Penalty For Non-Compliance With Companies Main Objective

Numerous companies listed with the Ministry of Corporate Affairs neglect to fulfill the requirement outlined in Section 4 of the 2013 Companies Act, along with Section 10. These sections clearly define that a company's memorandum should stipulate its intended objectives & other pertinent information.

As per the sources, several companies registered with the Ministry of Affairs fail to comply with the laws, regulations, and requirements of declaring the objectives according to the object clause of the memorandum of association. 

Facts of The Case

Regaal Resources Limited was incorporated on 02.03.2012 with its initial set of objectives. However, the company rectified its main intents to include the business of fine chemicals. As a result, the company ventured into the manufacturing of starch and established starch production facilities, which became operational in September 2018.

The company later changed its main objective On 10 Feb 2020,  specifically incorporating the starch industry. 

During the years 2018-19 and 2019-20, the company acknowledges that it conducted its starch business in contravention of the provisions stated in its Memorandum of Association (MOA).

Based on the provided information, there may be a potential violation of the mentioned provision. If it is determined that the company and its directors have violated the provision, they may be subject to penalties as per Section 450 of the Companies Act 2013. The penalty period would be applicable from February 16, 2015, to February 9, 2020.

Order

Section 450 of the Companies Act 2013 states that if a company or any of its officers violates any provision of the Act, they will be subject to a penalty of ten thousand rupees. In the event of a continuing violation, an additional penalty of Rs. 1000 per day may be imposed, with a maximum limit of Rs. 2 lakhs for a company and Rs. 50,000 for an officer, responsible for the violation.

If a company, its officers, or any other individual violates any provision of the Companies Act 2013, its corresponding rules, or any condition, limitation, or restriction associated with approvals, sanctions, consents, confirmations, recognitions, directions, or exemptions granted in relation to any matter, and if no specific penalty or punishment is provided elsewhere in the Act, the company, its officers, or such individuals will have to pay a penalty of Rs. 10,000. 

In the case of a continuing violation, an additional penalty of one thousand rupees per day may be imposed, starting from the day after the initial violation occurred. However, the maximum penalty shall not exceed two lakh rupees for a company and fifty thousand rupees for an officer or any other person in default.

In accordance with Rule 3(12) of the Companies (Adjudication of Penalties) Rules, 2014, the Registrar of Companies in Kolkata has imposed a combined penalty of Rs. 350,000, considering the applicable criteria. This penalty includes a sum of Rs. 200,000 imposed on the company and Rs. 50,000 on each of the three officers found to be in violation.