RD Hyderabad order

Order of Regional Director (RD), Hyderabad in the matter arising out of appeal from a ROC, Andhra Pradesh order against the company ATR Cars Private Limited and its two directors for not appointing a whole time company secretary as required under section 203 of the companies act, 2013.

The ROC, had levied a penalty of Rs.5.00 lakhs each on the company and two directors, totaling Rs.15 lakhs.

Upon appeal, the authorised representative pleaded that the company is making accumulated losses and not making any profit and therefore not in a position to appoint a whole time company secretary as required under the Act. Even then the company had appointed a whole time company secretary on 01/09/2022.

The RD considered the appeal and reduced the penalty to Rs.83,850 for the company and Rs.43,850 each for the two directors, totaling Rs.171,550/-.

That is a huge reduction in the penalty from Rs.15 lakhs to Rs.1.71 lakhs to the extent of almost 89% from the original amount levied. The penalty levied by the RD makes sense in the circumstances cited by the company for not appointing a whole time company secretary. Otherwise a penalty of Rs.15 lakhs was too much to bear – it might have been higher than the annual cost of employing a whole time company secretary.

For copies of the RD orders, you can go to

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

ROC Ahmedabad order

ROC (Registrar of Companies), Ahmedabad adjudicating order on company Gandharv Gems Private Limited for not maintaining registered office as required under section 12 of the Companies Act, 2013.

The company had been sent notices by the ROC office but these notices were returned back with the remark saying “closed company, addressee cannot be located”. ROC sent three more notices calling for adjudicating the matter and fixing the date of hearing, but all notices were left undelivered and nobody came to represent the company.

Therefore ex-parte order, penalty on the company and 5 directors Rs.1 lakh each, total penalty Rs.6 lakhs.

Incidentally penalty was levied on two directors who resigned in March 2021 and two directors who were appointed in November, 2021. Therefore director resigning and trying to escape from penal provisions will not work.

The company’s paid up share capital is Rs.1 lakh. Total penalty is 6 times the paid up share capital of the company, of course the penalty on the directors will have to be met by them from their own personal funds.

To view the ROC orders you can go to

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

e-signing

MCA has made amendment to the Companies (Registration Offices and Fees), Rules by inserting a new rule 8A which provides for e-signing of forms etc .by insolvency resolution professional or resolution professional or liquidator as the case may be.

This is in case of companies undergoing Corporate Insolvency Resolution Process wherein the Board of Directors have been superceeded and the resolution professional runs the show.

The operative part of the circular reads as under:

disqualification of directors

MCA has carried out some amendments to the Companies (Appointment and Qualifications of Directors), Rules, 2014, wherein it has some technical rectifications arising out of drafting errors in the previous amendments.

Whenever the company receives the form DIR-8 from the directors intimating about any disqualifications which he has attracted under the provisions of section 164 of the companies act, 2013, then it is mandatory for the company to file the form DIR-9 in this regard.

But pertinent to note that disqualifications under section 164(2)(a) is not covered under these rules. This rule pertains to non filing of annual financial statements or annual returns for any continuous period of three financial years. DIR-9 is not required to be filed for this sub-section and also removal of disqualification in form DIR-10 does not also cover the said disqualification.

foreign company

MCA has vide its amendment to the Companies (Registration of foreign companies), rules, amended one clause which required details of the father’s name, or mother’s name and spouse name of the directors and secretary of the foreign company within 30 days of its incorporation.

Now the amendment requires the details of father’s name, or mother’s name or spouse name.

This is more like a drafting error which is being rectified.

issue of bonus shares

MCA has vide its notification dated 20th January 2023 amended the Companies (Prospectus and Allotment of Securities) Rules, 2014 to provide that copy of resolution authorising issue of such bonus shares passed in the general meeting need not be attached to the form PAS-3.

Sub rule 6 of rule 12 of Companies (Prospectus and Allotment of Securities) Rules, 2014 has been omitted.

Sub-rule 6 mentioned this

rule 12 pertains to return of allotment of securities.

buy-back rules

MCA has vide amendment dated 21st January, 2023 amended the Companies (Share Capital and Debentures) Rules, 2014 – Rule 17 pertaining to buy-back of securities. 

Sub-Rule 14 has been amended to provide for declaration to be annexed to form SH-11 instead of a certificate in form SH-15. 

All other provisions remain the same. 

ROC Patna order

ROC (Registrar of Companies), Patna adjudication order on a company Chanpatia Farmer PRoducer Company Limited for not affixing or painting the name of its registered office on the outside of its registered office.

ROC officials had done an inspection and found that there is no sign board outside the registered office indicating the name, address, CIN no. GST no. (if any) etc. on a prominent place outside its registered office.

Since its a producer company the penalty amount is half of the normal penalty amount for a non producer company. The period of default is two days only. The company had subsequently rectified the omission and sent photographs to the ROC.

Still for the purpose of levying a penalty, an amount of Rs.1000/- each was levied on the company and its 5 directors. Total amount of penalty Rs.6000/-.

Really, for these trivial matters, ROCs are levying penalties, its laughable to say the least. The company should have been just let off with a warning. I think the warning provision is not there in the rules, first offence should be a written warning and only if the companies are committing repeated offences, penalties should be levied.

To view copies of these orders, please visit

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

ROC Coimbatore order

ROC (Registrar of Companies), Coimbatore adjudication order in the case of Maxwell Detective Force Private Limited for non filing of audited financial statements and annual return for three financial years i.e. 2018-19, 2019-20 & 2020-21.

Penalty levied on the company and the two additional directors – total amount of Rs.11.36 lakhs. Incidentally the company has not filed any annual returns after 2018. The paid up share capital of the company is only Rs.4 lakhs and the penalty is Rs.11.36 lakhs.

I fail to understand the logic of levying such hefty penalties way above the paid up share capital and networth of the company.

Further both the directors are shown as additional directors on the MCA portal, which is another violation because as additional director they can hold that position only upto the next annual general meeting of the shareholders of the company. Whether ROC, Coimbatore forgot to initiate action under that section as well?

Also the DIN of one director has been deactivated due to non filing of DIR-3-KYC, whereas the DIN of the other director is active. Why the DIN of these directors have not been disqualified pursuant to section 164(2) for non filing of annual financial statements or annual returns for any continuous period of three financial years.

Copy of the ROC orders can be found at

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

GNL-2 filings

MCA has clarified vide their circular no. 2/2023 dated 9/1/23 that companies which are required to file the GNL-2 and MGT-14 for the purpose of prospectus related documents, which are time bound, and which cannot wait for the migration from V.2 to V.3 to take place, can now by filed physically with the respective ROCs.

Company should also give an undertaking that once the form has been enabled on the V.3 portal, then they shall file the same on the V.3. portal after it opens up. In the meanwhile physical filing shall be without fees. Filing with fees shall be done only after the forms are enabled on the V.3. portal.

Begs to ask the question, why MCA could not have foreseen this eventuality and why both the systems i.e. V.2. and V.3 could not run simultaneously. Last time when the V.3. was rolled out it was a horrendous experience for the professionals.

Copy of the said circular can be found at the MCA site.

registered office

ROC (Registrar of Companies), Chattisgarh adjudicating order on a company Mamta Residency Private Limited for not maintaining its registered office at the premises mentioned in the MCA records.

The ROC had sent notice to the company and directors in view of the amalgamation proposal filed by the company. However, the notices which ROC sent were returned undelivered, hence the assumption that the registered office is not being maintained.

The notices were received by the Directors at their addressess, though.

The company replied vide representation that the premises was undergoing renovation hence there was nobody posted at the office to receive notices. The guard who was supposed to receive the notices was derelict in his duty.

However, the ROC disregarded the contentions of the company and levied a penalty of Rs.100,000/- each on the company and its two directors.

Maintaining a person to sit at the registered office has become a must in the adjudication era of the MCA as maximum adjudication orders are for not maintaining the registered office under section 12 of the companies act, 2013. MCA should come out with guidelines as to what construes not maintaining registered office. Mere one instance of letters returning undelivered cannot be considered as irrefutable proof that the company is not maintaining its registered office.

Also many companies (not alluding to this company) are tech companies where the very requirement of a registered office has become obsolete especially as companies are operating in the digital era. In the era of metaverse and artificial intelligence and robotics, digital currency, digital wallet etc. requirement of having a physical registered office where one person is required to sit there 24/7/365 is obnoxious to say the least.

To view copies of the orders, please visit here

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

non appointment of company secretary

ROC (Registrar of Companies), Delhi adjudication order against a company Alpur Solar Private Limited for non appointment of a company secretary after the previous one resigned.

The previous company secretary resigned on 28/01/2021 and the new appointment was made on 24/01/2022. The rules give leeway to appoint a new company secretary in place of the one resigned within a period of six months. Therefore the non compliance has occurred for 180 days.

Penalty for not appointing a company secretary is Rs.500,000 on the company and Rs.50,000/- on the directors and key managerial personnel and where there is a continuing default a further penalty of Rs.1000/- per day during which the default continues.

The ROC has levied penalty of Rs.500,000 on the company and Rs.2,30,000/- on the 5 directors of the company. Total penalty for not appointing a company secretary for 6 months comes to Rs.1,650,000/-. The company pleaded that due to the covid regime, it was unable to get good candidates and therefore compliance suffered, still the ROC levied these penalties.

The adjudicating order mentions the threshold limit for appointment of a company secretary as Rs.5 crores, whereas it has been enhanced to Rs.10 crores vide amendment made on 3rd January, 2020. Shows the extent to which the government officers are uptodate with the regulations made by them itself.

In my view, for the first offence the adjudicating authorities should let off with a strict warning. For second and subsequent offences, the penalties as per the applicable rules should be levied.

I doubt whether the salary of a company secretary for an entire year would come to Rs.1,650,000/-. Heavy penalty on the company.

For copies of orders you can visit here.

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

ROC Chattisgarh order

Registrar of Companies (ROC), Chattisgarh adjudication order against a company Zigma Dealcomm Private Limited for not maintaining its registered office as per section 12 of the companies act, 2013.

The ROC had issued a letter to the company’s registered office and also a reminder, but both letter and reminders were returned undelivered. The letters were also issued to the Directors but theirs was not returned undelivered.

Therefore the ROC surmised that the company is not maintaining its registered office at the address stipulated in the master data. Adjudication notice was issued and a representation was made with facts and evidence but apparently on the date when the ROC issued the letters and reminders, there was no evidence that the registered office was maintained.

The ROC therefore levied a penalty of Rs.50,000/- each on the company and its two directors, total Rs.150,000/-

Moot question that arises here is why is ROC still issuing paper notices by mail/ courier to the companies when it can very well issue a notice by e-mail to the e-mail address that is maintained at the master data. The MCA maintains e-mail ids of all the Directors as well, which is what the DIR-3-KYC was introduced for.

Other regulatory authorities like GST, Income Tax, issue notices by e-mail with reminders on SMS and whatsapp, if any. Why MCA cannot adopt the same procedure for sending its notices, its not clear.

Copies of the orders can be found here

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

ROC Coimbatore order

Registrar of Companies (ROC), Coimbatore adjudication order against a company Olho-Technik India Private Limited for not filing its annual financial statements and annual returns for 3 financial years i.e. 2018-19, 2019-20 & 2020-21.

The annual audited financial statements and annual returns of shareholders, directors, debt etc. are required to be mandatorily filed every year with the Registrar of Companies at their online portal within 30 days (in case of financial statements) from the conclusion of the annual general meeting of the shareholders of the company to adopt the financial statements and 60 days from the said date in case of the annual returns.

The company has not filed any annual returns after 2018 as is evident from its master data available at the MCA portal.

The penalty for not filing these documents online is Rs.10,000/- and Rs.100 per day during the period in which the default continues. The period of offence has been calculated upto 20/12/2022, the date of the order thereof. Its not clear whether the company replied to the show cause notice issued by the ROC or attended the hearing scheduled for it.

The total penalty on the company for both these offences has been set at Rs.519,800 and on each of the directors it is Rs.300,200/-. The total penalty on the company and its 3 directors for both these offences for three financial years comes to Rs.14,20,400/-

Incidentally, the paid up share capital of this company is Rs.15,00,000/-. So the penalty is almost equal to its paid up share capital.

Too heavy a cost for doing non compliances.

Copy of the orders can be found here

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html

ROC Patna order

Registrar of Companies, Patna order against a company Sukhasan Farmer Producer Company Limited for not painting the name & address of its registered office outside its registered office premises. Penalty of Rs.47,000/- each was levied on the company and its five directors.

The ROC officials visited the registered office on 29/8/2022 but found nothing outside the registered office to suggest that it was the registered office of a company. As per section 12 of the companies act, 2013 companies are required to paint or affix its name, address, telephone number, e-mail id and GST No. (if it has a GST regn no – this is as per the GST law) in a prominent place outside its registered office.

The penalty is Rs.1000/- per day during which the default continues.

The company replied stating that the name was affixed or painted but due to heavy rains and storms in the area, the said name plate got damaged. They managed to have it fixed on 31/8/2022 but on the day that ROC officials came visiting the said name board was missing, so they deemed it as a non compliance.

Surprisingly the no. of days of non compliance has been calculated as 94 days being from 29/8/2022 (date of ROC visit) to 30/11/2022 (the date that the company replied). But the fact that the name board has been replaced on 31/8/2022 as claimed by the company was not given any effect.

Since the company is a small company, it was levied half of the penalty leviable on non small companies and therefore the amount came to Rs.47,000/- each on the company and its 5 directors.

From the name of the company it appears that its a farmer producer company, a new concept for the agriculture sector, where producer farmers come together and register a company for the benefit of the farmers in their area. Still they have to navigate through the maze of compliances which other non producer companies have to adhere to. Producer companies have to also engage the services of company secretaries in order to ensure that they are in the right side of the law.

To view the adjudication order, you can visit here

https://www.mca.gov.in/content/mca/global/en/data-and-reports/rd-roc-info/roc-adjudication-orders.html