the officer-in-default.
The penalties are to be paid within 90 days of the order.
Implications for Compliance: This case highlights the stringent enforcement of compliance requirements under the Companies Act, 2013. Companies must ensure timely filing of necessary forms and declarations to avoid hefty penalties. The role of Company Secretaries and other KMPs is crucial in ensuring adherence to legal mandates.
Conclusion: The imposition of a ₹6 lakh penalty on Banaras Beads Limited for delayed filing of E-Form BEN-2 serves as a stern reminder of the importance of compliance with statutory requirements. Companies must prioritize timely and accurate filings to avoid legal repercussions. This case also emphasizes the accountability of company officers in maintaining corporate governance standards. As regulatory scrutiny intensifies, adherence to compliance timelines is not just a legal obligation but a critical component of corporate responsibility.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES,
Uttar Pradesh
37/17, Westcott Building, The Mall,
Kanpur – 208001 (U.P.)
Lb-1-ff/ Phone : 0512 – 2310443/2310227
Order No. 03/19/SBO/UP/2024/Banaras Beads/ Dated: 28/06/2024
ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 FOR VIOLATION OF PROVISIONS OF SECTION 90 OF THE COMPANIES ACT, 2013.
IN THE MATTER OF BANARAS BEADS LIMITED
(CIN : L01131UP1980PLC004984)
Date of hearing(s): 22.05.2024
Present on behalf of the Company and the Applicants: Mr. Ajay Jaiswal (Practicing Company Secretary)
The Ministry of Corporate Affairs vide its gazette notification no A-420 11/112/2014-Mil dated 24.3.2015, appointed the Registrar of Companies, Uttar Pradesh as the Adjudicating Officer in exercise of the powers conferred by Section 454(1) of the Companies Act, 2013 (hereinafter known as “the Act”) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Whereas the company viz. BANARAS BEADS LIMITED (hereinafter as “‘the reporting company”) was incorporated under the provisions of the Companies Act, 1956 on 10.04.1980, and has its registered office situated at A-1 Industrial Estate, Varanasi, Uttar Pradesh, Uttar Pradesh, 221106, India.
The company, being a listed entity, has 6,637 shareholders as per list of shareholders attached to e-form MGT-7 for the FY 2022-23.
3. That the provisions of Section 90 of the Companies Act, 2013 reads:‑
Section 90:- (1) Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2, over the company (herein referred to as “significant beneficial owner’), shall make a declaration to the company, specifying the nature of his interest and other particulars, in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof as may be prescribed:
Provided that the Central Government may prescribe a class or classes of persons who shall not be required to make declaration under this sub-section.
(2) Every company shall maintain a register of the interest declared by individuals under subsection (1) and changes therein which shall include the name of individual, his date of birth, address, details of ownership in the company and such other details as may be prescribed.
(3) The register maintained under sub-section (2) shall be open to inspection by any member of the company on payment of such fees as may he prescribed.
(4) Every company shall file a return of significant beneficial owners of the company and changes therein with the Registrar containing names, addresses and other details as may be prescribed within such time, in such form and manner as may be prescribed.
(4A) Every company shall take necessary steps to identify an individual who is a significant beneficial owner in relation to the company and require him to comply with the provisions of this section.
(5) A company shall give notice, in the prescribed manner, to any person (whether or not a member of the company) whom the company knows or has reasonable cause to believe
(a) to be a significant beneficial owner of the company;
(b) to he having knowledge of the identity of a significant beneficial owner or another person likely to have such knowledge; or
(c) to have been a significant beneficial owner of the company at any time during the three years immediately preceding the date on which the notice is issued,
and who is not registered as a significant beneficial owner with the company as required under this section.
(6) The information required by the notice under sub-section (5) shall be given by the concerned person within a period not exceeding thirty days of the date of the notice.
(7) The company shall
(a) where that person fails to give the company the information required by the notice within the time specified therein; or
(b) where the information given is not satisfactory,
apply to the Tribunal within a period offifteen days of the expiry of the period specified in the notice, for an order directing that the shares in question be subject to restrictions with regard to transfer of interest, suspension of all rights attached to the shares and such other matters as may be prescribed.
(8) On any application made under sub-section (7), the Tribunal may, after giving an opportunity of being heard to the parties concerned, make such order restricting the rights attached with the shares within a period of sixty days of receipt of application or such other period as may be
(9) The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed under sub-section (8), within a period of one year from the date of such order:
Provided that if no such application has been filed within a period of one year from the date of the order under sub-section (8), such shares shall be transferred, without any restrictions, to the authority constituted under sub-section (5) of section 125, in such manner as may be prescribed;
(9A) The Central Government may make rules for the purposes of this section.
(10) If any person fails to make a declaration as required under sub-section (1), he shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one thousand rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.
(11) If a company, required to maintain register under sub-section (2) and file the information under sub-section (4) or required to take necessary steps under sub-section (4A), fails to do so or denies inspection as provided therein, the company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day, after the first during which such failure continues, subject to a maximum of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of two hundred rupees for each day, after the first during which such failure continues, subject to a maximum of one lakh rupees.
(12) If any person willfully furnishes any false or incorrect information or suppresses any material information of which he is aware in the declaration made under this section, he shall be liable to action under Section 447.
4. (i) That Section 2(27) of the Act defines ‘control’:
“control” shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.
(ii) That Section 2(1) of the Companies (Significant Beneficial Owners) Rules, 2018 of the Act defines ‘significant influence’ as the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but is not control or joint control of those policies.
5. On examining the documents filed by the Company on MCA21 Registry, it is found that the Company had filed BEN-2 on 25.01.2024 vide SRN F91063131 for declaration of two Significant Beneficial Owner (SBO) viz. Mr. Ashok Kumar Gupta and Mr. Siddharth Gupta, both are present directors of the company. On further examination of e-form BEN-2 and the documents submitted by the reporting company, it was found that the reporting company received BEN-1 on 01.07.2019. Thus, there was reason to believe that ‘the reporting company’ has made delay in compliance with Section 90 of the Companies Act, 2013 i.e. declaration of beneficial ownership by filing of e-form BEN-2 of ‘the reporting company’. Thus, notice under Section 206(1) of the Act, 2013 was issued vide letter No. 03/19/SBO/UP/2024/Banaras Beads/7040-7045 dated 13.02.2024.
6. The reporting company submitted its reply vide letter no. BBL/14532/24 dated 16.02.2024, duly signed by Mr. R.K.Singh, Company Secretary of the reporting company, wherein it submitted that on the basis of shareholding as stated in Member Register of the Company from time to time, the Company had identified two SBO namely, Mr. Ashok Kumar Gupta and Mr. Siddharth Gupta as Trustee of Ram Gulam Kanhaiyalal Charitable Trust and sent notice through BEN-4 to them on 26.06.2019. The two SBO namely, Mr. Ashok Kumar Gupta and Mr. Siddharth Gupta had filed their BEN-1 to the Company on 01.07.2019. Accordingly, the Company had filed e-form BEN-2 in respect of both SBOs on 25.01.2024 vide SRN F91063131 and another e-form BEN-2 was filed on 27.01.2024 vide SRN F91163006 disclosing the change in shareholding of the Significant Beneficial Owner, Mr. Ashok Kumar Gupta.
7. On the observation made at Para 6 above, there existed sufficient reason(s) that ‘the reporting company’ has delayed in declaring Significant Beneficial Owner in terms of Section 90 the Companies (Significant Beneficial Owners) Rules, 2018 of the Companies Act, 2013, (herein after referred as SBO Rules), hence forward a Show Cause Notice (SCN) was issued to ‘the reporting company’, its directors and KMP for non-compliance of Section 90 r/w SBO rules made thereunder, vide letter No. 03/19/SBO/UP/2024/Banaras Beads/682-690 dated 26.04.2024 and date of hearing was fixed on 22.05.2024.
8. Response of the reporting company to SCN issued under Section 90 of the Act: Authorized representative of the Company, Mr. Ajay Jaiswal (Practicing Company Secretary) appeared on the date of hearing and submitted the response of the Company dated 22.05.2024, which was duly signed by Mr. R.K.Singh, Company Secretary of the reporting company. The company submitted that the it has effectively fulfilled its obligations under Section 90 of the Companies Act, 2013 and Significant Beneficial Owner (SBO) Rules, 2018, by remitting the requisite filing fees and additional charges, as mandated by the Ministry of Corporate Affairs (MCA) circular dated 01.01.2020.
The response submitted by the reporting company’ dated 22.05.2024, was examined and additional information/ documents/ clarifications were sought from ‘the reporting company’ vide e-mail dated 31.05.2024. The clarifications raised by the Registrar basically required the details of the Ultimate Beneficial Owner (UBO) disclosed to the Banks in India for ‘the reporting company’, details of bank accounts and list of employees. The Company sought extension of twenty one days to submit the additional information/ documents.
9. That as per Reserve Bank of India vide Master Direction DBR.AML.BC.No.81/14.01.001/2015- 16 issued Master Direction – Know Your Customer (KYC) Direction, 25.02.2016 which states:‑
“3 (iv). Beneficial Owner (BO)
a. Where the customer is a company, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have a controlling ownership interest or who exercise control through other means.
Explanation- For the purpose of this sub-clause‑
1. “Controlling ownership interest” means ownership of/entitlement to more than 25 per cent of the shares or capital or profits of the company.
2. “Control” shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.
b. Where the customer is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of capital or profits of the partnership.
c. Where the customer is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or capital or profits of the unincorporated association or body of individuals.
Explanation: Term ‘body of individuals’ includes societies. Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official.
d. Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.
Part IV – Identification of Beneficial Owner
34. For opening an account of a Legal Person who is not a natural person, the beneficial owner(s) shall be identified and all reasonable steps in terms of Rule 9(3) of the Rules to verify his/her identity shall be undertaken keeping in view the following:
a. Where the customer or the owner of the controlling interest is a company listed on a stock exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.
b. In cases of trust/nominee or fiduciary accounts whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary is determined. In such cases, satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also details of the nature of the trust or other arrangements in place shall be
10. In response to the clarifications raised as mentioned at para- 8 above, The reporting company’ submitted its reply through letter dated 18.06.2024 duly signed by R.K.Singh, Company Secretary of the reporting company stating that the reporting company is listed with BSE and NSE and is exempted for UBO Declaration under RBI Declaration. Further, list of employees, bank details and copy of BEN-4 are also submitted the Company. The reporting company has also stated that no individual(s) become SBO by way of control/ significant influence in the company.
Further, the reporting company submitted that the Board of Directors of the Company had authorized Mr. Ramesh Kumar Singh, Company Secretary, Key Managerial Person (KMP) of the company “Singly” in its meeting held on 22.01.2019 to ensure the compliance with the provisions of Section 89, 90 and other related provisions of the Companies Acts and Rules, thus other Key Managerial Personnel of the Company are not liable for any such default/ non-compliance of provision of Section 90 of Companies Act, 2013.
Thus, for non-compliance of Section 90(11) read with 5130 Rules, 2018, the duty lies on Mr. Ramesh Kumar Singh, KMP of the Company, being the officer in default and not the Managing Director and other directors on whom the Show Cause Notice was also served.
11. Adjudication of Penalty:
Taking in consideration the above facts and based on the submissions made by the reporting company and the documentary information and evidences filed by them in response to the SCN issued by the Registrar, it becomes evident that the reporting company has delayed in filing e-form BEN-2. Further, the same has also been admitted by the company in its reply.
Having arrived at this conclusion, the default u/s 90 r/w SBO Rules made there under the Companies Act, 2013, stands established on the company and the officer-in-default is Mr. Ramesh Kumar Singh, as per the board resolution dated 22.01.2019 submitted by the company.
The default period is counted from the date of decriminalization of default w.e.f. 21.12.2020 till the date of filing of e-form BEN-2 by the Company i.e. 25.01.2024 for violation of Section 90(4) r/w SBO Rules made thereunder and the default period is for 1131 days.
A. Calculation of Penalty imposed for violation of Section 90 r/w S130 Rules made there under of the Companies Act, 2013:-
| Violation Section | Penalty imposed on & Period | Calculation of penalty amount (in Rs.) | Penalty imposed as per Section 90 (11) of CA, 2013 in (in Rs.) |
|
A |
B |
C |
D |
| Section 90(4) of CA, 2013 Delay in filing e- form BEN-2 | BANARAS BEADS LIMITED (company) Default of 1131 days i.e. from 21.12.2020 to 25.01.2024 |
1,00,000 + 1131 x 500 = 6,65,500 Subject to maximum 5,00,000 |
5,00,000 |
| RAMESH KUMAR SINGH (CS, KW from 08.12.1998 to till date) Default of 1131 days i.e. from 21.12.2020 to 25.01.2024 | 25,000 + 656 x 200 —= 2,51,200 Subject to maximum 1,00,000 | 1,00,000 | |
| TOTAL PENALTY | 6,00,000 | ||
The company and its officers shall pay the said amount of penalty through online www.mca.gov.in (under Misc. Head] or by way of Demand Draft in favour of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days receipt of this order and intimate this office with the proof of penalty so paid. The Demand Draft shall be forwarded to this office address.
Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form ADJ 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 (Adjudication of Penalties) Rules, 2014].
Attention is also invited to Section 454(8) of the Companies Act, 2013, in the event of noncompliance of this order. In case appeal is made, 0/o the Registrar of Companies, U.P may be informed alongwith the penalty imposed and the payments made.
(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur
No. 03/19/SBO/UP/2024/Banaras Beads/1890 to 1898
Dated:28-6-2024
