The Ministry of Corporate Affairs (MCA), Government of India, has issued an order through the Office of Registrar of Companies, Uttar Pradesh, concerning RTS Fashion Private Limited. This order pertains to the adjudication of a penalty under Section 454 of the Companies Act, 2013, read with Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, for alleged violations of Section 90 of the Companies Act, 2013. The core issue addressed in this order is the applicability of Section 90 concerning the indirect shareholding or control within RTS Fashion Private Limited.
Detailed Analysis
On June 13, 2024, the Registrar of Companies, Uttar Pradesh, issued an adjudication order concerning RTS Fashion Private Limited (CIN: U19120UP2019PTC120284), headquartered in Kanpur, Uttar Pradesh. The order follows a hearing held on May 22, 2024, where Mr. S. K. Gupta, a practicing company secretary, represented the company.
Background
RTS Fashion Private Limited was incorporated on August 19, 2019, under the Companies Act, 2013. According to the e-form MGT-7 filed for the fiscal year 2021-2022, the shareholding pattern of the company is as follows:
1. Irshad Mirza: 12,44,100 shares (15.30%)
2. Rashid Ahmed Mirza: 22,35,900 shares (27.48%)
3. Shahid Ahmed Mirza: 16,35,600 shares (20.11%)
4. Tauseef Ahmed Mirza: 16,35,600 shares (20.11%)
5. Tasreef Ahmed Mirza: 13,83,300 shares (17.00%)
These details confirm that the company’s entire shareholding is directly held by the named individuals, with no evidence of indirect shareholding or control.
Legal Provisions
Section 90 of the Companies Act, 2013, mandates the declaration of beneficial ownership for those holding at least 25% of shares or exercising significant influence or control. The Act requires the maintenance of a register for such interests and necessitates filings with the Registrar of Companies. Penalties for non-compliance can be severe, including financial penalties and restrictions on share transfers.
Submissions by RTS Fashion Private Limited
RTS Fashion Private Limited argued that there was no indirect shareholding or control within the company. The pre-amalgamation issued share capital was directly held by the five shareholders mentioned above. The company’s Board of Directors, comprising Rashid Ahmed Mirza, Shahid Ahmed Mirza, Tauseef Ahmed Mirza, and Tasneef Ahmed Mirza, confirmed this direct control and management.
The company further asserted that since there was no indirect shareholding or control, the provisions of Section 90 did not apply. The Registrar of Companies reviewed the documentary evidence and submissions, confirming that the company did not violate Section 90.
Conclusion
After a thorough examination of the submissions and documentary evidence, the Registrar of Companies concluded that the provisions of Section 90 of the Companies Act, 2013, were not applicable to RTS Fashion Private Limited. Consequently, no penalties were imposed under this section.
This order underscores the importance of transparency in corporate governance and the necessity for companies to maintain accurate records of shareholding and control. RTS Fashion Private Limited successfully demonstrated compliance with the applicable legal provisions, thereby avoiding penalties for non-compliance under Section 90. The adjudication highlights the vigilant role of the Registrar of Companies in enforcing corporate laws while ensuring fair adjudication based on factual evidence.
*****
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES,
Uttar Pradesh
37/17, Westcott Building, The Mail,
Kanpur — 208001 (U. P.)
Phone . 0512 — 2310443/2310227
Order No. 03/31/SBO/UP/2024/RTS Fashion) 1595 to 1606 Dated: 13.06, 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 RTS FASHION PRIVATE LIMITED
(CIN : U19120UP2019PTC120284)
Date of hearing(s): 22.05.2024
Present on behalf of Applicants: Mr. S. K. Gupta, Practicing Company Secretary(Membership Number-2589) appeared on 22.05.2024.
The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-Ad.II 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. RTS FASHIONS PRIVATE LIMITED (hereinafter as “‘the reporting company”) was incorporated under the provisions of the Companies Act, 2013 on 19.08.2019, and has its registered office situated at 14/6,CIVIL LINES,KANPUR , Kanpur,UttarPradesh,208001,India. The shareholding details of ‘the reporting company’ as per list of shareholders attached to e-form MGT-7 for FY 2021-2022 is as follows: –
| S. No. | Name of the Shareholder | Number of shares held | Percentage of shares held |
| 1. | Irshad Mirza | 12,44,100 | 15.30 |
| 2. | Rashid Ahmed Mirza | 22,35,900 | 27.48 |
| 3. | Shahid Ahmed Mirza | 16,35,600 | 20.11 |
| 4. | Tauseef Ahmed Mirza | 16,35,600 | 20.11 |
| 5. | Tasreef Ahmed Mirza | 13,83,300 | 17.00 |
| Total | 81,34,500 | 100 |
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 be 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 be 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 prescribed.
(9) The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal forrelaxation 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 latch 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. That Rule 2(1)(h) of the Companies (Significant Beneficial Owners) Rules, 2018 of the Act defines
“Significant Beneficial Owner” in relation to a reporting company means an individual referred to in sub-section (1) of section 90, who acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting company, namely: -(I) holds indirectly, or together with any direct holdings, not less than ten per cent. of the shares; (ii) holds indirectly, or together with any direct holdings, not less than ten per cent. of the voting rights in the shares; (iii) has right to receive or participate in not less than ten per cent. of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings;(iv) has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct holdings alone:
Explanation L – For the purpose of this clause, if an individual does not hold any right or entitlement indirectly under sub-clauses (1), 00 or (iii), he shall not be considered to be a significant beneficial owner.
Explanation II – For the purpose of this clause, an individual shall be considered to hold a right or entitlement directly in the reporting company’, if he satisfies any of the following criteria, namely.’
(i) the shares in the reporting company’ representing such right or entitlement are held in the name of the individual;
(ii) the individual holds or acquires a beneficial interest in the share of ‘the reporting company’ under sub-section (2) of section 89 and has made a declaration in this regard to ‘the reporting company’.
Explanation III. – For the purpose of this clause, an individual shall be considered to hold a right or entitlement indirectly in ‘the reporting company, if he satisfies any of the following criteria, in respect of a member of ‘the reporting company, namely: -(i)where the member of ‘the reporting company’ is a body corporate (whether incorporated or registered in India or abroad), other than a limited liability partnership, and the individual, -(a) holds majority stake in that member; or (b) holds majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member.
6. Submissions made by the reporting company :-
The reporting company has submitted the following information in the reply submitted to the office vide letter dated 07.05.2024 received in this office on 09.05.2024.
a) The entire pre-amalgamation issued, subscribed and paid-up share capital of RTS Fashions Private Limited (“the Company”), was held by the following persons directly in their own name:
| Sr. No. |
Name of the Shareholders | Number of shares held | Percentage of shares held (%) |
| 1. | Mr. Irshad Mirza | 12,44,100 | 15.30 |
| 2. | Mr. Rashid Ahmed Mirza | 22,35,900 | 27.48 |
| 3. | Mr. Shahid Ahmad Mirza | 16,35,600 | 20.11 |
| 4. | Mr. Tauseef Ahmad Mirza | 16,35,600 | 20.11 |
| 5. | Mr. Tasneef Ahmad Mirza | 13,83,300 | 17.00 |
| Total | 81,34,500 | 100 |
b) As submitted by the Company and as well as information derived from the Annual Return filed by the Company, there was no indirect shareholding in the Company.
c) The Board of Directors of the Company prior to amalgamation with Mirza International Limited was comprised of the following persons :
| Sr. No. |
Name | DIN | Designation |
| 2. | Mr. Rashid Ahmed Mirza | 00049009 | Director |
| 5. | Mr. Shahid Ahmad Mirza | 00048990 | Director |
| 6. | Mr. Tauseef Ahmad Mirza | 00049037 | Director |
| 7. | Mr. Tasneef Ahmad Mirza | 00049066 | Director |
d) As per the information available with this office and as submitted by the Company, the aforesaid persons were the Promoter of the Company having control on the affairs and management of the Company.
It has also been submitted by the Company that there was neither any indirect shareholding of any person nor any indirect control over the affairs and management of the Company. Hence, the provisions of Section 90 of the Companies Act, 2013 is not applicable.
e) In terms of the provisions of Section 90 of the Companies Act, 2013 read with Rule 2 sub-rule (1) clause (h) of explanation 1 of Companies (Significant Beneficial Owners) Rule, 2018, the information on the Significant Beneficial Owners in the prescribed Form BEN 1 is required to be given only when the requisites of the said Rules are met.
f) There was no indirect shareholding in RTS Fashions Private Limited nor there was any indirect control over the affairs and management of the Company, the provisions of Section 90 of the Companies Act, 2013 are not applicable to RTS Fashions Private Limited.
7. Adjudication of Penalty:
The submissions of the company are taken on record alongwith the documentary information and evidences and accordingly the provisions of section 90 read with rules made thereunder of the Act are not attracted in light of the above facts and submissions.
(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur.
