ROC Penalizes Directors for Misclassifying Special Business in AGM Notice

The Registrar of Companies, Mumbai I has passed an adjudication order imposing monetary penalties on directors of OM SHYAMJI FOODS PRIVATE LIMITED for non-compliance with Section 102(5) of the Companies Act, 2013. The case revolves around an Annual General Meeting (AGM) notice in which items that were special business were incorrectly shown as ordinary business, resulting in non-disclosure of the mandatory explanatory statement.

The matter was examined in adjudication proceedings under Section 454 of the Companies Act, 2013, culminating in penalties of ₹50,000 on each defaulting director, to be borne from their personal funds.

Background of the Adjudication

Appointment of Adjudicating Officer

The Ministry of Corporate Affairs, by Gazette Notification No. S.O. 831(E) dated 24/03/2015, empowered the concerned officer as Adjudicating Officer under Section 454 read with the Companies (Adjudication of Penalties) Rules, 2014. The mandate covers levy of penalties for defaults under various provisions of the Companies Act, 2013, including Section 102(5).

Company and Individuals Involved

  • Company: OM SHYAMJI FOODS PRIVATE LIMITED

    • CIN: U15400MH2008PTC187366
    • Registered office: 119, VEENA BEEN SHOPING CENTRE, GURU NANAK ROAD, BANDRA (W) NA, MUMBAI, MAHARASHTRA, INDIA 400050

  • Directors (Noticees):

    • ANIL KUMAR GUPTA – Director
    • RAGHAV GUPTA ANILKUMAR – Director

These individuals were proceeded against as officers in default for violation of Section 102(5) relating to explanatory statements for special business.

Requirements Under Section 102

Section 102 of the Companies Act, 2013 deals with the obligation to annex an explanatory statement to the notice of a general meeting for items of special business. Such a statement must disclose all material facts, including the nature, concern or interest of directors, key managerial personnel, and their relatives, as applicable.

Under Section 102(5):

“Without prejudice to the provisions of sub-section (4), if any default is made in complying with the provisions of this section, every promoter, director, manager or other key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees or five times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is higher.”

Thus, failure to properly classify business and to attach the requisite explanatory statement triggers personal penalty on the officers in default.

Adjudication Mechanism Under Section 454

Section 454 of the Companies Act, 2013 provides for appointment of adjudicating officers and the process for imposing penalties. It also gives the right of appeal to the Regional Director and prescribes further penal consequences under Section 454(8) for non-payment of imposed penalty within the stipulated period.

Facts Identified During Inspection

Initiation of Inspection

The Ministry, through letter No. CL-II-07-489/2021 dated 02.03.2022, ordered an Inspection into the affairs of OM SHYAMJI FOODS PRIVATE LIMITED.

  • The Inspection Officer (IO) carried out the inspection.
  • The Inspection Report was submitted on 23.05.2023.

Separately, the company itself had filed a suo motu adjudication application through eForm GNL-1 (SRN No. AB5757182), acknowledging the issue and seeking adjudication.

Key Non-Compliance Observed

The IO scrutinized the notice for the AGM:

  • AGM notice date: 01.09.2021
  • AGM date: 30.09.2021

The IO recorded that: