In the adjudication order passed by the Ministry of Corporate Affairs (MCA) Registrar of Companies under Section 454 of the Companies Act, 2013, a total penalty of up to Rs. 1.69 lakh was imposed on a private limited company and its two directors for violating Section 29(1) of the Companies Act, 2013.
The company named Neptune Petrochemicals Limited has been registered under the provisions of the Companies Act 2013 and has a paid-up capital of Rs. 16.65 crores.
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Read More: MCA Penalizes Company and Directors for Non-Compliance with Section 29(1)(b) of Companies Act
Section 29 of the Companies Act states that:
“Whereas as per provisions of Section 29 (1) – Notwithstanding anything contained in any other provisions of this Act,
(a) Every company making public offer; and
(b) Such other class or classes of companies as may be prescribed, shall issue the securities only in dematerialized form by complying with the provisions of the Depositories Act,1996 and the regulations made thereunder.
[(1A) In case of such class or classes of unlisted companies as may be prescribed, the securities shall be held or transferred only in dematerialised form in the manner laid down in the Depositories Act, 1996 and the regulations made thereunder.]
(2) Any company, other than a company mentioned in sub-section (1), may convert its securities into dematerialised form or issue its securities in physical form in accordance with the provisions of this Act or in dematerialised form in accordance with the provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made thereunder.”
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In this case, the company under dispute is a public company and by virtue of Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014, the company was required to issue securities in dematerialized form.
It was noted by the adjudicating authority that the non-compliance was for a period of 109 days only, starting from 29.07.2024 to 15.11.2024, and was later rectified by obtaining ISIN No. INE156901014.
The Presenting Officer submitted that the company failed to comply with Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules by not issuing securities in dematerialized form.
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Since no specific penalty is provided for this violation under Section 29 of the Companies Act, 2013, the adjudicating authority can impose a penalty under Section 450 of the Companies Act. A penalty of Rs. 1.19 lakhs was imposed on the company, and a penalty of Rs. 50,000 was imposed on the managing director.
The order also stated that, according to Section 454(8) of the Act, if the order is not complied within 90 days, prosecution will be filed under Section 454(8)(ii) of the Companies Act, 2013.
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