Penalty for non-compliance with companies main objective

SHORT SUMMARY

As stated in Section 4 of the 2013 Companies Act when combined with Section 10. The Act's provisions under section 4(1)(c) state, among other things, that the company's memorandum must list the object for which it is intended to be formed as well as any other information deemed relevant to those purposes.

The disclosure of the objects and topics linked thereto for that company incorporated need to declare in the object clause of the memorandum of association is a requirement that, many of the companies registered with the Ministry of Corporate Affairs fail to comply with.

Appreciating Move by the Company for maintaining the Corporate Governance

The Company Regaal Resources Ltd. launched a Suo moto submission of an application respecting the terms of Section 4 read with Section 10 of the 2013 Companies Act. In this editorial we will discuss one of those order. The complete matter shall be covered here.

"Adjudication Order in the Matter of Regaal Resources limited"

FACTS OF THE CASE

1. The Regaal resources limited was established on 02.03.2012, and on 16.02.2015, the company's primary objective was changed to include the business of fine chemicals. After making such modifications, the company start the starch manufacturing facilities, and in September 2018 starch production began.
2. The Company also changed the primary objective on 10.02.2020, particularly incorporating the starch industry.
3. The company Suo moto also claims that it operated its starch business in the years 2018–19 and 2019–20 in violation of provisions the MOA.
4. In light of the foregoing, it is prima facie evident that the aforementioned provision appears to have been broken, and as a result, the company and its director are subject to penalties under Section 450 of the Companies Act 2013. The punitive clause is applicable from February 16, 2015, through February 9, 2020.

ORDER

As per the section of 450 of companies act 2013 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 in relation to 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 beliable 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.

According to rule 3(12) of the Companies (Adjudication of penalties) Rule, 2014, the ROC Kolkata levies a total penalty of Rs. 350,000 after taking the criteria into account. This penalty is made up of Rs 200,000 against the firm and Rs 50,000 against the each officer who is in violation.