PENALTY FOR NON FILING OF MGT-6 FORM BY THE COMPANY

[Mr. M. GOVINDARAJAN]

Section 89(1) of the Companies Act, 2013 (‘Act’ for short) provides that where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares, such person shall make a declaration within thirty days from the date on which his name is entered in the Register of Members Form MGT - 4 to the company specifying the name and other particulars of the person who holds the beneficial interest in such shares.

Section 89(2) of the Act provides that every person who holds or acquires a beneficial interest in share of a company shall make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars in Form MGT - 5 within 30 days after acquiring such beneficial interest in the shares of the company.

Rule 9(3) provides that where any declaration under section 89 is received by the company, the company shall make a note of such declaration in the register of members and shall file, within a period of 30 days from the date of receipt of declaration by it, a return in Form No.MGT.6 with the Registrar in respect of such declaration with fee.

Failure to comply with the above provisions the company shall be liable for penalty.  In one case the Registrar of Companies imposed penalty on the registered owner as well as the beneficial owner.  The said case is discussed below-

The Valor Advisory (India) Private Limited was incorporated on 23.12.2021 having registered office at B-25 Sagar Apartment, 6 Tilak Marg, Delhi Central, Delhi - 110 011.  It is not having any subsidiary company under its control. The Registrar of Companies observed that in the Annual return filed by the Company for the financial year 2021- 22, it is mentioned that Valor Management SDN. BHD is holding 100% share in the company.  But the company has 2 shareholders.  The Registrar of Companies observed that the beneficial owner and the registered owner have not declared the status of their interest under section 89 of the Act. 

The Registrar of Companies further observed that the company has not filed MGT - 6 form which is required to be filed by the company on receipt of the declaration under section 89, the company shall make a note of such declaration in the register of members.  The company shall also file a return in MGT - 6 within 30 days from the date of receipt declaration by the company with fee.  Therefore the Registrar of Companies issued a show cause notice to the company under section 89 of the Act on 05.10.2023.  The company filed its reply to the show cause notice on 17.10.2023.  In the reply the company submitted the following before the Registrar of Companies-

• section 89 is not applicable to the company.
• The requirement of declarations in Form MGT - 4, MGT - 5 and MGT - 6 arises when there is a distinction between the registered owner and the beneficial owner of the shares.
• One Mr. Chan Lye Yee is holding one share in the company as a nominee of Valor Management SDN. BHD and not the owner of the share.
• The company filed MGT - 6 on 16.10.2023 to avoid any further legal disputes.

The personal hearing was offered to the company on 01.11.2023.  The company reiterated the same points as given in the reply to the notice.

The Registrar of Companies observed that the company has filed MGT - 6 form along with MGT - 4 and MGT - 5.  The form MGT - 4 has been signed by Ms. Chan Lye Lee.  It is not clear who signs MGT - 5 on behalf of the beneficial owner.  It is reported by the company that Form MGT - 5 has been signed by Mr. Eugene Lee Cheng Hoe, the Director of the holding parent company Valor Management SDN. BHD registered in Malaysia. 

The Registrar of Companies analyzed the provisions of Section 89 of the Act and Rule 9 of Companies (Management and Administration) Rules, 2014. The Registrar of Companies observed that there is no merit on the submission of the company.  At one point of time the company indicated that the distinction between the registered owner and the beneficial owner does not arise in their case.   However in MGT - 6 form the company indicated that the individual is a registered owner but not beneficial owner in respect of the sole share.  The foreign company based in Malaysia declared that in respect of the sole share the beneficial interest lies with the Malaysian company.  Thus the obligations under Section 89 are attracted in this case. 

The Registrar of Companies held that Ms. Chan Lye Lee, as registered owner was entered in the Register of Member on 31.03.2022.  As such she was required to file MGT - 4 on or before 30.04.2022.  But the said form has been filed on 16.10.2023 after a delay of 534 days by the registered owner.  Thus the registered owner is liable for penalty under section 89(1) of the Act.  The Registrar of Companies imposed penalty on Ms. Chan Lye Lee a sum of Rs.1,56,800/- (Rs.50000+ Rs.200/- x 534 days)

The Registrar of Companies also imposed penalty on Valor Management SDN.BHD as a beneficial owner entered in the Register of Member on 31.03.2022.  The beneficial owner is required to file MGT - 5 on or before 30.04.2022.  But the said form has been field on 16.10.2023 after a delay of 534 days.  Thus the beneficial owner is liable for penalty under Section 89(2) of the Act.  The Registrar of Companies imposed penalty on Valor Management SDN.BHD a sum of Rs.1,56,800/- (Rs.50000 + Rs.200 x 534 days).