The Regional Director of the Ministry of Corporate Affairs (MCA) observed the Non-utilization of Corporate Social Responsibility (CSR) Funds and imposed a penalty of Rs.61.31 Lakhs on a Private Limited Company.
This is an appeal filed under Section 454(5) of the Companies Act, 2013 by the above appellants in under Section 454 passed by the Registrar of Companies, Telangana for default in compliance with the requirements of Section 135 of the Companies Act. 2013.
In the recent order of adjudication, the Registrar of Companies had addressed a case involving a company and its obligation under section 135(5) of the Companies Act, 2013. According to the order, the company was mandated to transfer the unspent amount of Rs.26,65,872/- to funds specified in Schedule VII of the Act within six months of the conclusion of the financial year 2020-21, specifically on or before 30.09.2021.
The Registrar of Companies noted that the company failed to comply with the stipulated timeline, thus violating Section 135(5) of the Companies Act, 2013, and rendering itself liable under section 135(7). The violation was due to the company’s failure to transfer the unspent amount to a fund specified in Schedule VII within the prescribed six-month period.
However, the order acknowledges that the company took corrective action by making a payment of the unspent amount (Rs.26,65,872/-) to the PM CARES Fund on 10.11.2022. This act of rectification, wherein the company fulfilled its obligation by contributing to one of the funds specified in Schedule VII of the Act, prompted the Registrar of Companies to consider the adjudication request.
In light of the company’s remedial action, the adjudication request has been deemed considered.
Gautami Darvesh, the authorized representative and Practicing Company Secretary, appeared on behalf of the Company. She reiterated the submissions from the appeal, emphasizing that the applicant company had no intention to default on the requisite CSR spending under Section 135(5) of the Companies Act, 2013. Ms. Darvesh stated that the company neither willfully defaulted nor intended to violate the provisions. Upon discovering the default, the applicant company promptly rectified the situation by making a payment of the unspent CSR amount to the PM Cares Fund.
In a recent adjudication order dated 14.09.2023, the Registrar of Companies maintained substantial penalties against a company whose entire shareholding is held by FMC Technologies Singapore and FMC Tech Inc,USA. Despite the size and profitability of the company, the Registrar declined to intervene in the penalties, upholding a Rs. 53,31,744/- fine for the company and Rs. 2,00,000/- each for directors David Macfarlane, Housila Prasad Tiwari, Narendra Kumar Dharmavarapu, and Niranjan Desal, totaling Rs. 61,31,744/-.
The appellants were instructed to comply with the order and Section 454(8) of the Companies Act, 2013, in conjunction with Companies (Adjudication of Penalties) Rules, 2014.
Accordingly, the order was issued to the Appellants with a copy sent to Registrar of Companies.
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