BAJRANGBALI SPONGE AND POWER LIMITED WAS PENALISED BY THE REGISTRAR OF COMPANIES (ROC), CUTTACK, FOR FAILING TO APPOINT A CHIEF FINANCIAL OFFICER (CFO) FOR OVER SIX YEARS (2014–2020) ROC CUTTACK vs BAJRANGBALI SPONGE AND POWER LIMITED

 BAJRANGBALI SPONGE AND POWER LIMITED WAS PENALISED BY THE REGISTRAR OF COMPANIES (ROC), CUTTACK, FOR FAILING TO APPOINT A CHIEF FINANCIAL OFFICER (CFO) FOR OVER SIX YEARS (2014–2020)

ROC CUTTACK vs BAJRANGBALI SPONGE AND POWER LIMITED

FACTS OF THE CASE

Bajrangbali Sponge and Power Limited was penalised by the Registrar of Companies (RoC), Cuttack, for failing to appoint a Chief Financial Officer (CFO) for over six years (2014–2020), despite being legally required under Section 203 of the Companies Act, 2013. The company and its directors were fined ₹5 lakh each for prolonged non-compliance.

VIOLATION:

Failure to appoint a whole-time CFO despite having paid-up share capital exceeding ₹10 crore (making CFO appointment mandatory).

LAW INVOKED:

Section 203(1)(iii) of the Companies Act, 2013, read with Rule 8 of the Companies (Appointment and Remuneration) Rules, 2014.

PENALTY:

·       ₹5,00,000 on the company.

·       ₹5,00,000 each on several directors/officers.

LEGAL BACKGROUND

Under Section 203 of the Companies Act, 2013:

·       Certain classes of companies must appoint Key Managerial Personnel (KMP), including a Managing Director/CEO, a Company Secretary (CS), and a Chief Financial Officer (CFO).

·       Non-compliance attracts penalties under Section 203(5):

·       Company: Fine up to ₹5 lakh.

·       Officers in default: Fine up to ₹50,000 plus ₹1,000 per day of continuing default.

COMPARISON OF PENALTIES

COMPANY	PERIOD OF DEFAULT	POSITIONS VACANT	PENALTY AMOUNT
Bajrangbali Sponge & Power Ltd	2014–2020 (6 yrs)	CFO	₹5 lakh (company) + ₹5 lakh each director
Virupaksha Organics Ltd	2018–2021 (3 yrs)	CS & CFO	₹79.40 lakh total
Mahatamil Mining & Thermal Ltd	2014–2023 (9 yrs)	CS, CFO, MD	₹75.18 lakh total

KEY LESSONS LEARNED

·       Mandatory CFO appointment applies to companies with paid-up capital ≥ ₹10 crore.

·       Non-compliance is costly: penalties can reach tens of lakhs depending on duration and positions vacant.

·       Regulators are strict: pleas for leniency (e.g., citing administrative oversight or pandemic delays) are often rejected.

·       Best practice: Companies should proactively appoint KMPs to avoid financial and reputational damage.

#YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

DISCLOSURE OF CSR SPENDING IN PLAIN FORMAT INSTEAD OF TABULAR FORMAT IS A VIOLATION AS HELD BY ROC CHENNAI AND M/S SIVARAJ SPINNING MILLS PRIVATE LIMITED WAS FINED RS 10000 FOR NON-COMPLAINCE UNDER U/S 135(4)(A) OF THE COMPANIES ACT, 2013, R/W RULE 8 OF THE COMPANIES (CSR) RULES.

 DISCLOSURE OF CSR SPENDING IN PLAIN FORMAT INSTEAD OF TABULAR FORMAT IS A VIOLATION AS HELD BY ROC CHENNAI AND M/S SIVARAJ SPINNING MILLS PRIVATE LIMITED WAS FINED RS 10000 FOR NON-COMPLAINCE UNDER U/S 135(4)(A) OF THE COMPANIES ACT, 2013, R/W RULE 8 OF THE COMPANIES (CSR) RULES.

ROC,CHENNAI VS M/S SIVARAJ SPINNING MILLS PRIVATE LIMITED

WHY THIS CONCEERNS?

Section 135(4)(a) requires companies to include details of CSR activities in their Board’s Report in the manner prescribed.

Rule 8 of the CSR Rules mandates that CSR disclosures must follow the format provided in the annexure, which is tabular.

A plain-text disclosure, even if it contains the same information, is treated as a violation because it doesn’t comply with the statutory format.

ANNEXURE FORMAT FOR CSR DISCLOSURE (RULE 8)

S. No.

CSR Project or Activity Identified

Sector in which the project is covered

Projects or Programs (Local area/others)

Amount Outlay (Budget) Project or Program-wise

Amount Spent on the Projects or Programs (Direct or through implementing agencies)

Cumulative Expenditure up to the reporting period

Amount spent: Direct or through implementing agency

·       The table must include all CSR projects undertaken during the financial year.

·       Companies must specify whether the project is in the local area or elsewhere.

·       The disclosure must clearly show budgeted vs. actual expenditure.

·       Details of implementing agencies (if any) must be mentioned.

·       This format is mandatory — any deviation (like using plain text instead of the table) is treated as non-compliance, as seen in the Sivaraj Spinning Mills case.

KEY TAKEAWAY FOR COMPANIES:

·       CSR reporting is not just about substance but also form.

·       Even minor deviations (like not using the tabular format) can attract penalties.

·       Boards should ensure their CSR disclosures strictly follow the prescribed annexure to avoid fines and reputational risks.

·       This case is a reminder that compliance in corporate law often hinges on both content and format.

## YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

WHETHER SUPREME COURT OF INDIA IS AGAINST THE CORPORATE CLASS ACTION SUIT AS THE JINDAL POLY FILMS LTD MINORITY SHAREHOLDERS ALLEGE THAT THEY WERE SIDELINED BECAUSE SC REFERRED THE DISPUTE TO PRIVATE ARBITRATION?

WHETHER SUPREME COURT OF INDIA IS AGAINST THE CORPORATE CLASS ACTION SUIT AS THE JINDAL POLY FILMS LTD MINORITY SHAREHOLDERS ALLEGE THAT THEY WERE SIDELINED BECAUSE SC REFERRED THE DISPUTE TO PRIVATE ARBITRATION? 

REFERRING THE DISPUTE TO PRIVATE ARBITRATION

The Supreme Court has ended India’s first-ever corporate class action suit against Jindal Poly Films Ltd., referring the dispute to private arbitration after both sides consented. This move has sparked controversy, as minority shareholders allege they were sidelined, with nearly 40,000 investors losing a statutory remedy.

KEY FACTS ABOUT THE CASE

CASE ORIGIN:

Filed in March 2024 by minority shareholder Ankit Jain, alleging siphoning of ₹2,500 crore through undervalued related-party transactions.

NCLT & NCLAT ORDERS:

 Both tribunals admitted and upheld the class action under Section 245 of the Companies Act, 2013, marking India’s first admitted shareholder class action.

SUPREME COURT DECISION (JUNE 2026):

 Set aside NCLT/NCLAT orders and appointed Justice Manindra Mohan Shrivastava (Retd. Chief Justice) as sole arbitrator, with Delhi as the arbitration seat.

LEAD PETITIONER EXIT:

 Ankit Jain sold his stake in March 2026; Monet Securities substituted as petitioner in May and then consented to arbitration.

SHAREHOLDER CONCERNS

LACK OF CONSULTATION:

Minority investors claim 40,000 shareholders were not consulted before the case was diverted to arbitration.

ALLEGED STRATEGY:

 Critics argue Monet Securities’ substitution and immediate consent to arbitration may have been a pre-arranged strategy with Jindal Poly to defeat the class action.

INVESTOR PROTECTION DEBATE:

 Legal experts warn this sets a precedent where class actions can be privately settled, undermining statutory safeguards for retail investors

ROLE OF SEBI

INTERVENTION:

 SEBI filed an investigative report confirming ₹760 crore losses to public shareholders due to opaque related-party transactions and disclosure violations.

PENDING ACTION:

 Despite arbitration, SEBI continues pursuing regulatory proceedings, meaning the company may still face penalties or compliance directives.

RISKS & TRADE-OFFS

TRANSPARENCY LOSS:

Arbitration is private, reducing visibility for retail investors.

PRECEDENT RISK:

May discourage future shareholder activism under Section 245.

INVESTOR REMEDIES:

Shareholders may need to pursue individual claims or rely on SEBI’s enforcement.

CONCLUDING REMARKS

In short, while the Supreme Court’s referral to arbitration resolves the dispute procedurally, it raises serious questions about minority shareholder rights, transparency, and the future of class actions in India.

Investors should closely monitor SEBI’s ongoing proceedings, as that remains the only avenue for broader accountability.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

DESPITE SEBI’S EXPLOSIVE FRAUD ALLEGATIONS, INDEPENDENT DIRECTORS OF RAJESH EXPORTS HAVE NOT RESIGNED. ARE THEY “SUPPORT” THE PROMOTER’S STAND?

 DESPITE SEBI’S EXPLOSIVE FRAUD ALLEGATIONS, INDEPENDENT DIRECTORS OF RAJESH EXPORTS HAVE NOT RESIGNED. ARE THEY “SUPPORT” THE PROMOTER’S STAND?

IT MORE LIKELY REFLECTS THE COMPLEX DYNAMICS OF CORPORATE GOVERNANCE, REGULATORY UNCERTAINTY, AND THE DIRECTORS’ OWN LEGAL OBLIGATIONS.

RAJESH MEHTA OF RAJESH EXPORTS IS FACING ALLEGATIONS OF ₹15.15 LAKH CRORE REVENUE FRAUD, MISUSE OF FUNDS, AND MISREPRESENTATION OF ACCOUNTS.

LIC (WITH 10.8% STAKE) WILL HAVE TO PLAY A CRUCIAL ROLE IN PUSHING FOR GOVERNANCE REFORMS IN RAJESH EXPORTS?

PRESENT SCENARIO

SEBI Order (June 2026): Rajesh Exports and promoter Rajesh Mehta face allegations of ₹15.15 lakh crore revenue fraud, misuse of funds, and misrepresentation of accounts. SEBI has barred the promoter from accessing the securities market pending further investigation.

INDEPENDENT DIRECTORS:

As of now, none of the independent directors have resigned en masse. However, there have been individual cessations in past years (e.g., Vijayalakshmi in 2024).

SHAREHOLDER PUSHBACK:

 In 2025, shareholders rejected the reappointment of Asha Mehta as an independent director, showing that investors are already skeptical of governance practices.

WHY INDEPENDENT DIRECTORS OF RAJESH EXPORTS  HAVN’T RESIGNED?

LEGAL DUTY VS. OPTICS:

Independent directors are bound by fiduciary duties. Resigning immediately could be seen as shirking responsibility when regulators expect them to cooperate in investigations.

REGULATORY PRESSURE:

 SEBI often requires independent directors to remain in place to ensure continuity and accountability during probes.

REPUTATION RISK:

 Resignation could be interpreted as an admission of complicity or failure to oversee, which may expose them to liability.

PROMOTER INFLUENCE:

 In promoter-driven companies like Rajesh Exports, independent directors may have limited autonomy, making resignation politically or professionally difficult.

DOES NON-RESIGNATION MEAN TO SUPPORT TO RAJESH EXPORTS ?

Not necessarily.

·       Staying on the board does not automatically mean they endorse the promoter’s position. It may simply reflect:

·       A wait-and-watch approach until SEBI’s final order.

·       Desire to protect themselves legally by showing they are cooperating.

·       Pressure from promoters or institutional investors to maintain stability.

INVESTOR TAKEAWAY

·       Do not assume silence = support. Independent directors may be constrained by law, optics, or promoter influence.

·       Watch SEBI’s next steps. If the regulator strengthens charges, directors may be forced to resign or face liability.

·       Institutional investors (like LIC with 10.8% stake) will play a crucial role in pushing for governance reforms.

FINAL THOUGHT

The lack of resignations   by Independent Director of Rajesh Exports is less about endorsement of the promoter’s stand and more about the legal, regulatory, and reputational complexities of corporate governance in India.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

ROC BENGALURU IMPOSED PENALTY ON TACTILE EDUCATION SERVICES PRIVATE LIMITED FOR CONVERSION OF LOAN INTO EQUITY WITHOUT PASSING SPECIAL RESOLUTION AND THE ALLOTMENT WAS INCORRECTLY REPORTED AS A RIGHTS ISSUE UNDER SECTION 62(1)(A).

ROC BENGALURU IMPOSED PENALTY ON TACTILE EDUCATION SERVICES PRIVATE LIMITED FOR CONVERSION OF LOAN INTO EQUITY WITHOUT PASSING SPECIAL RESOLUTION AND THE ALLOTMENT WAS INCORRECTLY REPORTED AS A RIGHTS ISSUE UNDER SECTION 62(1)(A).

ROC , BENGALURU VS ON TACTILE EDUCATION SERVICES PRIVATE LIMITED

FACTS OF THE CASE

CONVERSION OF LOAN INTO EQUITY WITHOUT PASSING SPECIAL RESOLUTION AND THE ALLOTMENT WAS INCORRECTLY REPORTED AS A RIGHTS ISSUE UNDER SECTION 62(1)(A) WHEREAS IT SHOULD HAVE BEEN TREATED AS A PREFERENTIAL ALLOTMENT UNDER SECTION 62(1)(C) INVOLVING CONSIDERATION OTHER THAN CASH.

VIOLATION:

·       Converted loans from shareholders/directors into equity shares without prior approval via special resolution under Section 62(3).

·       Incorrectly reported the allotment as a rights issue under Section 62(1)(a) instead of a preferential allotment under Section 62(1)(c).

·       This triggered non-compliance with Section 42 (private placement provisions).

REDUCED PENALTY DUE TO START UP

•       ₹2 lakh on the company.

•       ₹1 lakh each on directors Ravi Rangan Srinivasa, Aragudige Prabhakara Raghu, and Rajani Rangan.

•       Reduced penalties applied under Section 446B (benefits for start-ups).

RISKS & COMPLIANCE LESSONS

·       Misclassification of allotment (rights issue vs. preferential allotment) can lead to serious penalties.

·       Special resolution is mandatory before converting loans into equity.

·       Private placement rules under Section 42 must be strictly followed, including filing Form PAS-3 within 15 days.

·       Start-ups may receive reduced penalties under Section 446B, but violations still attract fines and reputational risk.

KEY TAKEAWAYS

·       Always pass a special resolution before converting loans into equity.

·       Ensure allotments are correctly categorized (rights issue vs. preferential allotment).

·       File PAS-3 on time to avoid additional penalties.

·       Seek legal and compliance review before restructuring capital.

·       Start-ups should leverage Section 446B relief, but not rely on it as a safeguard against non-compliance.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

REMOVAL OF AN INDEPENDENT DIRECTOR FOR NOT ATTENDING BOARD MEETING IN THE LAST 12 MONTHS BY A LISTED COMPANY NAMELY GTT DATA SOLUTIONS LIMITED UNDER SECTION 167(1)(B) OF THE COMPANIES ACT, 2013

 REMOVAL OF AN INDEPENDENT DIRECTOR FOR NOT ATTENDING BOARD MEETING IN THE LAST 12 MONTHS BY A LISTED COMPANY NAMELY GTT DATA SOLUTIONS LIMITED UNDER SECTION 167(1)(B) OF THE COMPANIES ACT, 2013

FACTS OF THE CASE

Mr. Samarjeetsinh Vikramsinh Ghatge (Independent Director) of GTT Data Solutions Limited was removed under Section 167(1)(b) of the Companies Act, 2013 because he failed to attend any board meetings for 12 consecutive months. His office was vacated automatically on 14 August 2025, and the company later disclosed this to the stock exchange in June 2026.

LEGAL BASIS FOR REMOVAL

SECTION 167(1)(B), COMPANIES ACT, 2013:

A director automatically vacates office if they are absent from all board meetings held during a continuous period of 12 months, regardless of whether leave of absence was sought.

This provision ensures that directors remain actively engaged in governance and prevents inactive directors from continuing in office.

DISCLOSURE DELAY:

 The company identified the lapse only after receiving its Annual Secretarial Compliance Report (ASCR) on 30 May 2026.

REGULATORY COMPLIANCE:

Disclosure was filed with BSE Limited on 2 June 2026 under Regulation 30 of SEBI (LODR) Regulations, 2015

KEY CONSIDERATIONS FOR LISTED COMPANIES

AUTOMATIC VACATION VS. REMOVAL:

Vacation under Section 167(1)(b) is automatic and does not require shareholder approval.

Removal under Section 169 requires a shareholder resolution.

COMPLIANCE OBLIGATIONS:

Listed companies must promptly disclose director cessations to stock exchanges under SEBI (LODR) Regulations.

RISK OF MISUSE:

 Courts have cautioned that improper notice of board meetings can make such vacation invalid. Companies must ensure proper documentation of meeting notices and attendance

BUT ROC MAY NOT APPROVE THE FORM DIR-12 AND ASK YOU TO RESUBMIT WITH THE FOLLOWING DOCUMENTS

·      Minutes of all Board Meetings during the relevant period

·      Board Meeting Attendance Register

     AFFIDAVIT CONFIRMING:

• The director had not attended meetings for 12 months

• Meeting notices were properly issued

• No litigation existed regarding the cessation

• The company was regular in MCA filings

COMPLIANCE WITH SECTIONS 167 AND 164

·      The ROC also gave the concerned director an opportunity to submit objections.

·      If no response was received, the DIR-12 was eventually approved.

CASE LAWS ON THE SUBJECT

Union of India v. R. Gandhi (Madras High Court, 2015)	The court emphasized that vacation of office under Section 167 is automatic and does not require a board resolution.
M.K. Srinivasan v. Registrar of Companies (NCLT, 2017)	The NCLT held that once a director fails to attend all meetings for 12 months, the company must file DIR‑12 with the ROC. •      The tribunal rejected arguments that leave of absence could protect the director, affirming that leave is irrelevant under Section 167(1)(b).

 

KEY LESSON LEARNED

Even though the law provides automatic vacation of office, the ROC may require strong documentary proof before approving DIR-12.

Proper corporate records are therefore critical.

RISKS & GOVERNANCE IMPLICATIONS

Delayed disclosure can attract regulatory scrutiny and penalties.

BOARD EFFECTIVENESS:

 Prolonged absence of directors undermines governance and decision-making.

INVESTOR CONFIDENCE:

 Transparency in reporting director cessations is critical for maintaining trust in listed companies.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,