Unsigned Minutes of board meetings: Penalty Imposed

In a recent order dated November 27, 2024, the Ministry of Corporate Affairs (MCA) imposed penalties on M/s Hind Woollen and Hosiery Mills Private Limited for failing to comply with provisions under the Companies Act, 2013. The company, based in Ludhiana, Punjab, was found to have violated Sections 118(1) and 118(2) of the Companies Act, 2013, which mandate the proper recording and signing of minutes for board and shareholder meetings.

The penalty was adjudged by the Registrar of Companies (ROC) for Punjab and Chandigarh after an inquiry was conducted under Section 206(4) of the Companies Act. The inquiry revealed that the company had failed to sign and maintain the minutes of several board meetings held between 2020 and 2021. Specifically, the Chairman, Sh. Vishwa Mitter Nayyar, had not signed the minutes for meetings held in 2020, and the Chairman Sh. Raghunath Nayyar also neglected to sign the minutes for other meetings. The failure to sign and maintain these critical records led to non-compliance with the statutory requirements outlined in the Companies (Management and Administration) Rules, 2014.

The company was issued a Show Cause Notice on November 7, 2024, citing violations of Section 118(1) and Section 118(2) of the Companies Act. Despite the notice, no response was received from the company or its directors, prompting the imposition of a penalty. As per the provisions of Section 118(11) of the Companies Act, 2013, the company and its officers were held liable for a penalty.

Penalty Details
The penalties were calculated based on the provisions outlined in the Companies (Adjudication of Penalties) Rules, 2014, with adjustments made due to the company’s status as a small company under Section 446B. The penalty amounts were reduced to 50% of the maximum limits for small companies. The penalties imposed are as follows:

• Hind Woollen and Hosiery Mills (Company): ₹12,500
• Directors (Each): ₹2,500 for each of the five directors involved, including Sh. Sanjay Nayyar, Sh. Raghunath Nayyar, Sh. Sanjeev Nayyar, Sh. Arvind Nayyar, and Sh. Rajeev Nayyar.

The penalty is considered to be commensurate with the nature and duration of the violation, and the officers-in-default are required to pay the fines from their personal income.

Further Legal Implications
In case of non-compliance with the penalty payment within 90 days, the company faces a fine ranging from ₹25,000 to ₹5 lakh, and the defaulting officers may face imprisonment for up to six months or a fine between ₹25,000 and ₹1 lakh.

The company and its directors also have the option to file an appeal with the Regional Director (Northern Region) in New Delhi within 60 days, using Form ADJ and citing the grounds for the appeal.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF
COMPANIES PUNJAB AND CHANDIGARH,
CORPORATE BHAWAN
PLOT NO.4-B, SECTOR 27B, CHANDIGARH
PHONE NO.172-2639415, 2639416

Order No. ROC CHD/Adj/ RCC. 866 to 872 Dated: 27/11/2024

ORDER UNDER SECTION 454 FOR VIOLATION OF SECTION 118(1) AND 118(2) OF THE COMPANIES ACT, 2013 READ WITH RULE 25(1)(D) OF COMPANIES (MANAGEMENT AND ADMINISTRATION) RULES, 2014 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014

IN THE MATTER OF M/S HIND WOOLLEN AND HOSIERY MILLS PRIVATE LIMITED (CIN: U18101PB1970PTC002921)

1. Appointment of Adjudicating Officer

The Ministry of Corporate Affairs vide its gazette notification no.S.O.831(E) dated 24.3.2015, has appointed the undersigned as Adjudicating Officer (AO) in exercise of the powers conferred by section 454 of the Companies Act, 2013 (hereinafter known as an Act) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company

Whereas M/s Hind Woollen And Hosiery Mills Private Limited (hereinafter referred to as “the Company”) is a company registered with this office under the Provisions of the Companies Act, 2013/1956 (or previous Acts in force, as applicable) having its registered office situated at A-6, Phase V Focal Point, Ludhiana, Punjab,141010, India. As per data available at MCA website, the other details as on 31.03.2023 are as under:-

3. Relevant Provisions of the Companies Act, 2013 which are applicable in the present case

Provisions of section 118(1) ,118(2) and section 446B of the Companies Act, 2013 are as under: ‑

i) Section 118(1) “Every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting concerned, or passing of resolution by postal ballot in books kept for that purpose with their pages consecutively numbered”

ii) Section 118(2) “The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.”

iii)Section 118(11) “If any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.”

iv) Section 446B of the Act

“Notwithstanding anything contained in this Act, if penalty is payable for non­compliance of any of the provisions of this Act by a One Person Company, small company, start-up company or Producer Company, or by any of its officer in default, or any other person in respect ofsuch company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be.

Explanation—For the purposes of this section‑

(a) “Producer Company” means a company as defined in clause 0 of section 378A;

(b) “start-up company” means a private company incorporated under this Act or under the Companies Act, 1956 and recognised as start-up in accordance with the notification issued by the Central Government in the Department for Promotion of Industry and Internal Trade.”

4. Relevant Rules are as under:-

(i) Rule 25(1)(d) of Companies (Management and Administration) Rules, 2014 “Each page of every such book shall be initialed or signed and the last page of the record of proceedings of each meeting or each report in such books shall be dated and signed‑

(i)  in the case of minutes of proceedings of a meeting of the Board or of a committee thereof by the chairman of the said meeting or the chairman of the next succeeding meeting;

(ii) in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting within the aforesaid period of thirty days or in the event of the death or inability of that chairman within that period, by a director duly authorised by the Board for the purpose;

(iii) In case of every resolution passed by postal ballot, by the chairman of the Board within the aforesaid period of thirty days or in the event of there being no chairman of the Board or the death or inability of that chairman within that period, by a director duly authorized by the Board for the purpose.”

(ii) Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014

“While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely.‑

a) size of the company

b) nature of business carried on by the company,

c) injury to public interest,

d) nature of the default, ‘

e) repetition of the default,’

f) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default: and

g)the amount of loss caused to an investor or group of investors or creditors as a result of the default

Provided that, in no case, the penalty imposed shall be less than the minimum penalty prescribed, if any, under the relevant section of the Act.”

(iii) Rule 3 (13) of Companies (Adjudication of Penalties) Rules, 2014 which read as under:

“In case a fixed sum of penalty is provided for default of a provision, the adjudicating officer shall impose that _,fixed sum, in case of any default therein.”

5. Facts about the case: ‑

That inquiry under Section 206(4) of the Companies Act, 2013 was conducted against M/s Hind Woollen And Hosiery Mills Private Limited and during inquiry proceedings it was found that the Chairman (Sh Vishwa Mitter Nayyar) has not signed the minutes of certain Board meetings held on 30.06.2020. 08.07.2020. 10.08.2020, 24.08.2020, 08.12.2020 & 01.03.2021. These minutes have not been signed at all. Sh Vishwa Mitter Nayyar has been made Chairman even though he is not  present in these meetings. Further,  the Chairman Sh Raghunath Nayyar has not signed minutes books of the Board Meetings  held on 23.09.2020. 01.10.2020, 06.11.2020 & 07.12.2020. It is pertinent to mention here that as per record available, no Board meeting was held for convening of the Annual General Meeting of the subject company for the financial year ended 31st March, 2022. This office had issued Show Cause Notice for violation of section 118(1) and 118(2) of the Companies Act, 2013 r/w Rule 25(1)(d) of the Companies(Management and Administration) Rules, 2014 read with Companies (Adjudication of Penalties) Rules, 2014 to the company and its directors vide this office letter No. /CH/Legal/777 to 782 dated 07.11.2024. But no reply or communication has been received to such show cause notice sent to the company and its directors

6. Adjudication of penalty:

Therefore, it is concluded that the company and its officers in default are liable for penalty as prescribed under Section 118(11) of the Companies Act, 2013 Accordingly, I am inclined to impose a penalty as prescribed under sub-section (11) of Section 118 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default is as under:

I am of this opinion that penalty is commensurate with the aforesaid failure committed by the Noticees and penalty so imposed upon the Officers-in-default shall be paid from their personal sources/income.

It is further directed that penalty imposed shall be paid through the Ministry of Corporate Affairs portal only as mentioned under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 under intimation to this office.

7. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodhi 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].

8. Please note that as per Section 454(8):

(i)where a company fails to comply with the order made under sub-section (3) or sub-section (7). as the case may be, 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, and

(ii) in case of an officer of a company who is in default, 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.

9. In terms of the provisions of sub-rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, copy of the order is being sent to: –

Order No. ROC CHD/Adj/866 to 872 Dated: 27/11/2024