M/s Paramount Dye Tec Limited (“The Company”) is incorporated on 04.01.2024. The company is engaged in the manufacturing and trading of fibers. However, such business was nowhere specified in the MOA of the Company. As per Section 4(1)(c) of the Companies Act, 2013, the Company must specify the purpose for which it is incorporated in MOA. Accordingly, RoC held that the company had violated the provisions of Section 4(1)(c) of the Companies Act, 2013, and therefore, RoC imposed a penalty on the company and the directors in default for carrying out business not mentioned in MOA.
Detailed analysis of the case is as follows:
Read also: RoC Imposed a Penalty on the Company for Not Carrying Out Business Specified in MOA
Relevant provisions of The Companies Act, 1956 are reiterated below for ready reference:
“4. Memorandum.—(1) The memorandum of a company shall state—
…
(c) the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof;
..”
450.“if a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption about any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person”
“3 Adjudication of Penalties:
…
(12) While adjudging the quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely:-
(a) size of the company;
(b) nature of business carried on by the company;
(c) injury to public interest;
(d) nature of the default;
(e) repetition of the default;
(f) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; and
(g) the amount of loss caused to an investor or group of investors or creditors as a result of the default:
Provided that, in no case, the penalty imposed shall be less than the minimum penalty prescribed, if any, under the relevant section of the Act.
…”
The RoC, Punjab and Chandigarh held that:
Read Also: Voluntary Winding up of Company| Companies Act, 2013 & Insolvency and Bankruptcy Code, 2016