Company secretary exonerated in RPT -transaction under companies act 2013 -IN M/S STANLEY LIFESTYLE LIMITED Vs ROC,BANGALORE

 

Company secretary exonerated in RPT -transaction under companies act 2013 -IN M/S STANLEY LIFESTYLE LIMITED Vs ROC,BANGALORE- Rs 50 lakh fine on MD & WTD

Between the fiscal years 2008–09 and 2013–14, Stanley Lifestyles Limited engaged in numerous transactions with related parties, including entities such as Designo, Saash Lifestyle Products Pvt. Ltd., Artex Aesthetes, ABS Seating, Starass Seating Pvt. Ltd., Classee, and Stanley Boutique.

The total number of such transactions across these years was substantial, with 1,392 transactions in 2008–09 and 323 in 2013–14. These transactions collectively accounted for approximately 33.34% of the company's annual turnover during that period.

ROC BANGALORE IMPOSED A PENALTY OF ₹50 LAKH ON DIRECTORS FOR NON-COMPLIANCE OF “Related Party Transactions” UNDER SEC 188 OF THE COMPANIES ACT, 2013.

M/s Stanley Lifestyle Limited ‘s Financial Statements, AS-18 disclosures, & AOC-2 Form, the company disclosed huge Related Party Transactions.

In the AOC-2 Form, it was disclosed that company had taken Board Approval on various dates in the FY 2015-16 & 2016-17, & continued with the same resolution even during FY 2020-21.

As per the provision of section188(2) of the CA,2013,” Every contract or arrangement entered into under sub-section(1)shall be referred to in the Board’s report to the shareholders along with the justification for entering into such contract or arrangement.”

NO OMNIBUS APPROVAL  FROM  AUDIT COMMITTEE

No Omnibus Approval was granted by the Audit Committee for these huge transactions on a year-on-year basis.

Huge transactions were carried out without proper authority in the past  years .

AT ARM'S LENGTH AND IN THE ORDINARY COURSE OF BUSINESS

However, they contended that all transactions were conducted at arm's length and in the ordinary course of business. They also undertook not to repeat this violation in the future.

COMPANY SECRETARY WAS EXONERATED

Ex-Company Secretaries were initially considered part of the default under Section 188(5) of the Companies Act, 2013.However, during the Personal  Hearing, a submission was made stating that the responsibility for entering into and authorizing such transactions rested solely with the MD & WTD. Accordingly, adjudication proceedings against the Ex-CS were dropped.

R V SECKAR, FCS, LLB

79047 19295