PENALTY IMPOSED ON NIDHI COMPANY BY RoC

[Mr. M. GOVINDARAJAN]

Nidhi Company

Nidhi Company is a public limited company and therefore the said companies are to comply with the provisions applicable to the public company.  Failure to comply with the provisions of the Companies Act, 2013 the Nidhi Company will be liable for penalty that may be imposed by the Adjudicating Authority.

Shri Narayani Nidhi Limited was incorporated on 13.07.2012 which falls under the jurisdiction of Registrar of Companies, Chennai.  The registered office of the said company was situated at 28A Kamalalayam Vadakarai, Tiruvarur, Tamil Nadu.  The said company has contravened certain provisions of Companies Act, 2013.  The RoC, Chennai imposed various penalties as discussed below-

Non Filing of MGT - 14

Section 117(1) of the Companies Act, 2013 read with Rule 24 of Companies (Management and Administration) Rules, 2014 provides that 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 30  days of the passing or making thereof in such manner and with such fees as may be prescribed. 

The Company filed an application for seeking the status of Nidhi before the Ministry of Corporate Affairs in e-form NDH - 4 on 27.02.2020.    The Ministry observed that the Company has not filed MGT - 14 for Board resolution passed for approval of accounts with RoC for the financial year ending on 31.03.2015, 31.03.2016, 31.03.2017, 31.03.2018 and 31.03.2019.  The Company filed an application for adjudication.  Hearing opportunity was given to the Company on 28.11.2022 and 14.12.2022.  The Company, through its authorized representative accepted the violations committed by it and requested to take a lenient view by the Adjudicating Authority.

The Adjudicating Authority imposes penalty for non filing of MGT - 14.  Section 117(2) provides that  if any company fails to file the resolution or the agreement under section 117(1) before the expiry of the period specified therein, such company shall be liable to a penalty of Rs.10,000/-.  In case of continuing failure, with a further penalty of Rs.100/- for each day after the first during which such failure continues, subject to a maximum of Rs.2,00,000/- will be imposed.  Every officer of the company who is in default including liquidator of the company, if any, shall be liable to a penalty of Rs.10,000/- and in case of continuing failure, with a further penalty of Rs.100/- for each day after the first during which such failure continues, subject to a maximum of Rs.50,000/-.

The Company filed MGT - 14 for the said period on 03.10.2022 after a delay of-

• 2560 days for the period ending 2014-15;
• 2194 days for the period ending 2015 - 16;
• 1828 days for the period ending 2016-17;
• 1433 days for the period ending 2017-18.

The Adjudicating Authority calculated the penalty at the prescribed rate for the Company and Officer-in-default (one officer) and imposed penalty for the company Rs.8,65,400/- and for officer Rs.2,50,000/- which shall be payable by the parties within 90 days from the date of receipt of order.  The said order was passed on 20.12.2022.

Non mentioning of Director Identification Number

Section 158 of the Companies Act, 2013 provides that every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director.

The Company filed NDH - 4 form for seeking status of Nidhi on 27.02.2020.  The Ministry of Corporate Affairs observed that the Directors signing the financial statement have not mentioned their Director Identification Number in the documents attached with Form AOC-4 for the financial years ending on 31.03.2015, 31.03.2017 and 31.03.2018.

The Company filed application on 17.10.2022 for adjudication.  The Company admitted its violations of the provisions of the Act in relation to Section 158 and requested to take the lenient view on the company.  The Registrar of Company, Adjudicating Authority took note of the submissions of the Company.  The Company was given opportunity of being heard.

There is no specific penalty for violation of Section 158 of the Companies Act, 2013.  Section 178 of the Act provides if a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of Rs.50,000/-, and in case of continuing failure, with a further penalty of Rs.500/- for each day during which such failure continues, subject to a maximum of Rs.3,00,000/- in case of a company and Rs.1,00,000/- in case of an officer who is in default.

The Adjudicating Authority imposed penalty on the company a sum of Rs.1,50,000/- on the company and Rs.1,50,000/- to the concerned Director.  The said order was passed on 20.12.2022. 

Non appointment of Company Secretary

Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 provides that every private company which has a paid up share capital of Rs.10 crores (with effect from 01.04.2020 - before that the limit is Rs.5 crores) or more shall have a whole-time company secretary.  The Company Secretary is treated as key managerial personnel.  Section 204 (4) of the Act provides that if the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of 6 months from the date of such vacancy.   

Section 204 (5) of the Act provides penalty for non compliance of section 204. The said Section 204(5) provides that if any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of Rs.5,00,000/- and every director and key managerial personnel of the company who is in default shall be liable to a penalty of Rs.50,000/- and where the default is a continuing one, with a further penalty of one Rs.1,000/-  for each day after the first during which such default continues but not exceeding Rs.5,00,000/-.

The paid up capital of the company was increased to more than Rs.10 crores by 31.05.2021.  The Company did not appoint the whole time Company Secretary till 01.07.2022.

The Company filed an application before RoC admitting the contravention committed by it.  Personal hearing was given to the company.  The authorized representative admitted the contravention and requested to take a lenient view. 

The Adjudicating Authority confirmed the violation done by the company in this matter and imposed penalty on the Company a sum of Rs.5,00,000/- and a sum of Rs.2,63,000/-  (Rs.50,000 + Rs.1000 * 213 days) on the Officer-in-default.  The said order was passed on 20.12.2022.

Payment of penalty

The Company shall pay the above three penalties within 90 days from the date of receipt of the order by the Company.  The company may prefer appeal before the Jurisdictional Regional Director within a period of 90 days from the date of receipt of the order from the Adjudicating Authority.

Consequences of nonpayment of penalty

If the company does not pay the penalty within 90 days the Company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend up to Rs.5,00,000/-.

If the Officer-in-default does not pay the penalty within 90 days he shall be liable for imprisonment that may extended to 6 months or with fine which shall not be less than Rs.25,000/- but which may extend to Rs.1 lakh or both.

In case of default prosecution will also be launched against the Officer-in-default by the Department at his own cost.