Penalty of Rs. 12 Lakhs levied on Company, CFO, Directors and CS for Non-Appointment of Independent Director

The Registrar of Companies India in the matter of WHEREAS KHED DEVELOPERS LIMITED has imposed a Penalty of Rs. 12 Lakhs levied on the Company, CFO, Directors and CS for Non-Appointment of an Independent Director.

WHEREAS KHED DEVELOPERS LIMITED having CINU70102PN2008PLC131478 is a company governed by the provisions Act and registered with this office having its office at FL No. C-303 Maharana Heights, Chavhanmala, Holewadi, Pune Maharashtra 410505 India.

Facts about the Case:

In the instant case, it is seen from MCA-21 records that the Paid up Share capital of the company is Rs. 571,081,974 during the FY from 01.04.2014 to 31.03.2022 & the company is crossing the above threshold with regard to paid-up share capital as per the financial statements since 01.04.2014 to till date, thus it is mandatory to constitute Nomination and Remuneration Committee consisting of a minimum of three Directors with independent Directors forming a majority as per section 178 of the Companies Act, 2013.

However, as per the records it is observed that from the date 14.12.2016 till 12.12.2022, the company has only one Independent Director as against the minimum number of two Independent Directors as required by 149 (4) of the Companies Act, 2013 and Rule 4 of Companies (Appointment of Directors) Rules, 2014 and the company has defaulted in the appointment of Independent Directors on board and has failed to constitute proper ‘Nomination and Remuneration Committee on board as per section 178 of the Companies Act, 2013 r/w rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014. The instant offence is adjudicable w.e.f. 21.12.2020.

Accordingly, the adjudication officer has issued an adjudication notice vide ROCP/ADJ/ 178/23-24/KHED/B/6/2282 to 2290 dated 19.12.2023 (hereinafter referred to as Adjudication Notice) under Section 454(4) read with 178 of the Companies Act, 2013 read with Rule 3(2) Of Companies (Adjudication of Penalties), 2014 as amended in Amendment Rules, 2020, to the company and its officers in default for the violation of the provisions of the act as mentioned in para “a” above;

A reply to the Adjudication notice was received on 29.12.2023 from the company and its Directors stating that the company had only one Independent Director during the period from December 14, 2016, till December 12, 2022, due to which the Company could not constitute a proper ‘Nomination and Remuneration Committee. The second Independent Director was appointed on December 13, 2022, and thereafter the Board constituted a proper Nomination and Remuneration Committee on March 31, 2023. Accordingly, the Company is in compliance of the applicable provisions of Section 178 of the Act read with Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Further, The company has requested that not to initiate any action or impose any penalty as referred to in the Notice.

Further, under section 454(4) of the Act read with Rule 3(2) of the Companies (Adjudication Of Penalties) Rules, 2014, Noticee(s) were given an opportunity to submit a reply by issuing an Adjudication Notice vide ROCP/ADJ/178/23–24/KHED/B/6/2282 to 2290 dated 19.12.2023 (hereinafter referred as Adjudication Notice) to why the penalty should not be imposed under the provisions of 178 of the Act against the Company and its officers in default for the above-stated violations.

The penalty has been imposed on KMP who is in default for the period from 21.12.2020 till the date of cessation of KMP i.e.15.06.2022 and in the absence of the KMP from 16.06.2022 till 12.12.2022, the penalty has been imposed on all directors who are in default.

Hence, in the opinion that no further hearing in the physical is required to ascertain the violation of the said section.

Furthermore, the Noticee(s) are at liberty to file an appeal against this order as per Para. 5.(e) of this order.

ORDER:

As per the records available as per the records it is observed that from the date 14.12.2016 till 12.12.2022, the company has only one Independent Director as against the minimum number of two Independent Directors as required by 149 (4) of the Companies Act, 2013 and Rule 4 of Companies (Appointment of Directors) Rules, 2014 and the company has defaulted in appointment of Independent Directors on board and has failed to constitute proper Nomination and Remuneration Committee on board as per section 178 of the Companies Act, 2013 r/w rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014. The instant offence is adjudicable w.e.f. 21.12.2020.

Thus, the company and its officers have violated provisions of section 178 read Rule 4 of Companies (Appointment of Directors) Rules, 2014 and are liable for action u/s Section 178(8) of the Act.

In exercise of the powers conferred on the undersigned vide Notification dated 24th March 2015 and after taking into account the factors mentioned herein above, Hereby impose the penalty of Rs.12 Lakh 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 for violation of section 178 of the Act.

This is the opinion that the penalty so imposed is commensurate with the aforesaid failure committed by the notice(s). The delay in issuance of order is on account of other admin work.

The Noticee(s)/applicant(s) shall pay the penalty so imposed through the Ministry of Corporate Affairs portal only as per rule 3(14) of Companies (Adjudication of Penalties) Rules, 2014.

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 Affairs 100, 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 emended by Companies (Adjudication of Penalties) Amendment Rules, 2019.

Your attention is also invited to section 454(8)(ii) of the Act regarding the consequences of non-payment of the penalty within the prescribed time limit of 90 days from the date of the receipt of the copy of this order in terms of the provisions of section 454(8)(i) of the Act.

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 KHED DEVELOPERS 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.

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