In a recent adjudication by the Ministry of Corporate Affairs (MCA), WURKNET Private Limited faced penalties for non-compliance with Sections 101 and 118 of the Companies Act, 2013. WURKNET Pvt Ltd, a startup registered under the Companies Act, 2013, undertook a sub-division of its share capital without adhering to the prescribed notice period of 21 days under Section 101. The company convened an extraordinary general meeting (EGM) on short notice, contrary to the statutory requirements of the Act and Secretarial Standard 2 (SS-2).
Despite receiving approval from the shareholders during the EGM, the MCA found the company at fault for procedural lapses. The adjudicating officer, Shri B. Mishra, imposed penalties on the company and its directors, Vivan Puri and Sanjay Dinkar Ramugade, under Sections 450 and 446B of the Companies Act, 2013.
The penalties imposed were as follows:
- WURKNET Pvt Ltd: Rs. 28,000
- Vivan Puri, Director: Rs. 18,000
- Sanjay Dinkar Ramugade, Director: Rs. 18,000
These penalties were deemed appropriate considering the severity of the violations and the company’s status as a startup, eligible for lesser penalties under Section 446B.
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-Mai I ID: roc.mumbainta.gov,in
No.ROC(M)/INPL-101 118/ADJ-ORDER/12312 Date : 29 FEB 2024
Order for Penalty under Section 454 for Contravention of Section 101 & Section 118 of the
Companies Act, 2013.
IN THE MATTER OF WURKNET PRIVATE LIMITED KIN: U74999MH2019PTC333001).
1. Adjudicating Officer: Shri B. Mishra, ICLS, ROC, Mumbai
2. Presenting Officer: Ms. Rujuta Bankar, ICES, AROC, Mumbai
3. Authorised representative of Company: Ms Ashwini Shah, Partner of HAS & Co
APPOINTMENT OF ADIUDICATING 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. Whereas the Company WURKNET PRIVATE LIMITED [herein after known as Company] is registered with this office under the provisions of Companies Act, 2013 having its registered address at office 204, 2nd Floor, Shalaka, Juhu Tara Road, Santacruz (West), MUMBAI, Mumbai City, Maharashtra, 400054, India, as per the MCA21 portal
FACTS ABOUT THE CASE:
3. On 02.04.2021, the Board of Directors in its meeting approved the proposal of sub-division of the existing share capital of the Company from 10,000 Equity Shares of Rs. 10 each to 1,00,000 Equity Shares of 1 each.
4. It was also proposed in the said board meeting that approval of members in the extra ordinary general meeting would be sought on 05.04.2021 by convening the said meeting at a shorter notice.
5. Since the then existing shareholders of the Company were promoters and friends & family members of the promoters, it was orally informed to them that the extra ordinary general meeting would be held on 05.04.2021 for seeking approval for sub-division of shares as per details mentioned above.
6. The meeting was convened, and all the shareholders present provided their necessary approval. However, the due procedure laid down under Section 101 of the Act was not
7. Subsequently, the ordinary resolutions passed on 05.04.2021 approving sub-division of share capital and alteration of Memorandum of Association were filed vide SRN T17681917 in e-form MGT-14;
8. While carrying internal due diligence of the Company, the Directors/Officers-in-default were made aware of such non-compliance. Since the proposal for subdivision of shares was already approved in the extra ordinary general meeting convened on 05.04.2021, the directors noted said non-compliance in the Board Meeting and decided to file a suo-moto compounding application with the Registrar of Companies, Maharashtra, Mumbai, India which was subsequently considered for adjudication.
RELEVANT SECTIONS OF THE ACT ARE REPRODUCED AS UNDER:‑
9. 101. Notice of meeting. – (1) A general meeting of a company may be called by giving not fess than clear twenty-one days’ notice either in writing or through electronic mode in such manner as may be prescribed:
Provided that ra general meeting may he called after giving a shorter notice if consent is given in writing or by electronic mode by not less than ninety-five per cent. of the members entitled to vote at such meeting.
(2) Every notice of a meeting shall specify the place, date, day and the hour of the meeting and shall contain a statement of the business to be transacted at such meeting.
(3) The notice of awry meeting of the company shall be given to
(a) every member of the company, legal representative of any deceased member or the assignee of an insolvent member;
(b) the auditor or auditors of the company; and
(c) every director of the company.
(4) Any accidental omission to give notice to, or the non-receipt of such notice by, any member or other person who is entitled to such notice for any meeting shall not invalidate the proceedings of the meeting.
118. Minutes of proceedings of general meeting, meeting of Board of Directors and other meeting and resolutions passed by postal ballot.
(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
(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.
(3) All appointments made at any of the meetings aforesaid shall be included in the minutes of the
(4) In the case of a meeting of the Board of Directors or af, committee of the Board, the minutes shall also contain-
(a) the names of the directors present at the meeting; and
(b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring with the resolution.
(5) There shall not he included in the minutes, any matter which, in the opinion of the Chairman of the meeting,
(a) is or could reasonably he regarded as defamatory of airy person; or
(b) is irrelevant or immaterial to the proceedings; or
(c) is detrimental to the interests of the company.
(6) The Chairman shall exercise ab sohite discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in sub-section (5).
(7) The minutes kept in accordance with the provisions of this section shall he evidence of the proceedings recorded therein.
(8) Where the minutes have been kept in accordance with sub-section (1) then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and the resolutions passed by postal ballot to have keit defty passed and in particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid.
(9) No document purporting to he a report of the proceedings of any general meeting of a company shall he circulated or advertised at the expense of the company, unless it includes the matters required by this section to be contained in the minutes of the proceedings of such meeting.
(10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 7980 (56 of 1980), and approved as such by the Central Government.
(11) 1f any default is made in complying with the provisions of this sechoit irr 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 he liable to a penalty of five thousand rupees.
(12) If a pet•5°12 is found gu do, of to tg with the minutes of the proceedings of meeting, lie shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.
446B.Lesser penalties for certain companies.— Notwithstanding anything contained in this Act, if penalty is payable for non-compliance 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 of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penally which shall not he 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 inklr rupees nt case of an officer who is in default or any other person, as the case nifty be.
Explanation. — For Me purposes of this section,
(a} “Producer Company” means a company as defined in clause (I) of section 378A;
(b) “start-up company” means a private company incorporated under this Act or under the Companies Act, 1956 (1 of 7956) and recognized as start-up in accordance with the notification issued by the Central Government in the Department for Promotion of Industry and Internal Trade.
HEARING AND REPLY OF THE COMPANY
10. Ashwini Shah, Partner of HAS &T Co, being authorized representative of the Company attended the hearing in person on 16.05.2023 at 02.30 pm.
11. She submitted that being Startup Company, the initial months were largely occupied in trying to gain a foothold for its business in the market and hying different strategies to raise funds. Hence, the promoters and directors were engaged in the business
12. With limited legal and compliance knowledge, the directors were absolutely unaware of non-compliance under the act.
13. However, while carrying internal due diligence of the Company, the Applicants were made aware of such non-compliance.
14. Since the proposal for sub-division was already approved in the general meeting convened on 05.04.2021, the Directors noted said non-compliance and decided to file a suo moto compounding application with the Registrar of Companies, Maharashtra, Mumbai, India.
15. The convening of extra ordinary general meeting without following the prescribed procedure under Section 101 of the act was accidental omission, committed inadvertently and without any malafide intention.
16. Further, she submitted that the shareholders during the meeting held on 05,04.2021, were given detailed information of the proposed resolutions of the sub-division. Sub-section 4 of Section 101 of the Act provides that any accidental omission to give notice to, or the non-receipt of such notice by, any member or other person who is entitled to such notice for any meeting shall not invalidate the proceedings of the meeting. Hence in view of the above the in-principle approval of the members ought to be treated as
17. Authorized representative further submitted that since the then existing shareholders of the Company were promoters and friends (Sr family members of the promoters, it was orally informed to them that the extra ordinary general meeting would be held on 04.2023 for seeking approval for sub-division of shares as per details mentioned above.
18. The extraordinary general meeting was convened, and all the shareholders present provided their necessary approval. However, the due procedure laid down under Section 101 of the Act was not followed.
19. She also stated that the Company is a small company as well as registered as a “Startup” and submitted a copy of Registration She requested that in terms of section 446B of the Companies Act, 2013, one-half of the total penalty should be levied on the company.
FINDINGS
20. The Company has Submitted the Certificate of Registration issued by Department of Promotion Industry and Internal Trade (DPIIT), Ministry of Corrunerce and Industry bearing certificate No. DIPP 49670. Thus, provisions of Section 44613 will be applicable to the Company, being a startup recognized by the Government of India
21. As per provisions of S. 101(1) of Companies Act, 2013, ‘A general meeting of a company may be coiled by giving not less than clear twenty-one days’ notice either in writing or through electronic mode.’
By failing to give 21-days’ clear notice, the Company has violated S,101(1) punishable u/s 450 of the Companies Act, 2013.
22. Further, Secretarial Standard 2 (SS-2) provides that, the consent of not less than ninety five percent of the members entitled to vote is required in writing, either physically or electronically in order to convene a general meeting on the basis of a shorter notice of less than 21 days.
In the present case, the company has failed to follow the provisions of Secretarial Standard 2 (SS-2), by orally informing the members of convening of the ECM at a shorter notice. The Company and its Officers in default are thus liable under S. 118(11) for violation of S. 118(10) which makes it mandatory for every Company to observe Secretarial Standards with respect to General & Board Meetings.
ORDER
23. Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose a penalty on Company and its Officers in default, for violation of provisions of Section 101 read with Section 450, and Section 118(11) read with Section 446B of the Companies Act, 2013 respectively, as per tables given below.
| No. of days of default |
Penalty imposed on Company/ Director(s) | First default Penalty in (Rs. (a) | Default continues Penalty in (Rs.) (b) | Total Penalty in (Rs.)(a) (b) | Penalty levied uis 450 read with s.4465 in (Rs.) |
| 21 | 1. WURKNET PRIVATE: LIMITED (COMPANY) | 10‘ 000/- | 21 X 1,000 = 21,000/- | 10,000 + 21,000 31,000/- = | 15,500/- |
| 2. VIVAN PURI, Director | 10,000/- | 21 X 1,000 = 21,000/- | 10,000 + 21,000 31,000/‑ = | 15,500/‑ | |
| 3. SANJAY DINKAR RAMUGADE, Director | 10,000/- | 21 X 1,000 = 21,000/- | 10,000 + 21,000 31,000/‑ = | 15,500/‑ |
–
| Penalty imposed on Company/ Director(s) | Penalty in (Rs.) | Penalty levied uis 118(11) read with s.446B in (Rs.) | |
| I. | WURKNET PRIVATE LIMITED (COMPANY) |
25,000 | 12,500 |
| 2. | VIVAN PURI, Director | 5,000 | 2,500 |
| 3. | SANJAY DINKAR Director RAMUGADE, | 5,000 | 2,500 |
TOTAL PENALTY PAYABLE: ‑
1. WURKNET PRIVATE LIMITED (COMPANY) = 28,000/-
2. VIVAN PURL (Director) = 18,000/‑
3. SANJAY DINKAR RAMUGADE, (Director) = Rs. 18,000/-
24. I am of this opinion that, the penalty is commensurate with the aforesaid failure committed by every officer of the Company.
25. 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.
26. Appeal against this order may be filed with the Regional Director (WR), Ministry of Corporate Affairs, 5 Floor, 100 Everest I3uilding, Marine Drive, Mumbai, Maharashtra within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website www,gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of the order. [Section 454(3) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].
27. 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 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.
28. Where an officer of a company who is in default does not pay the penalty within a period 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 fine which shall not be less than twenty five thousand rupees but which may extend to one lakh rupees, or with
29. 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.
(BENUDHAR MISHRA)
Registrar of Companies and Adjudicating Officer,
Maharashtra, Mumbai.
