ROC Imposes Penalty on Company for Not Maintaining a Separate Bank Account For Preferential Allotments

The Registrar of Companies (ROC), Vijayawada, has imposed penalties on a company named Three Seasons Exim Ltd and its directors for violations under Section 42(10) of the Companies Act, 2013. The company failed to operate a separate bank account for preferential allotments made in May 2017, as mandated under Section 42(6) of the Act.

A company must deposit the money received from a private placement in a separate account with a scheduled bank. Failing to do the same, or misusing the funds, attracts heavy penalties which may be extended to the amount raised through the private placement of Rs 2 crore, whichever is lower. In such a violation, the company is also required to refund the money with interest to the subscribers within 30 days of the penalty order.

As per the inspection report, the company did not open a separate bank account in a scheduled bank due to an SBI precondition for infusing additional capital via the existing current account. The company’s explanation regarding this failure was found unsatisfactory. Therefore, the Registrar of Companies (ROC) has imposed penalties of Rs 1 crore on the company and Rs 25 lakh each on its directors in default.

The company was required to rectify the default and pay the penalty within 90 days through the MCA portal.