Subway Finance Ltd. Penalized for late-filing of Financial Statement

Introduction: The recent adjudication order pertaining to Subway Finance and Investment Co Ltd highlights a significant breach of Section 137 of the Companies Act 2013. This article provides a comprehensive overview of the case, examining the violation, regulatory provisions, and ensuing penalties.

Detailed Analysis: Subway Finance and Investment Co Ltd, a registered company, faced regulatory scrutiny due to its failure to comply with the statutory obligation of filing financial statements within the stipulated timeframe as mandated by Section 137 of the Companies Act 2013. The company’s default in filing the financial statement for the financial year 2018-2019, with a delay of 361 days, led to the initiation of adjudication proceedings.

The adjudication process, initiated under Section 454 of the Companies Act 2013, underscores the gravity of regulatory non-compliance and its ramifications on corporate entities. Despite receiving a show cause notice, neither the company nor its officers in default responded, exacerbating the severity of the violation.

The adjudicating officer, duly appointed by the Ministry of Corporate Affairs, invoked powers conferred under the Companies Act 2013 to impose penalties commensurate with the breaches. A penalty of Rs. 3,61,000/- was levied on the company, with individual penalties imposed on the managing director, totaling Rs. 6,33,200/-.

The order elucidates the procedural intricacies, emphasizing the imperative for companies and their officers to cooperate during adjudication proceedings. It underscores the potential repercussions of non-compliance, including fines and prosecution under the Companies Act 2013.

Conclusion: The adjudication order against Subway Finance and Investment Co Ltd serves as a stark reminder of the importance of regulatory adherence in the corporate landscape. Non-compliance with statutory provisions, such as timely filing of financial statements, can attract significant penalties, underscoring the need for stringent compliance measures. As companies navigate the regulatory framework, proactive adherence to legal obligations emerges as a cornerstone for sustainable business operations and regulatory resilience.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES
100, “EVEREST”, MARINE DRIVE,
MUMBAI – 400 002
Website : www.mca.gov.in
e-Mail ID : [email protected]

No. ROC(M)/SFICL/ADJ-ORDER/5911 to 5914

Date: 18 DEC 2023

Order for Penalty under Section 454 for violation of Section 137 of the Companies Act, 2013.

IN THE MATTER OF SUBWAY FINANCE AND INVESTEMENT CO LTD
(L65990MH1983PLCO2930).

Appointment of Adjudicating Officer: –

1. Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad. II dated 24.03.2015 appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 [herein after known as Act] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

Company: –

2. The Company SUBWAY FINANCE AND INVESTEMENT CO LTD bearing CIN: L65990MH1983PLCO29350 (herein after known as ‘Company’) is a registered company with this office under the provisions of the Companies Act, 1956 having its registered office as per MCA masterdata at address EASTERN COURT, B 101, 1st FLOOR, JUNCTION OF TEJPAL & PARLESHWAR ROAD, VILE PARLE, Mumbai City, MUMBAI, Maharashtra, India, 400057.

Relevant Provisions of the Companies Act, 2013

3. Section 137- Copy of financial statement to be filed with Registrar. — (2) A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed ***:

Provided that where the financial statements under sub-section (1) are not adopted at annual general meeting or adjourned annual general meeting, such unadopted financial statements along with the required documents under sub-section (1) shall be filed with the Registrar within thirty days of the date of annual general meeting and the Registrar shall take them in his records as provisional till the financial statements are filed with him after their adoption in the adjourned annual general meeting for that purpose:

Provided further those financial statements adopted in the adjourned annual general meeting shall be filed with the Registrar within thirty days of the date of such adjourned annual general meeting with such fees or such additional fees as may be prescribed ***:

Provided also that a One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year:

Provided also that a company shall, along with its financial statements to be filed with the Registrar, attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and which have not established their place of business in India.

Provided also that in the case of a subsidiary which has been incorporated outside India (herein referred to as foreign subsidiary), which is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the requirements of the fourth proviso shall be met if the holding Indian company files such unaudited financial statement along with a declaration to this effect and where such financial statement is in a language other than English, along with a translated copy of the financial statement in English.

(2) Where the annual general meeting of a company for any year has not been held, the financial statements along with the documents required to be attached under sub-section (1), duly signed along with the statement of facts and reasons for not holding the annual general meeting shall be filed with the Registrar within thirty days of the last date before which the annual general meeting should have been held and in such manner, with such fees or additional fees as may be prescribed ***.

(3) If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified therein the company shall be liable to a penalty of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupees.

Facts about the case: –

4. In terms of provisions of Section 137 of the Companies Act, 2013, the Company was required to file the Financial Statement within thirty days from the date of Annual General Meeting held in pursuance of Section 96 of the Companies Act, 2013.

5. It was observed as per the MCA21 database, that the Company has defaulted in filing its Financial Statement for the Financial Year 2018-2019. The company is in violation of provisions of Section 137 of the Companies Act, 2013 for non-filing of Financial Statement for the financial year ended 31.03.2019 with a delay of 361 days. The due date of filing was 30.10.2019, however, the failed to file its Financial Statement for the Financial Year 2018-19.

6. This office had issued a Show Cause Notice to the Company and its Officers in default on 26.10.2020 under Section 454 of the Companies Act, 2013 for adjudication of offence under Section 92(5) of the Companies Act, 2013.

Reply of the Company: –

7. No reply has been received by this office from the Company and its Officers in default till date.

FINDINGS: –

8. As observed from the MCA21 database, the Company has failed in filing Financial Statement within the time prescribed by the provisions of Section 137 of the Companies Act, 2013.

9. It is also observed that no reply has been received from the Company and its Officers in Default to the Show Cause Notice till date.

10. As per Section 454 of the Companies Act, 2013 read with Rule 3(11) of Companies (Adjudication of Penalties) Rules, 2014, if the Company and Officers in default fail to reply or neglect or refuse to appear as required, the adjudicating officer may pass an order imposing the penalty in the absence of such person after recording the reasons for doing so.

11. As no reply has been received till date and the violation of the said provision has been established from the MCA21 database, the following Order is being passed.

12. Further, as per the provisions of Section 2(60) Read with Section 2(51) of the Companies Act, 2013 KMPs are being considered as Officers in Default. Hence, penalty is being levied on Mr. Ishan Rahul Shah (Managing Director) and not on the other noticees viz Mr. Sandeep Padmakant Parikh (Director), Mr Dilip Madhubhai Keralia (Director), Ms. Janki Nehal Shah (Director). Ms. Bhavana Suketu Shah (Director) and Ms. Sangita Kalpesh Shah (Director).

ORDER

13. In exercise of the powers conferred on me vide Notification dated 24.03.2015 and having considered the facts and circumstances of the case and after taking into account the factors mentioned in the relevant Rules, I am of the opinion that penalty shall be imposed for the default related to non-compliance of section 137 of the Act. The delay, if any, in passing of the order is due to the legal complexities involved in the matter.

14. Having considered the facts and circumstances of the case and after taking into consideration the above-stated factors, I hereby impose a penalty of Rs. 3,61,000/-on the Company (Rupees Three Lakhs and Sixty-One Thousand only) on the Company and Rs.1,36,100/- (Rupees One Lakh Thirty-Six Thousand and One Hundred Only) on its Officer in default, each, as per table given below for violation of provisions of Section 137 of the Companies Act, 2013.

TOTAL PENALTY PAYABLE: – Rs.6,33,200/-

(♦) The period of violation of provisions under Section 137 of the Companies Act, 2013 is from 31.10.2019 till 25.10.2020. As per signatory details available on MCA21 portal, the abovementioned individual was the Officer in default during the period of violation.

(♦) Due date of filing was 30.10.2019 and Financial Return has not been filed till the dispatch of the Show Cause Notice being 26.10.2020. Default period is thus calculated to be at a total of 361 days till 25.10.2020.

15. I am of this opinion that, the penalty is. commensurate with the aforesaid failure committed by the Noticee/s.

16. The Noticee/ s shall pay the said amount of penalty through “Ministry of Corporate Affairs” portal and proof of payment be produced for verification within 90 days of receipt of this order.

17. Please note that as per Section 454(8)(i) of the Companies Act, 2013, where the Company does not pay the penalty imposed by the Adjudicating Officer or the Regional Director within a period of 90 days from the date of 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.

18. Where an Officer of a Company, who is in default, does not pay the penalty within a period of 90 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.

19. Therefore, in case of default in payment of penalty, prosecution will be filed under Section 454(8)(i) and (ii) of the Companies Act, 2013 at your own costs without any further notice.

20. Further, the company and its officers are hereby direct that the penalty amount shall be remitted from their own sources through MCA21 portal within 60 days from the date of receipt of order. The company needs to file INC-28 as per the provisions of the Act, attaching the copy of the adjudication order along with payment challans.

21. As per Section 454 of the Companies Act,2013 read with the Companies (Adjudicating of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, appeal, if any, against this order may be filed in writing with the Regional Director, Western Regional, Ministry of Corporate Affairs, within a period of 60 days from the date of receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by the certified copy of this order.

22. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to the Company and Noticee/s and also to Office of the Regional Director, Western Region, Ministry of Corporate Affairs.

(B MISHRA)
Adjudication officer and Registrar of Companies,
Maharashtra, Mumbai.