Rs2.5lac Penalty for Non-Compliance with Director Appointment Filings

The Ministry of Corporate Affairs (MCA) took disciplinary action against Dehra Dun Club Limited, a company registered since 1957, for non-compliance with regulatory requirements. The case came to light during an inspection by the Registrar of Companies, Uttarakhand, who was appointed as the Adjudicating Officer under Section 454 of the Companies Act, 2013.

What's the violation?

The crux of the matter revolved around the club's failure to file Form DIR-12, which is mandatory for informing the Registrar of Companies about changes in the Managing Committee. The Registrar observed that certain individuals were inducted into the Managing Committee, while others resigned during the financial years 2017-18 to 2021-22. However, the club did not intimate the Registrar about these changes by filing Form DIR-12, as required by Section 152 of the Companies Act, 2013.

What's the club's defence?

In its defence, the club argued that the appointed individuals were temporary mess members nominated by the Army Mess and were not intended to be directors. The club contended that these individuals were appointed solely to enhance the administration, management, and discipline of the club, and to participate in Committee meetings. Furthermore, the club emphasized that it had no intention of appointing these individuals as directors, and therefore, they were not required to hold a valid Director Identification Number (DIN) or file Form DIR-12 under Section 152 of the Act.

What did the adjudicating officer find?

Despite the club's arguments, the Adjudicating Officer found the club in violation of Section 152 of the Companies Act, 2013, which mandates that every person proposed to be appointed as a director must furnish their DIN and a declaration of non-disqualification. Additionally, Section 152(5) requires that a person appointed as a director must provide consent to hold the office, which must be filed with the Registrar within thirty days of appointment.

What was the decision?

Consequently, the Adjudicating Officer imposed penalties on the club and its directors under Section 172 of the Companies Act, 2013, for the financial years 2017-18 to 2021-22. The total penalty amounted to ₹2,50,000, with ₹50,000 levied for each financial year.

The order directed the club and its directors to rectify the default immediately and pay the penalty within 90 days through the online mode on the MCA website. Failure to pay the penalty within the stipulated time may lead to consequences outlined in Section 454(8) of the Companies Act, 2013.

Furthermore, the club and its directors were informed of their right to appeal against the order within sixty days from the date of receipt, with the Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi, accompanied by a certified copy of the order.

FAQs:

Q1. What was the violation committed by Dehra Dun Club Limited?** A1. The club failed to file Form DIR-12 with the Registrar of Companies, informing about changes in the Managing Committee for the financial years 2017-18 to 2021-22, violating Section 152 of the Companies Act, 2013.

Q2. What was the club's defense?

A2. The club argued that the appointed individuals were temporary mess members nominated by the Army Mess and were not intended to be directors. Therefore, they were not required to hold a valid DIN or file Form DIR-12.

Q3. What was the penalty imposed on the club? A3. The Adjudicating Officer imposed a total penalty of ₹2,50,000 on the club and its directors under Section 172 of the Companies Act, 2013, with ₹50,000 levied for each financial year from 2017-18 to 2021-22.

Q4. What were the consequences of non-payment of the penalty?

A4.If the penalty was not paid within 90 days of receiving the order, the club and its directors could face potential consequences outlined in Section 454(8) of the Companies Act, 2013.

Q5.What was the appeal process available to the club?

A5.The club and its directors had the option to file an appeal against the order within sixty days of receipt, with the Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi, accompanied by a certified copy of the order.