he Ministry of Corporate Affairs (MCA) has levied an Rs. 8 lakh penalty on Velotio Technologies Private Limited for violating Section 134(3)(h) of the Companies Act, 2013. The case, handled by the Registrar of Companies in Maharashtra, Pune, highlighted discrepancies in the company’s related party disclosures involving K3 Innovation Lab LLP and Velotio Technologies Inc. This adjudication emphasizes the importance of transparency and accurate reporting in corporate governance.
Adjudication Order Details
1. Background and Appointment of Adjudicating Officer: The Ministry of Corporate Affairs, through a Gazette Notification dated March 24, 2015, appointed Mangesh Jadhav, Registrar of Companies, Maharashtra, Pune, as the Adjudicating Officer under Section 454(1) of the Companies Act, 2013. This appointment empowered the officer to adjudicate penalties for non-compliance under the Act.
2. Case Facts: Velotio Technologies Private Limited, registered under the Companies Act, 2013, made a suo-moto application on June 27, 2023, acknowledging non-compliance with Section 134(3)(h) of the Act. The non-compliance related to the disclosure of a service contract with K3 Innovation Lab LLP, effective from February 15, 2018, to March 2022. The company inaccurately reported K3 Innovation Lab LLP as an “Associate Entity” in its financial statements for the years ending March 31, 2021, and March 31, 2022. Further investigation revealed significant influence from Velotio’s directors over K3 Innovation Lab LLP, establishing it as a related party.
3. Disclosure Issues: The company failed to disclose related party transactions in its financial statements and Board’s Report for multiple financial years. Specifically, the company did not report its relationship with Velotio Technologies Inc, a Delaware-registered entity influenced by Velotio’s directors, for the fiscal years ending March 31, 2020, 2021, and 2022.
4. Legal Provisions: Section 134(3)(h) of the Companies Act, 2013, mandates the disclosure of particulars of contracts or arrangements with related parties in the prescribed form. Failure to comply attracts penalties under Section 134(8), which stipulates a fine of Rs. 3 lakh for the company and Rs. 50,000 for each officer in default.
Adjudication Process
The adjudicating officer issued notices to the company and its officers, calling them to present their case on March 21, 2024. Mrs. Pallavi Viraj Salunkhe, the company’s representative, submitted necessary documents and agreements detailing the transactions with K3 Innovation Lab LLP and Velotio Technologies Inc.
Findings and Penalties
1. Violations: The adjudicating officer established that Velotio Technologies Private Limited violated Sections 129 and 134 of the Companies Act, 2013, by failing to disclose related party transactions appropriately.
2. Penalty Imposition: The adjudicating officer imposed the following penalties:
- Velotio Technologies Private Limited: Rs. 6,00,000 (Rs. 3,00,000 for each instance of non-compliance)
- Kalpak Rajkumar Shah: Rs. 1,00,000 (Rs. 50,000 for each instance)
- Chirag Hemant Jog: Rs. 1,00,000 (Rs. 50,000 for each instance)
The officer deemed the penalties commensurate with the failures committed by the company and its officers, considering the complexity and duration of the non-compliance.
Compliance and Appeals
The company and its officers are required to pay the imposed penalties through the MCA portal. They have the right to appeal against the order to the Regional Director (Western Region), Ministry of Corporate Affairs, within 60 days from the receipt of the order. Non-payment of the penalty within the prescribed 90-day limit can lead to further legal consequences under Section 454(8) of the Act.
Conclusion
This adjudication highlights the critical need for accurate and transparent reporting of related party transactions. Velotio Technologies Private Limited’s failure to comply with these requirements resulted in significant penalties, underscoring the MCA’s commitment to enforcing corporate governance standards.
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OFFICE OF THE
REGISTRAR OF COMPANIES
MAHARASTRA, PUNE
MINISRTY OF CORPORATE AFFAIRS
GOVERNMENT OF INDIA
PCNTDA Green Building BLOCK A,
1st & 2st Floor, Near Akurdi Railway Station
Akurdi Pune: 411044
Adjudication Order No. RoCP/ADJ/order/134/VELOTIO/VVG/2023/385 to 388 Date: 27 MAY 2024
ADJUDICATION ORDER
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ADJUDICATION ORDER OF PENALTIES IN THE MATTER OF VELOTIO TECHNOLOGIES PRIVATE LIMITED CIN U72100PN2016PTC164259 UNDER SECTION 454(3) R/W 134 OF THE COMPANIES ACT, 2013
Please Read:
- Companies (Adjudication of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019 (G.S.R.131(E).
- Provisions of Subsection Section 134 of the Companies Act, 2013.
- Gazette Notification of Ministry of Corporate Affairs vide No. A42011/112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015)
In respect of:
VELOTIO TECHNOLOGIES PRIVATE LIMITED CIN U72100PN2016PTC164259 having its registered office as per MCA21 Registry at address “C-504, KARAN CELISTA, SURVEY NO. 8 BALEWADI NA PUNE MH 411045 IN”.
1. Appointment of Adjudicating Officer:
Ministry of Corporate Affairs vide its Gazette Notification No. A- 42011/112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015) appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (herein after known as Act) r/w Rule 3(1) of Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Company:
VELOTIO TECHNOLOGIES PRIVATE LIMITED CIN U72100PN2016PTC164259 (herein after referred as Company) is a registered company with this office under the provisions of section 7 of the Companies Act, 2013 having its registered office as per MCA21 Registry at address “C-504, KARAN CELISTA, SURVEY NO. 8 BALEWADI NA PUNE MH 411045 IN”.
3. Facts about the Case:
a) The company vide letter dated 27.06.2023 has submitted suo-moto application under Section 454 for adjudication of penalty under Section 134 (3) (h) of the Act. as reason stated for non-compliance of the provisions in application that the applicant company has a related party as per the provisions of the Companies Act, 2013 namely K3 Innovation Lab LLP with whom it has entered into a Service Contract effective from February15, 2018 and duration of said contract is until March 2022. In AOC-2 the applicant company has mentioned Nature of relationship with K3 Innovation Lab LLP as an Associate Entity for the year March 31,2021 and March 31, 2022. As per the provisions of the Companies Act, 2013 associate company in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company and K3 Innovation Lab LLP is not a Associate Entity of the Applicant Company. Thus, there is a non-compliance in reporting of exact nature of the relationship related party for the year March 31, 2021 and March 31, 2022.
b) From the records, it is seen that the Designated partners/Partners of K3 Innovation Lab LLP are Samata Rajkumar Shah and Komal Kalpak Shah. Out of this, Samata Shah also holds 0.46°/0 shares in the instant company and Kalpak Shah (relative of Komal Shah) holds 45.12% of shares in instant company and is also a director. Therefore, it is clearly established that K3 Innovation Lab LLP is an enterprise which is significantly influenced by the Director/his relatives. As submitted by the company the contract with K3 Innovation Lab LLP is entered into on 15.02.2018. From the financial statements filed by the company the disclosure regarding K3 Innovation Lab LLP is as under:-
| Financial Year |
In financial statements disclosed as | In AOC-2 disclosed as |
| 2017-2018 | Not disclosed | Not disclosed |
| 2018-2019 | Not disclosed | Not disclosed |
| 2019-2020 | Other Related Party | Firms with relatives of Director are partners |
| 2020-2021 | Associate Entity | Associate Entity |
| 2021-2022 | Associate Entity | Relative of Director |
c) Further, the Directors of the applicant company are also directors and shareholders of Velotio Technologies Inc. incorporated and registered under the Delaware General Corporation Law with whom the Applicant Company has entered into a Service Agreement for undertaking services related to collection of payments from the customer-based US on behalf of applicant company. From the definition of related party, it can be ascertained that Velotio Technologies Inc is a related party, a body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager. The Agreement made between the applicant company and Velotio Technologies Inc is effective from 1st April 2017 and the transactions with said party started with effect from April 18, 2019. The applicant company failed to report the disclosure of related party transactions entered with Velotio Technologies Inc in AOC-2 an annexure to its Board’s Report for the year ended on March 31, 2020, March 31, 2021, and March 31, 2022.
d) Accordingly, it is established that the company and its Directors have violated the provisions of Section 129 and Section 134 of the Companies Act, 2013 for Financial Year 2017-2018 to 2021-2022. The default of Section 134 is adjudicable w.e.f. 21/12/2020. Accordingly, the default is for Financial Year 2020-2021 and 20212022 and the company to file compounding application for Section 129 (Financial Year 2017-2018 to Financial Year 2021-2022) and Section 134 (Financial Year 2017-2018 to Financial Year 2019-2020) for both instances related to K3 Innovation Lab LLP and Velotio Technologies Inc.
e) In view of the above, the adjudicating officer has issued adjudication notice vide ROCP/ADJ/ STA/ 134/Velotio/2023 dated 13th February 2024 (herein after referred as Adjudication Notice) under Section 454(4) read with 134 of the Companies Act, 2013 read with Rule 3(2) Of Companies (Adjudication of Penalties), 2014 to the company and its officers in default for the violation of the provisions of Section 134 of the Companies Act, 2013.
f) The Adjudicating Officer vide letter dated 07.03.2024 called the company and officers in default to appear before the adjudicating officer on 21.03.2024 for granting reasonable opportunity of being heard before passing an order under section 454 r/w rule 3(6). Mrs. Pallavi Viraj Salunkc, CS appcarcd before the undersigned on 21.03.2024 along with Authorization letter. She was directed to submit copy of agreement, details of transaction with both entities i.e. Velotia Technologies Inc and K3 Innovation Lab, copy of compounding application made for violation of section 129 of the Act for ascertaining the facts. She has submitted the documents along with letter dated 30.04.2024.
4. Relevant provisions of the Companies Act, 2013:
As per Section 134 (3) (h) of the Act –
(3) There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include—
(h) particulars of contracts or arrangements with related parties referred to in subsection (1) of section 188 in the prescribed form.
As per Section 134 (8) of the Act –
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.]
1. ORDER:
a) The company and its officers, who have defaulted the provisions of section 134 of the Act as the company has submitted application under Section 454 for adjudication of penalty under Section 134 (8) of the Act. Further, the company has also made a Suo moto application as reason stated for noncompliance of the provisions. Thus, the Company and its Directors have violated the provisions of the Companies Act,2013 and are liable for action under 134(8) of the Companies Act,2013.
b) In exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and having considered the facts and circumstances of the case, I do hereby impose the penalty on the company and its officers in default pursuant to Rule 3(12) of Companies (Adjudication Of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication Of Penalties) Rules, 2014 r/w General Circular No. 1/2020 dated 02.03.2020; as per table below for violation of section 134 of the Act:-
| Penalty imposed on company/director(s) | Total /maximum penalty (In Rs) | |
| 1. | Velotio Technologies Private Limited | 3,00,000 x 2 instances = Rs.6,00,000/ |
| 2. | Kalpak Rajkumar Shah | 50,000 x 2 instances = Rs.1,00,000/- |
| 3. | Chirag Hemant Jog | 50,000 x 2 instances = Rs.1,00,000/- |
c) I am of the opinion that penalty so imposed is commensurate with the aforesaid failure committed by the notice(s). Further, the delay in passing the order is on account of time taken by company to submit replies, details required to be verified in the matter being complex in nature and multiple financial years involved and other administrative reasons.
a) The Noticee(s)/applicant(s) shall pay the penalty so imposed through Ministry of Corporate Affairs portal only as per rule 3(14) of Companies (Adjudication of Penalties) Rules, 2014
b) Appeal against this order may be filed under section 454(5) of the Act, in writing with the Regional Director (Western Region), Ministry of Corporate Affairs100, Everest, 5th Floor, Netaji Subhash Road, Marine Drive, Mumbai-400002, 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 of the Act read with Companies (Adjudication Of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019.
f) Your attention is also invited to section 454(8) (ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order in terms of the provisions of section 454(8)(i) of the Act.
g) 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 VELOTIO TECHNOLOGIES PRIVATE LIMITED and all directors/officers in default mentioned herein above and also to Office of the Regional Director (Western Region) and Ministry of Corporate Affairs at New Delhi.
(Mangesh Jadhav, ICLS)
Adjudicating Officer
Registrar of Companies
Maharashtra, Pune
