The recent imposition of a penalty on M/s. Martin Realty Private Limited by the Ministry of Corporate Affairs sheds light on the serious consequences of violating Section 179(3)(f) of the Companies Act, 2013.
The case involves M/s. Martin Realty Private Limited’s failure to comply with the provisions of Section 179(3)(f), which requires board approval for certain financial transactions. The company inadvertently made a payment of Rs. 1,30,15,000 to M/s. Aadhi Builders Trichy, which was meant to be made by an individual, Mrs. M. Leema Rose. Despite rectifying the error promptly upon discovery, the company failed to obtain the necessary board resolution for the transaction.
Section 179(3)(f) mandates that the board of directors must pass a resolution for granting loans, providing guarantees, or offering security for loans. Failure to comply with this provision constitutes a contravention under Section 450 of the Act, subjecting the company and its officers to penalties.
The adjudicating officer, considering the circumstances of the case, imposed a penalty of Rs. 1,75,000 on M/s. Martin Realty Private Limited and its directors. This penalty, though significant, reflects the seriousness of the violation while taking into account the company’s status as a small entity.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES
TAMILNADU — COIMBATORE
No.7 A G T BUSINESS PARK, PHASE II, 1ST FLOOR,
PEELAMEDU, COIMBATORE – 641014
e-Mail roc.coimbatore@mca.gov.in
Order Ref: ROC/CBE/A.O./179/13718/2024 Date: 28.03.2024
Order for Penalty under Section 454 for violation of Section 179 of the Companies Act, 2013 read with the Companies (Adjudication of Penalties) Rules, 2014
IN THE MATTER OF M/s. Martin Realty Private Limited.
CIN: U45201TZ2007PTC013718.
Appointment of Adjudicating Officer:
1. Ministry of Corporate Affairs vide its Gazette Notification No.A-42011/112/2014-Ad.II dated 24.3.2015 appointed 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:
1. Whereas Company M/s. MARTIN REALTY PRIVATE LIMITED (hereinafter Known as Company) is a company registered with this office under the provisions of Companies Act, 2013 having its registered address at 54, Mettupalayam Road, G N Mills Post, Coimbatore – 641 029.
Facts of the case:
2. The company and its directors have filed suo-moto application in this office on 01.11.2023 for adjudication of the penalty for violation of section 179 (3) (f) of the Companies Act, 2013.
3. The undersigned in exercise of power conferred under sub section 4 of section 454 of the Companies Act, 2013 with a view to give a reasonable opportunity of being heard before imposing any penalty, fixed the date of hearing on 20/03/2024 at 11.00 AM to adjudicate the penalty for violation of provision of section 179 (3) (f) of the Companies Act, 2013.
4. Board of Directors of the Company vide their resolution dated 31/08/2023 authorized Ms. M. Jayasree , Chartered Accountant to act as authorized representative of the company before the Registrar of Companies, Coimbatore, to carry out the formalities for the Adjudication of Penalties under Section 454 of the Companies Act, 2013.
5. During the hearing on 20/03/2024, Ms. M. Jayasree, Chartered Accountant and authorized representative of the Respondent made submissions that during the Financial Year 2020-21 there was a transaction for Rs. 1,30,15,000/- related to payment made to M/s. Aadhi Builders Trichy which was wrongly paid by the company instead of payment to be made by Mrs. M. Leema Rose. The fact was found out by the company on 31.03.2021, and on the same day, the amount was repaid by Mrs. M. Leema Rose to the Company. However the company did not obtain specific Board Resolution for the above transaction as the fact that the payment ought not to have been made by the company was known only on 31.03.2021 and immediate recovery action was taken.
Provisions of the Companies Act, 2013
6. Sub-Section (1) of Section 179 (3) (f) of the Act provides that the Board of Directors of a company shall exercise powers on behalf of the company by means of resolution passed at meetings of the Board to grant loans or give guarantee or provide security in respect of loans.
7. Section 450 provides that if a company or any officer of a company contraventions any of the provision of the Act or the rules made thereunder for which no penalty or punishment is provided elsewhere in the Act, the company and every officer of the company who is in default or such other persons 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 continues 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.
ORDER
8. Having considered the facts and circumstances of the case and the submissions made by the authorized representative of the Respondent, being a small company the Adjudicating officer do hereby impose penalty under section 446 B of the Act on Company and its director as per Table below for violation of Section 179 (3) (f) of the Companies Act, 2013.
| S. No | Name of the Respondents | Amount(In Rupees) |
| 1. | M/s. Martin Realty Private Limited | 1,00,000 |
| 2. | Shri. Martin Jose Daison | 25,000 |
| 3. | Shri. Arokiyam John Kennedy | 25,000 |
| 3. | Shri. Daisy Aadhav Arjuna | 25,000 |
| TOTAL | 1,75,000 |
9. The penalties imposed as under should be paid by the Respondents as per Law and submit the copies of Challan to this office. The company should file the INC 28 with attachment of this order and copy of aforesaid Challan.
10. The company and its directors are hereby directed to rectify the defect immediately on receipt of copy of this order.
11. The penalty imposed shall be paid through the Ministry of Corporate Affairs portal only.
12. Appeal, if any against this order may be filed in writing with the Regional Director, Southern Region, Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26, Haddows Road, Chennai-600 006 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 Companies Act, 2013 read with the Companies (Adjudicating Of Penalties) Rules, 2014).
13. Your attention is also invited to Section 454(8) of the Act regarding consequences of non-payment of penalty.
14. In terms of the provisions of sub-rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, a copy of this order is being sent to Company M/s. Martin Realty Private Limited and its directors.
And to:-
1. Regional Director, Southern Region, Ministry of Corporate Affairs, Chennai.
2. Director, Legal Section, Ministry of Corporate Affairs, 5th Floor, ‘A’ Wing, Shastri Bhawan, Dr. R. P. Road, New Delhi-110001.
3. E Governance Cell, Ministry of Corporate Affairs, Shastri Bhawan, 5th Floor, ‘A’ Wing, Dr. R. P. Road, New Delhi-110001.
Place: Coimbatore
Date: 28/03/2024
(BRIJESH KUMAR KAIN),ICLS
REGISTRAR OF COMPANIES
TAMILNADU, COIMBATORE.
