MCA imposed penalty for non-circulation of Board Meeting draft minutes
January 09, 2024
Background of the Case
On 02nd August 2023, Ministry of Corporate Affairs (MCA) received a complaint from Mr. Rakesh Jha and Mr. Pramod Jha, directors of Hemco Engineering Private Limited, a company registered under the provisions of Companies Act, 2013 (CA 2013) having its registered office situated at 53-A, Industrial Area, Malanpur, District Bhind, Madhya Pradesh – 477117, India. The contents of the complaint are as under: -
“On 08.07.2023 a board meeting was called by the company for allotment of shares and increase of paid-up share capital by the company at the registered office of the company. In the board meeting, it was very surprising to see that, Mr. Krishna Kant Jha who was shareholder of the company and Mr. Himanshu Jha came to attend the meeting without any specific authorisation and when an objection had been raised it was informed orally that both have been appointed as a director in the meeting held on 26.06.2023. The undersigned authorities were surprised because being a director it was obligatory on the part of other shareholders to issue a proper notice in respect of meeting held on 26.06.2023. When the undersigned has cross check the MCA portal, it has been found that both the persons were appointed as a director of the company in utter disregard with the provisions of Section 100, 101, 102, 173, 174, 175 and other relevant provisions of CA 2013. Further, there was no proper compliance of requirement of both Secretarial Standard No. 1 & 2. The undersigned did not receive any notice of board meeting and/or extraordinary general meeting about the so-called meeting dated 26.06.2023 wherein both the persons were stated to be appointed as a director”.
Whereas, on 18th August 2023, MCA received another complaint from Mr. Mukesh Jha, Mr. Himanshu Jha and Mr. Krishna Kant Jha, directors of Hemco Engineering Private Limited and the content of the complaint are as under: -
”Mr. Pramod Jha and Mr. Rakesh Jha, Directors of the company have violated the provisions of Section118 of the CA 2013 read with Secretarial Standard – I issued by the Institute of Company Secretaries of India by not circulating the draft minutes of the Board Meeting held on 11.08.2023 and 19.08.2023 to them, which is violation of the provisions of Section 118 of the CA 2013 read with Secretarial Standard -1. Therefore, the provisions of the section 118 of the Act, have been contravened and every officer of the company who is in default as the case may have rendered themselves liable for penal provisions under Section 118(11) of the Act”.
Observations by Adjudicating Officer:
The adjudicating officer critically analysed the sequence of events and subsequently issued show cause notice U/s. 118(1) of the CA 2013 to the company and its officers in default vide No. ROC-G/Adj.Pen./u/ s. 118(1)Hemco Engineering/2694 to 2699 dated 30.11.2023 to the company and officers in default.
In response of SCN dated 30th November 2023, the MCA received a letter from the directors of the company vide letter dated 12th December 2023, wherein they have stated that the EOGM of the members of the company dated 26.06.2023 was called by the requisitionists member of the company by giving notice dated 02.06.2023 to appoint Mr. Krishna Kant Jha and Mr. Himanshu Jha on the board of directors of the company. The said notice was sent to all the members of the company vide speed post dated 02.06.2023 and were duly delivered to them within the due time. Hence, baseless contentions of the complainants Mr. Rakesh Jha and Mr. Pramod Jha of non-receipt of the notice of the EOGM has no legs to stand as the notice dated 02.06.2023 of the EOGM dated 26.06.2023 has been duly sent to every member of the company and accordingly neither the section 118 of the CA, 2013 nor the Secretarial standard have been violated. The said information was presented before the adjudicating officer along with the Tracking receipt numbers of the speed posts.
Thereafter, “Notices of Inquiry” vide No. ROC-G/Adj. Pen. /U/s. 118(1)/ Hemco Engineering/2852 to 2857 dated 13.12.2023 were issued to the company and its officers in default. and the date of hearing was fixed on 19th December, 2023 at 3.00 P.M. at the office of Registrar of Companies, Madhya Pradesh.
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 30.11.2023 and 13.12.2023 issued by ROC, Gwalior, the adjudicating officer concluded that the company and its officers in default are liable for penalty as prescribed under Section 118(1) of the Act for default made in complying with the requirements of Section 118(1) of the Act.
Accordingly, under the provisions of Section 118(1) of the CA 2013, the adjudicating officer imposed a penalty on the company and officers in default as shown in the table below:
| Nature of default | Relevant section under the CA 2013 | Name of persons on whom penalty is imposed | Total default amount (Rs.) | Final penalty imposed. (Rs.) |
| Minutes of board meeting | Section 118(1) | On company | 25,000/- | 12,500/- |
| Pramod Jha | 5,000/- | 2,500/- | ||
| Rakesh Jha | 5,000/- | 2,500/- | ||
| Mukesh Jha | 5,000/- | 2,500/- | ||
| Krishana Kant Jha | 5,000/- | 2,500/- | ||
| Himanshu Jha | 5,000/- | 2,500/- |
The adjudication notice stand disposed off with this order.
Source:
The complete text of the Order No. ROC-G/Adj.Pen./u/s.118(1)Hemco Engineering/300 dated 26th December 2023 may be viewed at the below link:
https://www.mca.gov.in/bin/dms/getdocument?mds=YSYmfcyHOSrecI5LdoDwpQ%253D%253D&type=open