Violation of Section 14 & Article of Association- MCA Imposes Penalty

Introduction: The Ministry of Corporate Affairs (MCA) has issued a penalty order dated 23/11/2023 against Dehra Dun Club Limited for a violation of Section 14 of the Companies Act, 2013. The adjudication order, under Section 454(3) of the Act, highlights the company’s breach of the Companies (Adjudication of Penalties) Rules, 2014.

Detailed Analysis:

1. Appointment of Adjudicating Officer: The MCA appointed the Registrar of Companies, Uttarakhand, as the Adjudicating Officer, exercising powers under Section 454 of the Companies Act, 2013. This appointment is in line with the Companies (Adjudication of Penalties) Rules, 2014.

2. Company Overview: Dehra Dun Club Limited, a registered company since 12/08/1957, faced scrutiny for violating Article 42 of its Articles of Association during the financial years 2020-21, 2021-22, and 2022-23. The breach involved the consecutive election of Mr. Bipin Berry and Mr. Vijay Khanna to the Managing Committee.

3. Facts of the Case: The company argued that the pandemic caused delays in conducting the Annual General Meeting (AGM) for the financial year 2020-21, leading to the inadvertent continuation of Mr. Bipin Berry and Mr. Vijay Khanna’s terms. The company attributed the violation to the extraordinary circumstances created by the COVID-19 pandemic.

4. Relevant Legal Provisions: The Sections 14(1), 14(2), and 14(3) of the Companies Act, 2013, were invoked in the adjudication process, emphasizing the legal framework governing alterations in a company’s articles. Additionally, Article 42 of the Articles of Association was cited to support the breach claim.

5. Adjudication of Penalty: As Section 14 of the Companies Act, 2013, does not prescribe a specific penalty, the general penalty under Section 450 of the Act was levied. A penalty of Rs. 10,000 was imposed on Dehra Dun Club Limited, Bipin Berry, and Vijay Khanna. The company and its directors were instructed to rectify the default promptly.

Conclusion: The adjudication order underscores the importance of adherence to corporate regulations, even in exceptional circumstances. Dehra Dun Club Limited is directed to pay the prescribed penalties within 90 days and rectify the default. The order also outlines the appeal process and highlights the consequences of non-compliance with the penalty payment timeline.

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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES
CUM-OFFICIAL LIQUIDATOR,
UTTARAKHAND
ATTACHED TO HIGH COURT, NAINITAL
OFFICE AT MEZZANINE FLOOR, 78, RAWUR ROAD
SHRI RADHA PLACE, DEHRADUN — 248001 (U.K.)
Phone : 0135 — 2745012/2745013

Order No.ROC/UK/Dehra Dun Club/Penalty Order/2023/1119 to 1122 Dated : 23/11/2023

ORDER

ADJUDICATION ORDER FOR PENALTY UNDER SECTION 454(3) OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 FOR VIOLATION OF SECTION 14 OF THE COMPANIES ACT, 2013 IN THE MATTER OF Dehra Dun Club Limited (CIN U9111OUR1957NPL000040)

1. Appointment of Adjudicating Officer:–

The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-Ad.II date 24.03.2015, has appointed Registrar of Companies, Uttarakhand as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 {herein after referred as Act} read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company:–

Whereas the Company Dehra Dun Club Limited [herein after known as Company] is a registered company with this office under the provisions of Companies Act, 2013/1956 (or previous Acts in force, as applicable) on 12/08/1957, having its registered office situated at 15 R B. UGRASEN ROAD Dehradun, Uttarakhand — 248001 as per MCA website. The financial & other details of the subject company for immediately preceding Financial Year as available on MCA-21 portal is stated as under: –

3. Facts of the Case: –

The Company has fled application u/s 454 r/w Section 14 of the Companies Act, 2013.The Registrar of Compan es in its SCN issued has pointed out that two of the members, namely Mr. Bipin Berry and Mr. Vijay Khanna were on the Managing Committee for two consecutive terms during the financial years 2020-21 and 2021-22. Thereafter, in the financial year 2022-23 also they got elected as they members of the managing committee in the violation of Article 42 of the article of association of the company.

The Company has submitted its response stating that the AGM of the Company for the financial year 2020-21 was held with great difficulties due to the pandemic in the year 2020 and 2021.The management Committee of the Club could not be formed timely due to various COVID guidelines issued by the local authorities and the Government of India and due to ongoing COVID pandemic scare. As a result, these existing members continued their term on the committee in the subsequent year primarily for smooth functioning of the club under the extraordinary difficult conditions.

The Company in its Application has stated that the continuity of aforesaid two members was inadvertent and primarily due to COVID that disrupted the usual functioning of the Club during the relevant time period due to which elections to the Management Committee of the Club could not be held timely and smoothly. The Club hereby makes an adjudication application for the default Committed for the F nancial Year 2022-23 under section 14 of The Companies Act,2013. The Default ccmmitted was inadvertent and there was no malafide intention of the management behind

this.

The Relevant Provisions of Sections 14 are reproduced as under:

Section 14(1)-Subjec: to the provisions of this Act and the conditions contained in its memorandum, if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion cf—

(a) a private ccmpany into a public company; or

(b) a public company into a private company:

Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company. Provided further that any alteration having the effect of conversion of a public company into a private company shall not valid unless it its approved by an order of the Central Government on an application made in such form and manner as may be prescribed:

Provided also that ary application pending before the Tribunal, as on the date of commencement of the Companies (amendment) Act, 2019, shall be disposed of by the Tribunal in accordance with the provisions applicable to it before such commencement.

Section 14(2)-Every alteration of the articles under this section and a copy of the order of the Central Government] approving the alteration as per sub-section (1) shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the same.

Section 14(3)- Any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act, be valid as if it were originally in the articles.

Article 42-of the AOA The period of continuous membership of managing committee shall be limited to 2 terms at a time. In other words, person who has served for 2 continuous terms on the Managing Committee as member shall wait for 2 terms before seeking re-election of the Committee either as a member or as President.

Section 450- If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continue, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person

4. ADJUDICATION OF PENALTY: –

In the present case it is evident that the company has made violation of section 14 of the Companies Act, 2013.However, since no penalty has been prescribed under section 14 of the Act, general penalty u/s 450 of the Act shall be Levied in this case.

Mr. Anupam Nagalia, Director and Ms. Manisha Rawat, Company Secretary appeared on behalf of the Company on 21.11.2023.

However, since penalty prescribed under section 450 of the Companies Act, 2013 is an amount of Rs. 10,000/-so it is levied on the company that is M/s. Dehra Dun Club and Officers in default as mentioned below:

a) The company and its directors are hereby directed to rectify the defaul: immediately on the date of receipt of copy of this order.

b) The notices shall pay the said amount of penalty as mentioned in column C above through online mode by using the website mca.gov.in (Misc. head) in favor of Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

c) Appeal against this order may be filed with the Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryanvaran Bhawan, CGO Complex, Lodhi road, New Delhi —110003 within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website mca.gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of the order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].

d) Your attention is also invited to section 454(8) of the Act in the event of non-payment of penalty within the prescribed time limit

e) 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 Company and its officer in default and also to Office of the Regional Director (Northern Region), Ministry of Corporate Affairs at New Delhi.

(Imran Ahmad Siddiqui)

ROC-Cum-O.L. & Adjudicating Officer

Uttarakhand, Dehradun.

Copy to:

No.LC/SCN 14/ROC/UK/20231

Dated .11.2023

1. M/s Dehra Dun Limited

15R.B Ugrasen Road,

Dehradun-248001,

Uttarakhand, India

No.LC/SCN 14/ROC/UK/20231

Dated .11.2023

2. Shri Suneet Mehra,

Designation: President,

Address:114 Canal Road, Kishanpur,

Dehradun-248001,

Uttarakhand, India

Copy for Kind Information and Records to:

1. The Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing 2nd Floor, Pt. Deendayal Upadhyay Bhawan, CGO Complex, Lodhi Road, New Delhi-110003

2. Email to E-Gov. Cell, Ministry of Corporate Affairs for publication on Ministry’s website