MCA Imposes Penalty on Company and Directors for Loan Default and Violation of Section 180(1)(c)

In the adjudication order passed by the Ministry of Corporate Affairs (MCA) Registrar of Companies under Section 454 of the Companies Act, 2013, the company and its directors were penalized with Rs. 3.5 lakhs for loan default and violation of Section 180(1)(c) of the Companies Act, 2013.

In this case, the company M/s BCL Homes Limited has been incorporated under the Companies Act, 1956, with a paid-up capital of Rs. 8.49 crores. 

 Coming to the facts of the present case, the Central Government directed the office of the MCA to inspect the books and papers of the company.  A Show Cause Notice and Preliminary Findings Letter were issued to the company and its directors on 28-2-2023, with a further summons sent on March 15, 2024, seeking additional information. But the company failed to furnish any reply.

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By going through the  Directors' report for the financial year ended 31.03.2019 and the certification given by CS in practice in Form no. MGT-8 for the financial year ended 31.03.2017, the adjudicating authority noted that the company has defaulted in repayment of term loan and interest thereon to Canara Bank and has not complied with the provisions of Section 180(1)(c) of the Companies Act.

Provision of Section 180(1)(c) of the Companies Act, 2013 states that:

180. Restrictions on Powers of Board.

"(1) The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution, namely:-

(c) to borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up share capital and free reserves and securities premium, apart from temporary loans obtained from the company's bankers in the ordinary course of business:

Provided that the acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of monies by the banking company within the meaning of this clause.”

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The Registrar of Companies and Adjudication Officer, Kamna Sharma, imposed a total penalty of Rs. 3.5  lakhs on the company and the directors for the violation of Section 180(1)c of the Companies Act.

To Read the full text of the Order CLICK HERE

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