The Registrar of Companies (ROC), Karnataka, passed an Order of Adjudication of Penalty under Section 454 of the Companies Act, 2013, for the violation of Section 101 of the Act by Stanley OEM Sofas Limited.
Key Findings of the Order:
Company Name: Stanley OEM Sofas Limited
Violated Section: Section 101 of the Companies Act, 2013, read with the rules, which governs the Notice of Meeting (General Meeting).
Provision Violated: Section 101(1) mandates giving not less than clear twenty-one days' notice for a general meeting, or securing consent for a shorter notice.
For an Annual General Meeting (AGM), shorter notice requires consent from not less than ninety-five per cent of the members entitled to vote.
Facts of the Default: During an inquiry, it was reported that:
The statutory auditor certified and submitted the Audit Report on 29.12.2020.
The Annual General Meeting (AGM) for the approval of financial statements for the year 2019-2020 was convened on the same day, 29.12.2020.
The company was required to state how it complied with Section 101, including supporting documents like the notice sent to shareholders, directors, and the auditor.
The Adjudicating Officer (ROC, Karnataka) found a violation and, since the company is a public limited company and does not qualify as a small company, the provision for a lesser penalty under Section 446B was not applicable.
The penalty was imposed under Section 450 of the Act (Punishment where no specific penalty is provided).
Penalty Imposed (Total ₹40,000):
Company: ₹10,000
Director (Shubha Suma): ₹10,000
Director (Sunil Suresh): ₹10,000
Director (Ananthakrishnan Gowravith): ₹10,000
Payment & Filing Instructions: The penalty must be paid within 90 days from the date of the Order, and the company must file Form INC-28 attaching a copy of the Order and payment challans. Directors must pay the penalty out of their own funds.
📝 Compliance Alert for CS Professionals
📢 The 21-Day Rule: ROC Karnataka Penalises Company for Short-Notice AGM under Section 101
The Ministry of Corporate Affairs (MCA) and the Registrar of Companies (ROC) are constantly vigilant about procedural compliance. A recent adjudication order by ROC, Karnataka, against Stanley OEM Sofas Limited serves as a critical reminder of the fundamental requirement for convening general meetings, especially the Annual General Meeting (AGM). The case underscores the strict interpretation of Section 101 of the Companies Act, 2013, regarding the notice period.
The Core Violation: The Short-Notice Trap
Section 101(1) of the Companies Act, 2013, is clear: a general meeting must be called by giving not less than twenty-one clear days' notice.
In the case of Stanley OEM Sofas Limited, the breach was evident: the Audit Report for FY 2019-2020 was submitted on December 29, 2020, and the AGM to approve the financial statements was convened on the very same day! This procedural lapse meant the company failed to provide the mandatory 21 clear days' notice.
What about Shorter Notice?
The Act does provide a mechanism for shorter notice, but it is conditional. For an Annual General Meeting (AGM), it requires the written or electronic consent of not less than 95% of the members entitled to vote. The company was specifically asked to produce supporting documents like the notice and consent, indicating a failure to adhere to this crucial proviso.
Key Takeaways for Compliance Professionals
This order highlights several non-negotiable compliance points:
Strict Adherence to Notice Period: Always calculate the 21-day notice period meticulously (excluding the day of sending and the day of the meeting). Convening an AGM on the same day as the audit report submission is a clear breach of this statutory requirement.
Mandatory 95% Consent for Short Notice (AGM): If a meeting is held on shorter notice, the consent mechanism is a must. For an AGM, consent from at least 95% of the eligible members is required, and this consent must be maintained in writing or electronic form.
No Small Company Exemption: Since Stanley OEM Sofas Limited is a Public Limited Company, it was ineligible for the benefit of a lesser penalty under Section 446B, which applies to One Person Companies, Small Companies, etc.. Non-compliance can be costly for larger entities.
Penalty under Section 450: Where no specific penalty is provided for a section (like Section 101), the default penalty under Section 450 is invoked, leading to a penalty of ₹10,000, with further penalties for continuing default (up to ₹2 Lakh for the company).
Personal Liability for Directors: A total penalty of ₹40,000 was imposed on the Company and its three Directors (₹10,000 each). Directors were explicitly directed to pay the penalty out of their own funds.
Action Required Post-Adjudication
The Order mandates the following post-adjudication steps:
Payment Timeline: The Company and the Directors must pay the penalty amount within 90 days from the date of receiving the Order.
Filing Requirement: The payment must be reported by filing Form INC-28 with the ROC, attaching a copy of the Order and the payment challans.
Appeal: An appeal against the Order, if any, must be filed with the Regional Director (South East Region), Hyderabad, within 60 days in Form ADJ.
CS Tip: Proper documentation of the notice dispatch date, member list, and a meticulous record of the 95% consent for shorter notice is paramount. Treat the statutory 21-day period as sacrosanct to avoid penalties and compounding hassles.
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