In the recent order of adjudication passed by the Ministry of Corporate Affairs ( MCA ) Registrar of Companies, a penalty was imposed on a private limited company and its directors for the failure to constitute an audit and remuneration committee despite a loan breach.
This company was incorporated in the year 2005 and has a paid-up capital of Rs. 8.49 crores.
The Central Government ordered an inspection of the company’s records, but despite a Show Cause Notice (28.02.2023) and a summons (15.03.2024), no response was received.
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The inspection found that since 01.04.2017, the company exceeded loan limits under Rule 4(iii) of the Companies (Appointment and Qualification of Directors) Rules, 2014. As a result, it was required to form audit and nomination committees under Sections 177 and 178 of the Companies Act, 2013, but failed to do so.
The adjudicating authority noted that this non-compliance made the company and its officers liable for penalties under Section 178(8) of the Companies Act.
Section 177 of the Companies Act deals with the establishment of Audit committees, and Section 178 of the Act deals with the nomination and remuneration committees and stakeholders relationship committee.
The penalty imposed has been clearly given in the order in the table. Penalties have been levied on both the company and the directors.
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The order also stated that an appeal against this order may be filed in writing with the Regional Director within sixty days from the date of receipt of this order, in Form ADJ, setting forth the grounds of appeal, and should be accompanied by a certified copy of this order.
The order of adjudication was passed by Kamna Sharma, Registrar of Companies and Adjudicating Officer, Punjab and Chandigarh.
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