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The Cost of Non-Compliance: Adjudication Orders under the Companies Act, 2013



INTRODUCTION:


Adjudication orders have been issued against Longcheng Composites Private Limited (“the Company”), resulting in substantial penalties under two distinct sections of the Companies Act, 2013 ("Act"). These cases demonstrate the critical importance of adhering to statutory requirements. The penalties imposed on the Company emphasize the severe financial and legal repercussions that can arise from non-compliance. This article aims to delve into these cases, highlighting the specific sections of the Act that were violated and the resultant penalties, thereby illustrating the essential nature of statutory compliance in accordance with the Act for all companies.

 

CASE 1: VIOLATION OF SECTION 12(3)(c) OF THE ACT

 

PROVISION OF THE ACT:

 

The section 12(3)(c) of the Act, states that every company shall get its name and address of its registered office as well as Corporate Identity Number (CIN), telephone number, fax number (if any), email and website addresses (if any) printed on all business letters, billheads and other official publications of the company.

 

FACTS:

 

1.   The Company’s registered office was situated as mentioned below:

 

Sr. No.

Period

Registered office address

a.

April 10, 2019 to May 10, 2019

Shiv Shakti Apt shop, 02 CTS, 1168 SR 226/3B/2, Pimpri, Pune - 411017

b.

May 10, 2019 to August 23, 2019

Shop 2, Shiv Shakti Apts, CTC 1168, SR-226/3B/2, near Ashok theatre, Pimpri, Pune - 411017

c.

August 24, 2019 till date

PAP K-1/1, 1/2, Chakan MIDC Phase 2, Khed, Pune - 410501

 

2. Attachments to the Form PAS-3, filed via SRN R78307550 dated December 28, 2020, contain an incorrect registered office address.

 

3. The financial statements for the financial year 2019-20 of the Company incorrectly state the registered office address on the letterhead.

 

4. Attachments to the Form SH-7, filed via SRN R75125302 dated December 15, 2020, contain an incorrect registered office address.

 

5. An order under section 206(4) of the Act, via letter no. ROCP/INQ/2021/1982 to 1983 dated February 11, 2022, was sent to the Company for their representation. However, the reply submitted by the Company was unsatisfactory, and the competent authority has directed adjudication of the matter.

 

6. The Company and directors were served the adjudication notice via No. ROCP/ADJ/Sec-12/JTA(B)/23-24/17(iv)/ 2783 to 2785 dated March 31, 2024. However, no reply was received.

 

FINDINGS AND PENALTIES:

 

The Company and directors have contravened the provisions of section 12(3)(c) of the Act and are subject to action under section 12(8) of the Act. A maximum penalty of INR 1,00,000 (Indian Rupees One Lakh) was levied on the Company and on each of the directors.

 

CASE 2: VIOLATION OF SECTION 101(1)

 

PROVISION OF THE ACT:

 

According to the provision of section 101 of the Act, every general meeting requires a minimum of twenty-one (21) clear days’ notice to be served to all members of the company. However, a meeting may be convened with shorter notice upon obtaining consent from the members, as stipulated in the proviso to section 101 of the Act.

 

FACTS:

 

  1. The Company circulated the notice for the Extraordinary General Meeting (EOGM) on August 24, 2019, for the meeting to be held at 02:00 PM on the same day.

  2. However, it did not obtain any consent for shorter notice in writing or through electronic mode.

  3. An order under section 206(4) of the Act via letter no. ROCP/INQ/2021/1982 to 1983 dated February 11, 2022, was sent to the Company requesting their representation. However, the reply submitted by the Company was unsatisfactory, and the competent authority has directed adjudication of the matter.

  4. The Company and directors were served the adjudication notice via No. ROCP/ADJ/Sec-101(1)/PTA(B)/23-24/17(i)/2777 to 27779 dated March 31, 2024. However, no reply was received.

 

FINDINGS AND PENALTIES: 

The Company and directors have violated provisions of section 101(1) of the Act and are subject to action under section 450 of the Act. A maximum penalty of INR 2,00,000 (Indian Rupees Two Lakhs) on the Company, and INR 50,000 (Indian Rupees Fifty Thousand) was levied on each of the directors.

 

CONCLUSION:

These cases underscore the imperative for companies adhering to statutory requirements as mandated by the Act. Non-compliance can result in substantial financial penalties and significant legal consequences. The experiences of Longcheng Composites Private Limited serve as instructive examples, highlighting the necessity for companies to remain vigilant regarding their statutory obligations.

Compliance not only facilitates the avoidance of penalties but also fosters confidence and trust among stakeholders, thereby promoting sustainable business growth.

 

*The adjudication orders can be accessed through the following links:


Aravind Palavesam (Associate | Transaction Advisory – Legal & Compliance)

Drashti Savla (Principal Associate | Transaction Advisory – Legal & Compliance)

In case any clarification is required, please reach us at drashti@constellationblu.com Disclaimer: This article is provided for informational purposes only and does not constitute legal advice or an official legal opinion. The views expressed are those of the author and are based on the applicable law and facts available at the time of writing. The information has been prepared with due diligence and accuracy. Readers are advised to consult their own advisors, and refer relevant statutory provisions, latest judicial decisions, circulars, and clarifications before taking any action based on the information in this article. Alternative interpretations of the subject matter may exist. By utilizing this information, you agree that the author and Constellation Blu are not liable for the accuracy, authenticity, completeness, or any errors or omissions contained herein, nor for any actions taken based on this information.



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