Recently, Fine Gems Export Private Limited and its directors were penalized by the Ministry of Corporate Affairs (MCA) for violating Section 10(1) of the Companies Act, 2013. The ruling from the Rajasthan High Court, Jaipur Bench’s Registrar of Companies, cum Official Liquidator, dated November 23, 2023, clarifies the adjudication procedure and the repercussions for the company and its directors.
In order to handle the penalty procedures under Section 454 of the Companies Act, 2013, the MCA designated the Registrar of Companies/Adjudicating Officer. The case concerns infractions pertaining to Section 10(1) of the 2013 Companies Act.
Penalties were imposed for the alleged infractions against Fine Gems Export Private Limited and its directors, Navneet Maheshwari, Mahendra Kumar Golechha, and Murli Devi Maheshwari.
Section 10(1) of the Companies Act, 2013 highlights that the company and its members are obligated to abide by all terms of the memorandum and articles when they are registered. Penalties for breaking the Act are outlined in Section 450, and in this instance, the infraction is for breaking Section 10(1).
According to the adjudication application, Fine Gems Export Private Limited planned to participate in real estate activities during the Financial Years 2015–16 and 2016–17. The company’s planned activities were impeded by external conditions, leading it to reallocate excess funds towards loans and investments.
The business was served with a Show Cause Notice for failing to comply with Section 10(1) of the 2013 Companies Act. Following the Respondent Company’s responses, an adjudication notice was issued. A hearing on the subject was scheduled for November 7, 2023.
After taking the circumstances into account, Shri Ruvit Kumar, the adjudicating officer, levied fines. The corporation and its directors were hit with penalties that were determined by taking into account the default period. The order contains specifics on the type of default and the ultimate penalty amounts.
The order details the steps involved in submitting an appeal of the ruling. Businesses and individuals have sixty days from the date of order receipt to file an appeal with the Ministry of Corporate Affairs, Ahmedabad’s Regional Director (NWR).
The order places a strong emphasis on what happens if the fines are not paid. According to the Companies Act of 2013, noncompliance can result in fines or jail time.
The MCA’s imposition of penalties on Fine Gems Export Private Limited and its directors serves as a reminder of the stringent adherence necessary to the provisions of the Companies Act, 2013. The case emphasizes how crucial it is to follow the activities that are listed in the memorandum and the consequences that businesses who stray from the approved business scope would suffer. Businesses should continue to be watchful in making sure they comply with the law in order to avoid fines and legal action.
Date of Hearing — 07.11.2023
Whereas the Ministry of Corporate Affairs vide its Gazette Notification No. SO 831 (E) dated 24.03.2015 appointed the Registrar of Companies/undersigned as Adjudicating Officer in exercise of the Power conferred by Section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules, 2014. The Registrar of Companies vide the Companies (Amendment) Act, 2019 is entrusted with the power to adjudicate penalty as provided under Section 450 of the Companies Act, 2013 (penal provision of section 10 (1) of the Companies Act, 2013).
Whereas Fine Gems Export Private Limited, Company (CIN U36911RJ1988PTC004689) has its registered office at 322-Delhi Wala Building, Gopal Ji Ka Rasta, John’, Jaipur, Rajasthan- 302003. 3. Relevant Provisions of the Companies Act, 2013:
Whereas as per provision of section 10 (1) of the Companies Act, 2013 “subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and the articles.”
Whereas as per the provision of section 450 of the Companies Act, 2013 “if a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person.”
As per the adjudication application, this office has observed that during the Financial Year 2015-16 & 2016-17, the Respondent Company intended to carry on the business of real estate. For the same, the company has purchased land for the construction of the complex. Further, out of the purchased land, a piece of land was acquired by the Government and the company has received compensation from the Government in this regard. Further, due to a lack of land, the real estate activities were not carried out by the company. Further, the surplus lying with the company has been used for extending loans and investments and has earned interest thereon.
This office has further observed that the Respondent Company has carried out Financial Activity during the Financial Year 2015-16 & 2016-17 without altering its memorandum and violated the provision of section 10(1) of the Companies Act, 2013.
> In view of the above, this office has sent a Show Cause Notice to the Respondent Company and its Directors vide letter dated 27.07.2023 for non-compliance with section 10(1) of the Companies Act, 2013. In this regard, the Respondent Company has furnished its reply vide letter dated 28.08.2023 and 20.09.2023.
The adjudication notice stands disposed of with this order.