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ROC penalizes Co. & director for failure to mention DIN while communicating to the regulator - A Case Study
Background of this case
This is the case where, the director of a company named M/s Wind World (India) Limited did not mention the director identification number (DIN) while sending a reply letter dated 9th August 2022 to the office of the Registrar of Companies, pursuant to an enquiry conducted by the inspecting officials under the provisions of sub-section (4) of section 206 of the Companies Act 2013. As per the framework of the Companies Act 2013, pursuant to section 158 of the Companies Act 2013, every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall have to mandatorily mention the director identification number (DIN) in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director. Since the reply submitted by the director of M/s Wind World (India) Limited, the Adjudication Officer of Goa, initiated the proceedings against the company and following the due process of law passed the adjudication order and penalized the company and director to a tune of rupees one lakh. Let us go through this case in order to understand the intricacies, requirement of the law and the consequences of default on this matter.
Relevant provision of the Companies Act relating to this case
As per the sub-section (1) of section 158 of the Companies Act, 2013 in Chapter XI, every person or company, while furnishing any return, information or particulars as are required to be furnished under the Companies Act 2013, shall have to mention the Director Identification Number (DIN) in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director.
Penal provisions for default committed if any
Section 172 of the Companies Act 2013, spells out the punishment for any contravention committed in this chapter i.e. chapter XI. As per the provisions of section 172, if a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of rupees
Consequences of default/violation
To understand the consequences of any default / non-compliance while complying with the provisions of section 158 of the Companies Act 2013 relating to indicating the details of director identification number while communicating to the regulators by a director of a company, let us go through the decided case law by the Registrar of Companies of Goa, Daman & Diu on this matter on 15th April 2024 relating to M/s. Wind World (India) Limited.
The relevant case law on this matter
We shall go through the adjudication order bearing no. ROCGDD/Ao/Sec-158/2024/04 passed by the Registrar of Companies, Goa, Damn & Diu on 15th April 2024 under section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules 2019 in respect of M/s. Wind World (India) Limited.
Details of the company
M/s. Wind World (India) Limited is a registered company under the provisions of the Companies Act, 1956 with effect from 22nd May 2003 and having its registered office situated at Plot no.33, Daman Patalia Road, Bhimpore, Daman. The company falls under the jurisdiction of Registrar of Companies, Goa, Daman &Diu and the office of the Registrar of Companies is situated at Goa. The company, as per the details shown at the MCA portal has three directors on its board and also a whole time company secretary (KMP). Wind World (India) Limited is majorly in manufacturing machinery &equipment business.
Facts of the case
The Registrar of Companies had conducted on the company M/s.Wind World (India) Limited through its inspecting officials under section 206(4) of the Companies Act 2013. During the inspection and enquiry, the inspecting officials had come across a reply letter written by one of the director of the company dated 9th August 2022 to the Registrar of Companies which did not contain the director identification number (DIN). The inspecting officials took up the matter with the company and the reply provided by the company was found to be unsatisfactory. Thereafter, the matter was referred to the competent authority at the Directorate of Ministry of Corporate Affairs.
Directions issued by the competent authority to the Registrar of Companies of Goa
The Registrar of Companies of Goa received directions from the competent authority of Ministry of Corporate Affairs to initiate penal action against the concerned director of the company.
Issue of show cause notice by the Registrar of Companies/Adjudication Officer
Subsequently, the Registrar of Companies/Adjudication Officer, as directed by the competent authority initiated the penal action against the company and its director. The Registrar of Companies/Adjudication Officer had issued show cause notice dated 28th February 2024 under section 454(4) of the Companies Act 2013 read with Rule 3(2) of the Companies (Adjudication of Penalties) Rules 2014 to the company and its director in default for the violation of section 158 of the Companies Act 2013. The show cause notice directed the company and its director to show cause as to why penal action could not be initiated against them for the violation committed for failure to mention the DIN details in the reply letter dated 9th August 2022 addressed to the Registrar of Companies.
Response from the company
In response to the show cause notice issued by the Registrar of Companies the company and its director not responded to the same and no reply was received by the Registrar of Companies / Adjudication Officer till the time of passing the adjudication order.
Conclusions arrived by the Registrar of Companies/Adjudication Officer
Since no response had been received from the company in respect of the show cause notice issued to the company and its directors, the Registrar of Companies / Adjudication Officer, decided to conclude the case with the available materials on record and on its merit basis. After carefully
having considered the facts and circumstances of the case with the available documents on record concluded that the company and its director in default were liable for penalty as prescribed under section 172 of the Companies Act 2013 for default made in complying with the requirements of section 158 of the Companies Act 2013 – for failure to mention the DIN details while communicating with the Registrar of Companies.
Order passed by the Registrar of Companies/Adjudication Officer
The Registrar of Companies/Adjudication Officer in exercise of the powers vested upon
him under section 454(1) & (3) of the Companies Act, 2013 and after having considered the facts and circumstances of the case and after taking into account the factors discussed above imposed penalty upon the company and its defaulting directors pursuant to Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication of Penalties) Rules 2014 for the violation of section 134 of the Companies Act 2013.(filing the unsigned copies of the financial statements /other documents by the directors and auditors of the company)
The details of the penalty imposed on the company was shown in the table below:
a.?The order stated that the penalty imposed shall have to be paid by the company and its director through the Ministry of Corporate Affairs portal only under intimation to the office of the Registrar of Companies.
b.?The order stated that an appeal against this order may be filed in writing with the Regional Director, Western Region, Ministry of Corporate Affairs, 100, Marine Drive, Everest Building, Mumbai within a period of sixty days from the date of receipt of this order in Form ADJ setting forth the grounds of appeal and the appeal shall have to be accompanied by a certified copy of this order. (Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules 2014 as amended by Companies (Adjudicating of Penalties) Amendment Rules 2019.
c.?The order also drawn the attention of the company to the provisions of section 454(8) of the Companies Act, 2013 regarding consequences of non-payment of penalty.
Despatch of the order
The order was sent by the Registrar of Companies, Goa, Daman &Diu in terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules 2014 to the company and its defaulting director and to the Regional Director, Western Region, Ministry of Corporate Affairs, 100 Marine Drive, Everest Building, Mumbai. The order copy also was sent to E-Gov cell for uploading the order documents at the MCA site.
The complete order for reading
The readers may like to read the complete adjudication order passed by the Registrar of Companies / Adjudication Officer of Goa, Daman & Diu on 15th April 2024 adjudication order bearing no. ROCGDD/Ao/Sec-158/2024/04 under section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules 2019 in respect of M/s. Wind World (India) Limited at the MCA website at https://www.mca.gov.in/ content/ mca/ global/en/ data-and-reports/ rd-roc-info /roc- adjudication-orders.html.(the order is uploaded by the ROC of Goa on 4th June 2024 titled as orders adjudication of penalties passed by ROC, Goa, Daman & Diu under section 454 of the Companies Act 2013 for violation of section 158 of the Companies Act 2013 in the matter of M/s. Wind World (India) Limited )
Conclusion
We can conclude in saying that the company secretary, in the absence of the company secretary, the directors and other authorized officials of the company needs to ensure, that the DIN Number is mentioned beneath the signature of the director on information, documents and returns (including the financial statements) submitted to the regulator by the company whenever such documents are signed by the director for the submission to the regulator and as well as in all documents received from the director by the company in the capacity of a director.
The company secretary/director and other officials' needs to take every care to ensure that the DIN number is mentioned underneath the signature of the director upon signing since not mentioning the DIN number which appears to be a trivial matter would attract heavy penalty and fines, in view of the stringent provisions of the Companies Act 2013.
In this particular case, the company and directors ended up in paying a lakh of rupees for failure to mention the DIN in the communication letter addressed to the Registrar of Companies. In cases where the companies not required to have a company secretary, it is better to take the help of the practicing professional like a practicing company secretary and ensure the absolute compliance in order to avoid any penal action from the regulator. If the compliance is not taken care, as seen in this case, the company and the defaulting directors would face the penal actions and end up in spending the time and also face the monetary penalty. Needless to mention that the company directors need to be vigilant in ensuring the required compliance
NCLT's order allowing contempt application set aside due to CLB's lack of contempt jurisdiction under Cos. Act: NCLAT
In the instant case, the appellant company obtained project finance from bank 'I', and some preference shares were allotted to it. The appellant failed to repay the finance amount, so the bank sold the said shares to the respondent company.
The appellant filed a petition before the High Court for approval of cancelling/reducing the capital of its preference shares, including shares allotted to the bank, and the same was allowed.
The Respondent filed a petition before the Company Law Board (CLB) against the appellant, seeking a direction to the appellant to transfer the sum of the said shares and the same was allowed.
The appellant then filed an appeal before the High Court challenging the order of CLB; however, the appeal was dismissed, and the Supreme Court affirmed the dismissal.
Thereafter, the Respondent filed an application before the NCLT to initiate a proceeding of contempt against the appellant for disobedience of the order passed by CLB, and a compensation amount was imposed on the appellant vide the impugned order.
It was noted that in N Venkata Swamy Naidu Vs. M/s Sri Surya Teja Construction Pvt. Ltd. (2007) 140 412, decided by the High Court, it was held that the High Court, under section 10 of the Contempt of Courts Act, had the power to punish for contempt of a subordinate court, coextensive with its power to punish for contempt of itself. Thus, the CLB had no jurisdiction to issue the order of contempt because the power to punish for contempt had to be specifically provided for and conferred under the Companies Act 2013.
The NCLAT held that, once the order of the CLB merged with the order passed by the High Court and further merged in the order of the Supreme Court, contempt would only be of the order of the Supreme Court or an order passed by the High Court but would not lie against the order passed by the CLB.
Further, since the contempt petition itself was not maintainable on various grounds, the direction issued in that petition against the appellants was not sustainable, and thus, the instant appeal was to be allowed.
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