MCA Imposed Penalty for Non-Circulation of Board Meeting Draft Minutes
Background of the Case
On 02nd August 2023, the 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 the 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 follows:
“On 08.07.2023, a board meeting was called by the company for allotment of shares and increase of paid-up share capital at the registered office of the company. During the meeting, it was surprising to see Mr. Krishna Kant Jha, a shareholder of the company, and Mr. Himanshu Jha attending without specific authorization. When an objection was raised, it was orally informed that both had been appointed as directors in the meeting held on 26.06.2023. However, no proper notice was given for this meeting, and cross-checking the MCA portal revealed their appointment as directors without following the provisions of Sections 100, 101, 102, 173, 174, 175, and other relevant provisions of the CA 2013. Furthermore, there was no compliance with Secretarial Standard No. 1 & 2, and the undersigned did not receive any notice of the board meeting or extraordinary general meeting (EOGM) about the meeting on 26.06.2023, where their appointment was allegedly made.”
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. The contents of the complaint are as follows:
”Mr. Pramod Jha and Mr. Rakesh Jha, directors of the company, have violated the provisions of Section 118 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 meetings held on 11.08.2023 and 19.08.2023. This is a violation of Section 118 of the CA 2013 and Secretarial Standard – I. Therefore, the provisions of Section 118 have been contravened, rendering the officers in default liable for penal provisions under Section 118(11) of the Act.”
Observations by Adjudicating Officer
The adjudicating officer analyzed the sequence of events and issued a show cause notice (SCN) under Section 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.
In response to the SCN dated 30th November 2023, MCA received a letter from the directors of the company dated 12th December 2023, stating that the EOGM on 26.06.2023 was called by requisitionists of the company, with notice dated 02.06.2023, to appoint Mr. Krishna Kant Jha and Mr. Himanshu Jha as directors. The notice was sent to all members by speed post and delivered within due time. Therefore, the contentions of non-receipt of the EOGM notice by Mr. Rakesh Jha and Mr. Pramod Jha were deemed baseless.
Subsequently, “Notices of Inquiry” were issued to the company and its officers in default, and the hearing was scheduled for 19th December 2023 at the Registrar of Companies, Madhya Pradesh.
Order Passed by Adjudicating Officer
After considering the facts and circumstances, and letters dated 30.11.2023 and 13.12.2023 issued by the ROC, Gwalior, the adjudicating officer concluded that the company and its officers were liable for penalty under Section 118(1) of the Act for default in complying with Section 118(1). The penalties imposed are as follows:
| Nature of Default | Relevant Section under 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/- | ||
| Krishna Kant Jha | 5,000/- | 2,500/- | ||
| Himanshu Jha | 5,000/- | 2,500/- |
The adjudication notice stands disposed of 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 link below:
