ROC levies penalty on company for not opening separate Bank A/C and Utilization of money without filing return of Allotment

The Registrar of Companies of India in the matter of Cookiejar Technologies Private Limited has levied penalty on company for not opening separate Bank A/C and Utilization of money without filing return of Allotment.

Cookiejar Technologies Private Limited (U72900PN2016PTC 166251) (herein after referred as Company) is a registered company with this office under the provisions of section 7 of the Companies Act, 2013 having its registered office as per MCA21 Registry at address “KUMAR VASTU F-801 SR. NO-209/ IA, BHAMBURDA, NEAR BHOSALE NAGAR, RANGE HILLS, Pune, Pune, Maharashtra, 411030, India”.

Facts about the Case:

The Company has made suo motto application with complete application on 22/08/2022 followed by further submissions on 30/01/2023, for adjudication for Section 42(6) of the Companies Act, 2013 in respect of allotment(s) of 666 equity shares of Rs.10 each at a premium of Rs.11,245 each to Clayfin Technologies Private Limited as Private Placement offer by passing a special resolution in the Extra Ordinary General Meeting held on 21st August 2020. The Investor had applied for the said shares and remitted Rs.74,95,830 to the Company in three tranches on September 16, 2020 and September 18, 2020 as share application money, to the existing Current Bank Account of the Company. The Company allotted 666 equity shares of Rs.10 each to the Investor vide a resolution passed by the Board of Directors in their meeting held on October 20, 2020, which is well within the prescribed timeline for allotment i.e. 60 days from the date of receipt of funds. Post allotment, the Applicant Company filed the return of allotment in form PAS-3 on December 7, 2021 vide SRN T62254958. As a condition subsequent of the investment, the investor, M/ s Clayfin Technologies Private Limited, has appointed a nominee Director, Mr. Rajesh Bhaskar Laxmi Narasimha on the Board of the Applicant Company with effect from 18th October 2021.

The Applicant Company was unable to comply with following provisions of Section 42 of the Act:-

1. Opening of Separate Bank Account for receipt of private placement share application money.

2. Filing of Form MGT-14 before circulation of private placement offer letter and within 30 days from the date of passing special resolution for issue of shares on private placement basis.

3. Filing of Form PAS-3 within 15 days from the date of allotment.

The management inadvertently failed to adhere with the said provisions on account of following reasons.

1. Lack of expert knowledge and awareness about the Companies Act, 2013.

2. Non-routine nature of the corporate action.

3. Urgency of investment and Outbreak of Covid-19 pandemic.

In view of the foregoing facts, the Company inadvertently failed to comply with the provisions of Section 42 of the Companies Act, 2013.

Accordingly, the adjudication officer has issued adjudication notice vide notice No. ROCP/ADJ/PP/2022/1518 to1526 dated 09.11.2022 (herein after referred as Adjudication Notice) under Section 454(4) read with 42 of the Companies Act, 2013 read with Rule 3(2) Of Companies (Adjudication of Penalties), 2014 as amended in Amendment Rules, 2019, to the company and its officers in default.

A reply to the Adjudication notice has been received on 24.11.2022 from the company stating that being an NBFC-AA required approval of the Reserve Bank of India to commence its business activities. Pursuant to the provision of the Reserve Bank of India Act, 1934, a company is required to have a minimum net worth of Rs.2,00,00,000 before applying to RBI for registration as an NBFC-AA , the Company received investment from Clayfin Technologies Private Limited and allotted 666 equity shares to the Investor on 20-10-2020 by way of Private Placement . Due to the embryonic stage of the Company, the management was still in process of gaining detailed knowledge of the Compliances required for issue and allotment of shares under private placement u/s 42 of the Act., the directors of the Company did not have any legal knowledge or awareness, in the infant stage with nil revenue to recruit competent professional to handle its legal and secretarial work, inadvertently resulted in non­compliance of various provisions of section 42 of the Act. Further at the time of the placement in 2020, due to covid-19 pandemic which had caused considerable disruption in the functioning of companies and banks, employees were working form home for safety reasons, considering the urgency of funding requirement of NBFC registration, the management obtained the fund in their existing current bank account maintained with ICICI bank.

a) Furthermore, under section 454(4) of the Act read with Rule 3(5) of the Companies (Adjudication Of Penalties) Rules, 2014, Noticee(s) were given an opportunity to be heard by issuing a Notice vide ROCP /ADJ/PP /22-23 / 1848 -1851 dated 20-12-2022 (herein after referred as Hearing Notice) to appear before Adjudicating Authority through Virtual Hearing on 18.01.2023.

b) The Directors of the Company, Viz. Mr. Munish Bhatia, Mr.Manoj Ajit Alandkar, & Ms. Kishori Prabhu, appeared before Adjudicating Authority through Virtual Hearing on 18.01.2023 and submitted that:-

Pursuant to1 section 42(6) of the Act, if a company fails to repay the application money within 60 days, it is liable to repay that application money with interest at the rate of 12 per cent per annum from the expiry of the sixtieth day. As the Company has allotted equity shares within prescribed time period of 60 days, it is not liable to repay the application money received from Clayfin Technologies Pvt Ltd and section 42(10) is applicable to the extent of monetary penalty only and not for refund .Further they informed that the Investor, Clayfin Technologies Private Limited has submitted its no objection for non-refund of the share application money duly signed by its Director.

Further they informed that the intent behind the definition of officer in default is to identify the person involved in a transaction and who has defaulted by not acting in the best interest of the Company. Further, the definition stresses on the word ‘officer of the Company’, Thus, a person would be an officer in default in his individual capacity and not be considered as separate individual because of his dual designation. Hence they are requesting that the promoter and director being the same individuals, Mr. Munish Bhatia, Mr.Manoj Alandkar and Mrs. Kishori Prabhu should be liable for penalty in their individual capacity and not in dual designation capacity.

Further Company has requested to Adjudicating officer that considering the low capital and turnover, recently initiated business activities and new business concept, to levy minimum penalty on the Company and the officers in default.

Order

The applicant company and its officers, who have defaulted the provisions of section 42(4), 42(6) & 42(8) of the Act for not opening separate bank account, not filing the e-form PAS-3 (Return Of Allotment) Within 15 days of allotment and utilization of money before filing return of allotment with the Registrar; are liable for penalties under section 42(9) & 42(10) of the Act. Thus if a Company defaults in filing the return of allotment within the period prescribed under sub section (8), the Company, its promoters and Directors shall be liable to a penalty for each default of one thousand rupees for each day during which such default continues but not exceeding twenty five lakh rupees.

Subject to sub-section (11), if a company makes an offer or accepts monies in contravention of this section, the Company, its promoters and Directors shall be liable for a penalty which may extend to the amount raised through the private placement or two crores rupees, whichever is lower and the company shall also refund all monies with interest as specified in sub-section (6) to subscribers within a period of thirty days of the order imposing the penalty.

As per prov1s10ns of Section 446B, the Companies Act 2013 Notwithstanding anything contained in this Act, if penalty is payable for non-compliance of any of the provisions of this Act by a One person Company, Small Company, start-up Company or Producer Company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified n such provisions subject to a maximum of two lakh rupees in case of a Company and one lakh rupees in case of an officer who is in default or any other person, as the case may be .

As per MCA records, it is seen that the promoters and Directors are same individuals. Further the investor, Clafin Technologies Private Limited intends to stay invested in the Company and thus has given an NOC dated 09.08.2022 which is signed by Mr. Rajesh Bhaskar Laxmi Narasimha , Chief Executive Officer of the Company mentioning that they do not intend to receive their investment back and give their consent and no objection for non-refund of share application money and interest thereon. Therefore no order is passed for refund as required u/s 42(10) and no separate penalty is being levied on the defaulters in dual capacity.

However, the Company has not opened separate Bank Account as per proviso of section 42(6) which is penalized u/s 42(10). The Company has not filed the return of allotment as required u/s 42(8) which is to be penalized u/s 42(9). Also, finally, the Company utilized the money before filing of returns of allotment which is not as per proviso of section 42(4) which is to be penalized u/s 42(10).

Therefore, In exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and having considered the facts and circumstances of the case besides oral submissions made by the representative of Noticee(s) at the time of virtual/physical µearing and after taking into account the factors mentioned herein above, I do hereby impose the penalty 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; as per table below for violation of section 42(4) , (6) & (8) of the Act. Further, the delay is passing the order is due to complexity of the matter and other administrative work .

Accordingly, the following penalty is levied:-

i) A total Penalty of Rs.5,00,000 levied u/s 42(10) for not opening separate Bank Account as per section 42(6) of the Companies Act, 2013.

ii) A total Penalty of Rs.5,00,000 levied u/ s 42(9) for not filing return of allotment within time as per section 42(8) of the Companies Act, 2013.

iii) A total Penalty of Rs.5,00,000 levied u/s 42(10) for Utilization of money without filing the return of allotment as per section 42(4) of the Companies Act, 2013.

For Official Order Download PDF Given Below: