ROC imposed penalty for violation of Sec 89 of the Companies Act, 2013

Background of the Case

Mynd Fintech Private Limited (“herein after known as Company”) has been incorporated on 14^th January, 2021 and having its registered office at F-83, Basement NA, Near D.P.S. School New Delhi, Delhi 110065, India.

It is observed from the filed Annual Return in Form e-Form MGT-7 vide SRN: F63723456 for FY 2022-23, wherein its mentioned that Mynd Solutions Private Limited (MSPL) is holding 100% shares in the Company. However, it is seen that company has in total 2 shareholders. Therefore, the beneficial holder and registered holder ought to have declared the status of their interest in the shares in terms of Section 89(1) and Section 89(2) of the Act. Further, it was also seen that the Company has not filed form MGT-6 with the ROC, therefore, it seems to be violation of Section 89(1), 89(2) and 89(6) of the Act.

On 05^th October, 2023, the Company has received show cause notice under Section 89 of the Act.

In response of SCN dated 05^th October, 2023, the Company requested to grant extension to reply till 30^th October, 2023 vide email dated 19^th October, 2023. Subsequently, vide email dated 23^rd October, 2023 Company was allowed to reply by 30^th October, 2023. A reply in this matter is received vide email dated 29^th October, 2023 which inter alia states that:

1. Copy of form MGT-4 dated 27th January, 2021 was submitted and signed by Mr. Vivek Mishra.
2. Copy of form MGT-5 dated 27th January, 2021 was submitted by MSPL and signed by Mr. Sandeep Mohindru.
3. Copy of form MGT-6 was filed vide SRN-F74357468 dated 28th October, 2023.
4. That Company has been a wholly owned subsidiary since its incorporation of MSPL holding 99.99% shares through its authorized representatives and One share held by Mr. Vivek Mishra to fulfil the statutory requirement to have a minimum number of two members as per the provisions of the Companies Act, 2013.
5. In terms of Section 187 of the Act the alleged Company was of the opinion that Mr Vivek Mishra holds One share of the Company in the capacity of a nominee of MSPL, hence the Form MGT-6 is not applicable on the alleged Company.

Therefore, it is evident from the filing of e-form MGT-6 (filed vide SRN-F74357468) that Company had received forms MGT-4 and MGT-5 has been filed on 28^th October, 2023 with delay of 975 days.

Observations by Adjudicating Officer:

The adjudicating officer critically analysed the sequence of events and subsequently issued show cause notice U/s. 89 of the CA 2013 to the company and its officers in default vide dated 05^th October, 2023 to the company and officers in default and reply received thereafter.

Company has received the form MGT-4 and form MGT-5 from registered holder and beneficial holder respectively. In such case, Company is bound to file Form MGT-6 within the stipulated timelines, which was not done by the Company.

The Company as per its own submission has received the form MGT-4 & form MGT-5 on 27^th January, 2021 and accordingly the Company was required to file Form MGT-6 on or before 25^th February, 2021 which Company has failed to file and thereafter, it has filed the Form MGT-6 with delay of 965 days on 28^th October, 2023. Hence, there is violation of Section 89(6) of the Act and therefore, the Company and officer in default are liable for penalty under Section 89(7) of the Act.

The Company doesn’t cover under small company as defined under Section 2(85) of the Act. Hence, the benefit of Section 446B of the Act would not be applicable on the Company.

Order passed by Adjudicating Officer:

Having considered the facts and circumstances of the case and after taking into account the factors above and letter dated 10.01.2024 issued by ROC, NCT of Delhi & Haryana, the adjudicating officer concluded that the company and its officers in default are liable for penalty as prescribed under Section 454(6) and Section 454(8) of the Act for default made in complying with the requirements of Section 89 of the Act.

Accordingly, under the provisions of Section 454(6) & 454(8) of the CA 2013, the adjudicating officer imposed a penalty on the company and officers in default as shown in the table below:

The adjudication notice stand disposed off with this order.

Source:

The complete text of the Order No. ROC/D/Adj/Order/89/Mynd Fintech/87-90 dated 10^th January, 2024 may be viewed at the below link:

https://www.mca.gov.in/bin/dms/getdocument?mds=Ng4Z6x5Kfcm7J1N1zIEI5A%253D%253D&type=open