ROC Levies penalty of Rs. 975,000 for Non-Appointment of Independent Director [Read Order]

The Ministry of Corporate Affairs (MCA) in the matter of Khed Devleopers Limited imposed penalty of Rs. 975,000 for Non-Appointment of Independent Director.

Khed Devleopers limited having CIN-U70102PN2008PLC131478 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 this Case:

In the instant case, it is seen from MCA-21 records that the criteria for appointing independent directors is fulfilled by the company on account of Paid up Share capital being Rs. 571,081,974 during the FY from 01.04.2014 to 31.03.2022.

Further, as per records, there are only one directors in the category of Independent director. Thus, the company is not having the required no. of Independent directors from 01.04.2014 to 12.12.2022. However, the said offence is adjudicable w.e.f. 21.12.2020.

Further, the company is crossing the above threshold with regard to Paid up share capital as per the financial statements since 2015-16, thus it is mandatory to constitute Audit Committee consisting of a minimum of three Directors with independent Directors forming a majority as per section 177 of the Companies Act, 2013. However, the company has defaulted in appointment of Independent Directors on board and has failed to constitute proper balance of Executive and Non-Executive Directors on Board of the Company. Hence, company and its directors have violated the provisions of Section 149(4) of the Companies Act, 2013.

Accordingly, the adjudication officer has issued adjudication notice vide ROCP/ADJ/Sec-149/JTA(BW)/23-24/1136 to 1144 dated 27.07.2023 (herein after referred as Adjudication Notice) under Section 454(4) read with 149 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 “b” above;

A reply to the Adjudication notice has been received on 10.08.2023 from the company and its Directors stating that the company was continuously in search of a suitable candidate having vast experience in the field of law/finance/ administration or handling matters relating to the farmers. The company could not find a suitable candidate and the same has been disclosed in the Board Report for the respective Financial years.

Further, the company has requested that not to initiate any action or impose any penalty as referred 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/Sec-149/JTA(BW)/23-24/1136 to 1144 dated 27.07.2023 (herein after referred as Adjudication Notice) to why the penalty should not be imposed under the provisions of 172 of the Act against the Company and its officers in default for the above stated violations.

From the date 21.12.2020 till 12.12.2022, the company has only one Independent Director as against 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.

The penalty has been imposed on KMP who is in default for the period from 21.12.2022 till the date of cessation of KMP i.e. 15.06.2022 and in absence of the KMP, the penalty has been imposed on the directors who are in default for the period from 16.06.2022 to 12.12.2022.

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

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

Order:

From the date 21.12.2020 till 12.12.2022, the company has only one Independent Director as against 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.

Thus, the company and its officers have violated provisions of section 149 read Rule 4 of Companies (Appointment of Directors) Rules, 2014 and are liable for action u/s Section 172 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. 975,000 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 149(4) of the Act.

The opinion that 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 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.

Attention is also invited to section 454(8)(ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of 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 Devleopers 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.

For Official Order Download the PDF Given Below: