Significant Beneficial Owner Rules Violation: MCA imposes Penalty

The Registrar of Companies for NCT of Delhi & Haryana was appointed as the adjudicating officer to address MBL Infrastructure Limited’s compliance with Section 90 of the Companies Act, 2013. Despite the company’s initial responses, including their claims of meeting the significant beneficial ownership (SBO) disclosure requirements, the adjudicating officer found the replies inadequate. Notably, issues arose regarding the identification of Mr. Venkatesh Lakhotia as an SBO due to his extensive shareholding connections through various entities. A show cause notice was issued, followed by a hearing where the company conceded the need to file Form BEN-2 for accurate SBO reporting. Discrepancies in form submissions and claims for regulatory exemptions were also noted. MBL Infrastructure Limited has been directed to rectify its filings and ensure compliance with SBO regulations.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS,
OFFICE OF REGISTRAR OF COMPANIES,
NCT OF DELHI & HARYANA
4TH FLOOR, IFCI TOWER, 61,
NEHRU PLACE, NEW DELHI – 110019

ORDER UNDER SECTION 90 OF THE COMPANIES ACT, 2013

IN THE MATTER OF MBL INFRASTRUCTURE LIMITED
(L27109DL1995PLC338407)

1. Appointment of Adjudicating Officer: –

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad. II, dated 24.03.2015 appointed Registrar of Companies, NCT of Delhi & Haryana as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter known as Act) r/w Companies (Adjudication of Penalties) Rules, 2014 (hereinafter known as “Rules”) for adjudging penalties under the provisions of this Act.

2. Company: –

Whereas the company viz. MBL INFRASTRUCTURE LIMITED (hereinafter known as “company” or “subject company”) has been incorporated on 25.08.1995 and it has its registered office at Baani Corporate One Tower, Suite 308, 3rd Floor, Plot No. 5, Jasola, New Delhi, South Delhi, Delhi, 110025, India. It is a listed company, which is listed on the BSE and NSE Stock Exchanges. The financial & other details of the subject company for F.Y.2022-23 as available on MCA-21 portal is stated as under:

3. The details of the proceedings:

A. Issuance of a notice under section 206(1)

A notice was issued to the subject company under section 206(1) of the Act on 14.02.2024 to ascertain compliance of section 90 of the Act and rules made thereunder. The notice was issued for broadly ascertaining the following compliances:

i. Whether the company had filed form BEN-2 in terms of section 90(4) of the Act. If yes, provide a copy of the same. If no, provide reasons with supporting documents.

ii. Provide details of all the actions taken by the company to identify its Significant Beneficial Owner in terms of section 90(4A) of the Act.

iii. Did the company comply with the mandatory compliance of issuing a BEN-4 notice as required in rule 2A (2) of the Companies (Significant Beneficial Owners) Rules, 2018. If no, provide reasons.

iv. Provide the details of the application moved by the company to the NCLT in terms of section 90(7) of the Act.

B. Reply submitted by the company:

In response to the above notice a reply was received on 26.02.2024 from the company, wherein it was inter alia stated as under:

i. The Company is a listed entity with both BSE & NSE. The information about the shareholders holding not less than 10% of the shareholding is disclosed to stock exchanges on quarterly basis and annual basis as well as disclosed in the Annual Report of the Company. The Company to identify its Significant Beneficial Owner in terms of Section 90 of the Companies Act, 2013, issues notice to the person to whom the Company knows or has reasonable cause to believe, seeking information in the prescribed format in accordance with section 90 read with rules made therein.

ii. We further confirm that none of the individual exercise control or significance influence on the Company in terms of section 90 of the Companies Act, 2013 read with rules made thereunder.

iii. The Company has complied with mandatory compliance of issuing a BEN-4 notice as required in rule 2A(2) of Companies (Significant Beneficial Owners) Rules, 2018.

iv. The information about BEN-4 notice issued by the Company to the shareholders holding not less than 10% of the equity share capital in the Company is as:

v. The response from the aforesaid shareholders were received within the prescribed time period and the response was found to be satisfactory.

vi. MBL A Capital Limited holds 31.77% equity shares of the Company as a registered and beneficial owner of the shares of MBL Infrastructure Ltd. Further, no individual member of MBL A Capital Limited holds majority stake in the MBL A Capital Limited nor there is any holding company of MBL A Capital Limited. Hence, the information sought is not applicable.

vii. Dipika Suppliers LLP (since converted from Dipika Suppliers Pvt. Ltd.) holds 11.27% equity shares of the Company as registered and beneficial owner and does not fall within the description provided in Clause III of explanation of Rule 2(1)(h). Hence, the information sought is not applicable.

C. Show Cause Notice issued under section 90 of the Act:

I. The reply of the subject company was found to be unsatisfactory. Accordingly a SCN under section 90 was sent to the company and its officers on 14.03.2024, wherein the following issues were highlighted to suggest that the subject company had not complied with the provisions of section 90 of the Act:

i. The reply of the company is unsatisfactory as it is evident that LLP, namely Dipika Suppliers LLP holds 11.27% shares in the subject company, and it has three partners including two companies. Clearly Mr. Venkatesh Lakhotia is a partner of the LLP, further by virtue of being a partner alone is SBO of the subject company as per rule 2(a) Explanation III(a) of Companies (Significant Beneficial Owners) Rules 2018. Further, Mr. Venkatesh Lakhotia is also holding majority stakes i.e., 99.8% in another partner of Dipika Suppliers LLP. Besides this, Mr. Venkatesh Lakhotia holds 5.59% shareholding in MBL A Capital Limited, which in turn holds 31.77% in the subject company and he holds a majority stake i.e., 52.01% in Surprise Commercial Private Limited, which in turn holds 41.42% in MBL A Capital Limited. Thus, he exercises control over 47.01% shares in MBL A Capital Limited, which in turn holds 31.77% in MBL Infrastructure Limited.

ii. Therefore, it appeared that in terms of the provisions of Companies (Significant Beneficial Owners) Rules 2018, as amended from time to time it appears that Mr. Venkatesh Lakhotia is SBO of the subject company.

iii. Further, it is seen that Mr. Anjanee Kumar Lakhotia is father of Mr. Venkatesh Lakhotia and Mr. Ankit Lakhotia.

D. Reply of the company and Mr. Venkatesh Lakhotia to the SCN issued under section 90 of the Act:

I. On account of closure of the financial year, the subject company vide its letter dated 28.03.2024 requested for time till 10.04.2024 to submit its reply.

II. The company’s reply dated 09.04.2024 was received in the office on 23.04.2024, wherein the company inter alia raised the following contentions in support of its argument that it had no SBO:

a. Section 90 of the Companies Act, 2013 defines ‘Significant Beneficial Owner’ (SBO), which means any individual, who acting alone or together or through one or more persons, holds beneficial interest of not less than 10% in the shares of the Company that gives it right to exercise or actual exercising of significant influence or control over the Company.

b. Further Rule 2(h) of the Companies (SBO) Rules, 2018, SBO means an individual referred to in Section 90(1) of the Companies Act, 2013.

c. Therefore, from the reading of the section 90 of the Companies Act, 2013 it is clear, that the relevance of Section 90 is on control or on significant influence and inter-alia the individual should fulfil both the conditions i.e. (i) holding indirectly more than 10% in the shares of the Company and (ii) such holding should give it to right to exercise or actual exercising of ‘significant influence’ or ‘control over the Company.

d. Dipika Suppliers LLP holds 11.27% of equity shares of the Company. Mr. Venkatesh Lakhotia holds majority shares in one of the designated partner of Dipika Suppliers LLP. Mr. Venkatesh Lakhotia is neither an employee of the Company nor has any commercial transaction with the Company. Though Mr. Anjanee Kumar Lakhotia is father of Mr. Venkatesh Lakhotia, he is independent and there is no pecuniary relationship or economic interest with the Company nor there is any related party transactions with the Company or Mr Anjanee Kumar Lakhotia. Mr. Venkatesh Lakhotia is qualified professional (MBA) and independent and has his own business independent from the Company and his relatives including Mr Anjanee Kumar Lakhotia.

e. MBL A Capital Ltd. is a registered NFBC and falls within the non-applicability under Rule 8 of Companies (SBO) Rules, 2019. The shareholders of MBL A Capital Ltd. are separate and independent from each other. Therefore, Mr. Venkatesh Lakhotia although holding of 5.59% in MBL A Capital Ltd. and 52.01% in Surprise Commercial  Pvt. Ltd. does not has any right nor can exercise any control over the shares of MBL A Capital Ltd.

f Although Mr. Venkatesh Lakhotia is holding majority shares in one of the designated partner of Dipika Suppliers LLP, for the reasons explained above, he has no “control” nor any “Significant Influence over the affairs of the Company and as such Mr. Venkatesh Lakhotia does not falls within the definition of “Significant Beneficial Owner” as defined under section 90 of the Companies Act, 2013. MBL Infrastructure Ltd is a widely held public listed Company and is professionally managed with majority of Board of Directors of the Company being independent. Thus the observation made by you that Mr. Venkatesh Lakhotia is SBO of the Company and that the Company has failed to provide information with regard to its Significant Beneficial Owner as per Section 90 of the Companies Act 2013 is wrong and incorrect.

g. Please note that Mr. Bhagwan Singh Duggal, to whom this notice has also been marked as a Director of the Company, had ceased to be a director of the Company upon his demise on 01.03.2021. In this connection, the Company had filed form DIR-12 along with a copy of death certificate with MCA vide SRN No T 10140671 dated 25.03.2021. A copy of DIR-12 along with his death certificate is enclosed. We request you to please remove his name from all the future communications to be made to the Company and/or its Directors and KMPs.

III. Mr. Venkatesh Lakhotia’s reply dated 10.04.2024 was received in the office on 23.04.2024, wherein he supplemented the arguments made by the company and inter alia made the following submissions:

a. At the outset, I would like to humbly submit that I am professionally qualified post graduate and have my own business set up separate & independent of my relatives including my father, Mr Anjanee Kumar Lakhotia. The investments were made by me in the Company, which happen to be one of the designated partners of Dipika Suppliers LLP, was much prior to the conversion of Dipika Suppliers Pvt Ltd to Dipika Suppliers LLP and are commercial in nature. I was a nominee shareholder of Dipika Suppliers Pvt Ltd pursuant to the requirement of the law and on conversion of Dipika Suppliers Pvt Ltd to Dipika Suppliers LLP, I happen to be one of the designated partners.

b. The investments made by MBL A Capital Ltd, being a registered NBFC, falls within exemption category as specified in the Companies (SBO) Rules, 2018.

c. I have no ‘control’ or ‘significant influence’ on MBL Infrastructure Ltd, which is a widely held public listed company with four independent directors and one professional executive director against one promoter director. I am neither a shareholder nor a director nor an employee or officer of MBL Infrastructure Ltd.

d. I have read the reasons/explanation given by MBL Infrastructure Ltd vide letter dated 09.04.2024 and concur with the same.

E. Providing an opportunity of being heard to the company

I. The reply of the subject company was found to be unsatisfactory. It had wrongly concluded that the requirement to disclose SBO would only arise if the individual fulfilled both the criteria, whereby he/she would be indirectly holding 10% stake and having the right to exercise or actual exercising of ‘significant influence’ or ‘control over the Company.

II. Accordingly, a hearing was fixed on 31.05.2024. Just two days before the scheduled date of the hearing, an email was received from the company, wherein the company asked for an extension of time. Thereafter, a hearing was fixed on 12.07.2024. On the said date, Mr. Anubhav Maheshwari, CS of the Company and Mr. Ankit Singhi, Practicing Company Secretary, appeared on behalf of the company and its officers.

III. During the oral submissions, it was submitted by the Company that they have reexamined this matter, and it is now of the opinion that a BEN-2 form is required to be filed in respect of Mr. Venkatesh Lakhotia. Thus, the CS of the company and the authorized representative submitted that as soon as the eform BEN-2 is available on the MCA V3 portal they will file it immediately.

IV. During the course of hearing, the CS of the Company and the authorized representative were specifically asked to provide a copy of registration certificate of MBL A Capital Ltd. so as to claim exemption under rule 8 of SBO rules. In addition, the Company was also required to clarify that MBL A Capital Ltd is an “Investment vehicle regulated by RBI. The Company agreed to submit their response to the aforementioned queries raised and to file BEN-2 by 22.07.2024.

F. Declaration of SBO by the company by filing BEN-2

I. In tune with the submissions made by the company, eform BEN-2 was filed by it on 17.07.2024. However, there was an apparent discrepancy as the date of declaration of SBO was shown as 08.02.2019 and the date of receipt of declaration was also shown as 08.02.2019. Incidentally, the BEN-1 attached to the said form provided that the date of receipt of declaration by SBO was 05.07.2024.

II. A clarification was sought from the company in this regard, to which it clarified vide its email dated 25.07.2024, wherein the following submission was made by the company:

Post the hearing, the Company filed form BEN-2 vide SRN AA9341663 dated 17.07.2024. Though the reason why the Company mentioned the date of receipt of BEN-1 as 08.02.2019 in form BEN-2 has already been outlined as part of the attachment to the form but we would like to again submit to your office that while considering the date of receipt of BEN-1 as 06.07.2024, the form BEN-2 was not showing any additional fees, which it ought to have shown had the form being filed in accordance with the timelines outlined under the provisions of Section 90. Therefore, in order to ensure that due additional fee is being paid, the date on which BEN-1 ought to have been received, was provided as 08.02.2019 instead of 06.07.2024.

II. As far as the issue of application of rule 8 to MBL A Capital Ltd. is concerned,

the company gave the following submissions in its letter dated 19.07.2024: Please note that MBL A Capital Ltd. is registered with RBI as a NBFC with Registration No. 8.05.007421 dated 27.02.1998. A copy of Registration Certificate of MBL A Capital Ltd. is enclosed as Annexure-2.

Further clause (f) of Rule 8 of the SBO Rules provides that an investment vehicle regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority is exempt from reporting requirements under the SBO Rules. In this regard, we would like to bring to your notice that the term ‘investment vehicle” has not been defined by RBI under the RBI Act 1934. Therefore, the same has to be understood in its literal meaning. As per general parlance, any entity which is being used to make investment can be said to be an investment vehicle. As mentioned hereinbefore, MBL A Capital Ltd. is registered with RBI as a NBFC. As per the details available on the RBI website, MBL A Capital Ltd has been classified as an investment and credit company (NBFC-ICC). Further as per the Reserve Bank of India (Non-Banking Financial Company Scale Based Regulation) Directions, 2023, an “NBFC-ICC” means any company which is a financial institution carrying on as its principal business asset finance, the providing of finance whether by making loans or advances or otherwise for any activity other than its own and the acquisition of securities; and is not any other category of NBFCs as defined by the Reserve Bank in any of its Master Directions. Therefore NBFC- ICC is a NBFC whose main business is to lend and acquire securities.

MBL A Capital Ltd. as a NBFC is in the business, inter-alia, to invest, to finance, to lend, to borrow, to deal in securities of other body corporates, firms etc. and/ or in activities which are aligned or fall within the ambit of investment vehicle. The same is also evident from its main objects outlined in the Memorandum of Association. MBL A Capital Ltd., also holds shares in MBL Infrastructure Ltd., as a long term investment and as one of the Promoters’. Thus, MBL A Capital Ltd., by nature of its operations, is an ‘investment vehicle’ and, therefore, falls within the exemption category as envisaged in Rule 8 of Companies SBO Rules.

III. The arguments of the company insofar it deals with exempting the layer of shareholding held by MBL A Capital Ltd has merits. However, the date of declaration of SBO is clearly found to be incorrect. The eform BEN-2 and form BEN-1 of the company/its SBO were further scrutinized and it was noted that Mr. Venkatesh Lakhotia has been declared as an SBO only on account of the fact that he is a partner of the partnership entity [member of the subject company] which holds more than 10% shares in the subject company. This declaration is not found to be complete.

IV. It was noted that besides being a partner in Dipika Suppliers LLP [which held 11.27% in the subject company], Mr. Venkatesh Lakhotia is also holding almost the entire stake in Aaniya Commercial Private Ltd., which is one of the partners of Dipika Suppliers LLP. Thus he is also covered under sub-clause (b) to clause (iii) to Explanation III of rule 2(1) of the Companies (Significant Beneficial Owners) Rules, 2018, as Mr. Venkatesh Lakhotia has majority stake in the body corporate partner of Dipika Suppliers LLP. Thus, the filing made in form BEN-2 does not disclose the complete picture as it ignores the additional criteria on account of which Mr. Venkatesh Lakhotia is also required to be regarded as an SBO in relation to the company.

4. Determination of default

I. The submissions of the company with regard to discrepancy in the date of declaration of SBO in eform BEN-2 and the BEN-1 are not acceptable. Insofar as BEN-2 is concerned, the filing requirement is triggered after a declaration is received in BEN-1. Thus, if the eform BEN-2 is filed within 30 days of receipt BEN-1 then no additional fees is payable. This requirement is clearly provided in rule 4 of the Companies (Significant Beneficial Owners) Rules, 2018. Perhaps, the company has mixed up its culpability in complying with the requirements of section 90 with the need to deposit additional fees on the filing of the eform. Clearly, the submission of the company is not acceptable.

II. In the instant case, the subject company has now filed eform BEN-2 on 17.07.2024. The declaration has been made by the SBO only on 05.07.2024. The liability of Mr. Venkatesh Lakhotia is being seen after the conversion of Dipika Suppliers Private Limited to Dipika Suppliers LLP on 05.07.2020 till the date of declaration by the SBO in BEN-1 on 05.07.2024.

III. Again, upon scrutiny of form BEN-2, additional defects have also been noted, which are pointed out above.

IV. The subject company and its officers are liable for action under section 90 (11) of the Act for its failure to take necessary steps as per section 90(4A) to identify the SBO in relation to the company. The liability of the company and its officers is being seen after the conversion of Dipika Suppliers Private Limited to Dipika Suppliers LLP on 05.07.2020 till the date of hearing on 12.07.2024 when the representatives of the company admitted their default. The liability of the subject company to declare their SBO was apparent. However, the subject company filed the relevant form only after the initiation of the proceedings under section 90. It clearly denotes that sufficient steps were not taken by the company to identify its SBO. All the officers, including the non-executive directors, are liable for this violation due to the presumption of clear knowledge on the part of each of such directors about the holding structure of the company.

V. The company has disclosed that it had sent notices in form BEN-4 and thus they are not liable as per rule 2A (2) of the Companies (Significant Beneficial Owners) Rules, 2018 r/w/ section 90(5)

5. The relevant provisions for adjudication

Section 90 – Register of significant beneficial owners in a company are as follows:

(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:

(2) Every company shall maintain a register of the interest declared by individuals under sub-section (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.

(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.

(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 wilfully 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.

The relevant provision Companies (Significant Beneficial Owners) Rules, 2018:

Rule 3

3. Declaration of significant beneficial ownership in shares under section 90.-

(1) Every significant beneficial owner shall file a declaration in Form No. BEN-1 to the company in which he holds the significant beneficial ownership on the date of commencement of these rules within ninety days from such commencement and within thirty days in case of any change in his significant beneficial ownership.

(2) Every individual, who, after the commencement of these rules, acquires significant beneficial ownership in a company, shall file a declaration in Form No. BEN-1 to the company, within thirty days of acquiring such significant beneficial ownership or in case of any change in such ownership.

Rule 4

4. Return of significant beneficial owners in shares.-

Where any declaration under rule 3 is received by the company, it shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration, within a period of thirty days from the date of receipt of declaration by it, along with the fees as prescribed in Companies (Registration offices and fees) Rules, 2014.

6. Adjudication of penalty: –

i. The subject company and its officers are liable for action under section 90 (11) of the Act for its failure to take necessary steps as per section 90(4A) to identify the SBO in relation to the company. All the officers, including the non-executive directors are liable for this violation due to the presumption of clear knowledge on part of each of such directors about the holding structure of the company.

ii. The declaration from SBO has also been received only after the initiation of the proceedings. Thus, there is clearly a “failure” to file in terms of section 90(10) on the part of the SBO as well.

iii. Now in exercise of the powers conferred vide Notification dated 24th March 2015, and having considered the reply submitted and hearings held in the matter, I do hereby impose the penalty on the company and its officers in default as follows:

Table- I

Table- II

a. Names of parties as mentioned in Table I and Table II above are hereby directed to pay the penalty amount as per column no. ‘E’ therein.

b. The subject company is required to make a fresh filing of eform BEN-2 to rectify the defects mentioned in the aforementioned order.

c. The said amount of penalty shall be paid through online by using the website mca.gov.in (Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

d. Appeal against this order may be filed with the Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi-110003 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 the order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].

e. Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order.

(Pranay Chaturvedi, ICLS)
Registrar of Companies
NCT of Delhi & Haryana

No. ROC/D/Adj/ 90/MBL Infra/ 3141-3152

Date: 13.08.2024