Adjudication Order u/s 454 for violating Sec. 117(1) against Stanley Lifestyles Ltd by ROC-Hyderabad

Adjudication Order u/s 454 for violating Sec. 117(1) against Stanley Lifestyles Ltd by ROC-Hyderabad. In this article, we will take you through the mandatory provisions under Section 117(1) of the Companies Act, 2013. A copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed. 
Provided that the copy of every resolution which has the effect of altering the articles and the copy of every agreement referred to in sub-section (3) shall be embodied in or annexed to every copy of the articles issued after passing of the resolution or making of the agreement. Failure to comply with these requirements may result in penalties for both the company and the officers in default, as specified under Section 403 of the Companies Act, 2013. Therefore, it is essential to adhere to these provisions to avoid any legal consequences. 
Applicable Provisions:- 
A copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed. 
Provided that the copy of every resolution which has the effect of altering the articles and the copy of every agreement referred to in sub-section (3) shall be embodied in or annexed to every copy of the articles issued after passing of the resolution or making of the agreement. 
(2) If any company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified therein, such company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees and every officer of the company who is in default including liquidator of the company, if any, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees. 
Facts of the case: 
The company passed three resolutions during its board meetings on May 20, 2019, December 16, 2019, and September 27, 2021. According to Section 117(1) of the Companies Act, 2013, these resolutions were required to be filed in e-form MGT-14 within 30 days of passing of the resolutions. However, the company filed the forms on October 13, 2023, resulting in delays of 1577 days, 1367 days, and 716 days, respectively. To address these delays, the company filed suo-moto applications for delayed compliance. Following the appropriate legal procedures, the Registrar of Companies in Bangalore issued an adjudication order, imposing a penalty of Rs. 10.74 lakh on the company, its directors, and its key managerial personnel. 
Against the order of the Registrar of Companies of Bangalore, the company filed an appeal challenging the penalty of RS. 10.74 lakh levied, before the Regional Director (South Eastern Region) Ministry of Corporate Affairs, Hyderabad. After reviewing the appeal, the Regional Director reduced the penalty from Rs. 10.74 lakh to Rs. 2.15 lakh, citing that the company's default was primarily due to oversight and the disruptions caused by the Covid-19 pandemic. 
Penalty Imposed by Registrar of Companies on Company and Officers in Default 
Taking into consideration the facts of the appeal and submissions made by the authorized representative, the penalty imposed by Registrar of Companies is reduced to 20%.

Violation of section

Penalty imposed on company/ directors

Penalty imposed by ROC

Revised penalty imposed by RD

Sec. 117 of the Companies Act, 2013

Company

3,95,700

79,140

Managing Director

1,50,000

30,000

Whole time Director

1,50,000

30,000

Chief Financial Officer

1,29,000

25,800

Company Secretary

1,50,000

30,000

Ex Company Secretary

1,00,000

20,000

Total

10,74,700

2,14,940

Reduction in penalty 
The grounds stated for the reduction of penalty are as follows:

That the delay was due to over sightedness and the disruptions caused by the Covid-19 pandemic, the company's business was affected and the main focus of the company was to maintain its existing turnover and profits of the company.

Exemption to Startup/ Small Company/OPC under section 446B: 
As per sec. 446B of the Companies Act, 2013, 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 in 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.  
In this case, Section 446B does not apply, as the company does not meet the criteria. 
Conclusion 
In conclusion, the company faced penalties for not filing important documents on time, totaling Rs. 10.75 lakh. They appealed this decision, explaining that their failure was largely due to oversight and challenges posed by the Covid-19 pandemic. The Regional Director reviewed their appeal and agreed to reduce the penalties to Rs. 2.15 lakh, recognizing the circumstances the company faced. This case shows that companies can successfully appeal penalties if they have valid reasons for their non-compliance, particularly when those reasons are beyond their control.  
Download MCA adjudication order:

In this article, we will take you through the mandatory provisions under Section 117(1) of the Companies Act, 2013. A copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed.

Provided that the copy of every resolution which has the effect of altering the articles and the copy of every agreement referred to in sub-section (3) shall be embodied in or annexed to every copy of the articles issued after passing of the resolution or making of the agreement. Failure to comply with these requirements may result in penalties for both the company and the officers in default, as specified under Section 403 of the Companies Act, 2013. Therefore, it is essential to adhere to these provisions to avoid any legal consequences.

Applicable Provisions:-

A copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed.

(2) If any company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified therein, such company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees and every officer of the company who is in default including liquidator of the company, if any, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees.

Facts of the case:

The company passed three resolutions during its board meetings on May 20, 2019, December 16, 2019, and September 27, 2021. According to Section 117(1) of the Companies Act, 2013, these resolutions were required to be filed in e-form MGT-14 within 30 days of passing of the resolutions. However, the company filed the forms on October 13, 2023, resulting in delays of 1577 days, 1367 days, and 716 days, respectively. To address these delays, the company filed suo-moto applications for delayed compliance. Following the appropriate legal procedures, the Registrar of Companies in Bangalore issued an adjudication order, imposing a penalty of Rs. 10.74 lakh on the company, its directors, and its key managerial personnel.

Against the order of the Registrar of Companies of Bangalore, the company filed an appeal challenging the penalty of RS. 10.74 lakh levied, before the Regional Director (South Eastern Region) Ministry of Corporate Affairs, Hyderabad. After reviewing the appeal, the Regional Director reduced the penalty from Rs. 10.74 lakh to Rs. 2.15 lakh, citing that the company's default was primarily due to oversight and the disruptions caused by the Covid-19 pandemic.

Penalty Imposed by Registrar of Companies on Company and Officers in Default

Taking into consideration the facts of the appeal and submissions made by the authorized representative, the penalty imposed by Registrar of Companies is reduced to 20%.

Violation of section	Penalty imposed on company/ directors	Penalty imposed by ROC	Revised penalty imposed by RD
Sec. 117 of the Companies Act, 2013	Company	3,95,700	79,140
	Managing Director	1,50,000	30,000
	Whole time Director	1,50,000	30,000
	Chief Financial Officer	1,29,000	25,800
	Company Secretary	1,50,000	30,000
	Ex Company Secretary	1,00,000	20,000
	Total	10,74,700	2,14,940

Reduction in penalty

The grounds stated for the reduction of penalty are as follows:

That the delay was due to over sightedness and the disruptions caused by the Covid-19 pandemic, the company's business was affected and the main focus of the company was to maintain its existing turnover and profits of the company.

Exemption to Startup/ Small Company/OPC under section 446B:

As per sec. 446B of the Companies Act, 2013, 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 in 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.

In this case, Section 446B does not apply, as the company does not meet the criteria.

Conclusion

In conclusion, the company faced penalties for not filing important documents on time, totaling Rs. 10.75 lakh. They appealed this decision, explaining that their failure was largely due to oversight and challenges posed by the Covid-19 pandemic. The Regional Director reviewed their appeal and agreed to reduce the penalties to Rs. 2.15 lakh, recognizing the circumstances the company faced. This case shows that companies can successfully appeal penalties if they have valid reasons for their non-compliance, particularly when those reasons are beyond their control.