Technology Absorption details not furnished: MCA imposes Penalty of Rs. 8 Lakh

Introduction: The Ministry of Corporate Affairs (MCA) has taken decisive action against M/s SACS Infotech Private Limited for non-compliance with Technology Absorption reporting requirements. Issuing a penalty of Rs. 8 Lakh, the MCA emphasizes the significance of adhering to Section 134(3)(m) of the Companies Act, 2013. Let’s delve into the details of this adjudication and its implications.

Detailed Analysis:

1. Background and Jurisdiction:

• M/s SACS Infotech Private Limited, incorporated in 2000, faced an inquiry for violating Section 134(3)(m) of the Companies Act, 2013.
• The adjudication falls under the jurisdiction of the Registrar of Companies, Chennai.

2. Violation and Show Cause Notice:

• The violation pertains to the company’s failure to furnish Technology Absorption details, as mandated by Section 134(3)(m) and Rule 8(3)(B)(i) to (ii).
• The company received a Show Cause Notice on 20.07.2021, initiating an inquiry into the matter.

3. Sections and Rules Involved:

• Section 134(3)(m) emphasizes the attachment of a Board report containing details on technology absorption.
• Rule 8(3)(B)(i) to (ii) of Companies (Accounts) Rules 2014 outlines the specifics required in the Board’s report regarding technology absorption.

4. Observations during Inquiry:

• The Inquiry Officer noted the absence of required details in the Directors’ reports for the years 2013-2014 and 2014-2015.
• The violation prompted the Regional Director, Chennai, to issue directions for action against the company and its officers.

5. Adjudication Hearing and Penalty Imposition:

• The company and its officers attended the Adjudication Hearing on 07.09.2023, admitting the violation.
• The penalty imposed includes Rs. 6,00,000 on the company and Rs. 1,00,000 each on the two officers, totaling Rs. 8,00,000.

6. Appeal and Default Consequences:

• The aggrieved parties have the option to appeal to the Regional Director within sixty days from the receipt of the order.
• Non-payment of the imposed penalty within ninety days may lead to fines and potential imprisonment for the officers.

Conclusion: The MCA’s stringent action against SACS Infotech highlights the importance of adhering to statutory reporting requirements, especially concerning technology absorption. Businesses must diligently comply with Section 134(3)(m) and related rules to avoid penalties and legal consequences. This case serves as a reminder of the regulatory obligations that companies must fulfill to maintain corporate governance and transparency.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES,
TAMIL NADU, ANDAMAN & NICOBAR ISLANDS, CHENNAI
II FLOOR, C- WING, SHASTRI BHAVAN,
26, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI- 6

F.NO.ROC/CHN/SACS/ADJ/S.134/2023

Date 2 OCT 2023

ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALITES) RULES 2014 FOR VIOLATION OF PROVISIONS OF SECTION 134(3)(M) OF THE COMPANIES ACT, 2013 READ WITH RULE 8(3)(B)(I) TO (II) OF THE COMPANIES (ACCOUNTS) RULES, 2014. IN THE MATTER OF M/S SACS INFOTECH PRIVATE LIMITED

1. In the matter of M/s SACS Infotech Private Limited (CIN U52391TN2000PTC044744) incorporated on 17/04/2000 under the jurisdiction of Registrar of Companies, Chennai with the registered office situated at Vigneshwar Apartments, Old No.3, New No.9, Periyar Road, T.Nagar, Chennai – 600 017. Tamilnadu, India.

2. Whereas the company was taken up for Inquiry by an Officer authorized by the Central Government and this office had issued Show Cause Notice vide letter dated 20.07.2021 for violation of Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3)(b)(i) to (ii) of the Companies (Accounts) Rules 2014.

3. Whereas pursuant to sub-section (3)(m) of Section 134 of the Companies Act 2013, which read as under:

“There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include.

(m). the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed: “

4. Whereas pursuant to Rule 8(3)(b)(1) ( ii) of Companies (Accounts) Rules 2014. Which read as under:

“The report of the Board shall contain the following information and details. namely

(B) Technology absorption–

(1) the efforts made towards technology absorption:

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution:”

5.Whereas the Inquiry Officer has observed during the Inquiry that, Directors report of the Balance Sheet as at 31.03.2014 & 31.03.2015 under head of ” Technology Absorption”. The Companies has not furnished the details as prescribed in Rule 8(3)(B)(i) to (ii) of the Companies (Accounts) Rules 2014 read with Section 134(3)(m) of the Companies Act, 2013.

6. Whereas Regional Director, (SR), Chennai vide letter dated 27.06.2018 issued directions to initiate action against the company and its officers in default and the undersigned has reasonable cause to believe that the aforesaid provisions of the Act have not been complied with, and accordingly this office had issued Adjudication Hearing Notice to the Company and its Directors on 01.08.2023 fixing the hearing date as 07/08/2023.

7. Whereas in response to the hearing notice dated 01.08.2023, this office has received email dated 05.08.2023 from the Company requesting to postpone the hearing. The request has been considered by the undersigned and the hearing has been rescheduled on 07.09.2023 at 11.30 A.M. Pursuant to final hearing notice, Shri R. Thamizhvanan. (Practicing Company Secretary), Authorized by the company and directors appeared before the undersigned on 07.09.2023 and made submissions that, “the said violation may be adjudicated and accepted to pay the penalty as prescribed u/s 134(8) of the Companies Act, 2013.”

8. Whereas as per section 134 (8) of the Companies Act, 2013, which read as under:-

“If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.”

9. Shri R. Thamizhvanan. (PCS). Authorized Representative admitted the violation and hence following penalty referred to in Para No.8 is imposed on the applicant for the violation of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3)(B)(i) to (ii) of the Companies (Accounts) Rules, 2014.

Therefore in view of the above said violation of the undersigned in exercise of the powers vested to him under Section 454(1) & (3) of the Companies Act, 2013.Hereby impose a penalty of Rs.6,00,000/- to the company and Rs.1,00,000 /- each to the officer in default (Totaling Rs.8,00,000/- as penalty amount).

10. Whereas sub-section (5) of section 454 of the Companies Act,2013 provides that any person aggrieved by an order made by the adjudicating officer under sub-section(3) may prefer an appeal to the Regional Director having jurisdiction in the matter and further sub-section(6) provides that every appeal under sub-section(5) shall be filed within sixty days form the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form, manner and be accompanied by such fees as may be prescribed.

11. Please note that as per Section 454(8) (i) of the Companies Act, 2013, Where company does not pay the penalty imposed by the adjudicating officer or the Regional Director within a period of ninety days from the date of the 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.

(ii) Where an officer of a company who is in default does not pay the penalty within a periM of ninety 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 tine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.

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. Alongwith the penalty to be imposed and the same should be submitted.

B. SRIKUMAR,
ICLS REGISTRAR OF COMPANIES
TAMILNADU, CHENNAI.
ADJUDICATING OFFICER