SEBI IMPOSES RS 29 CR PENALTIES ON SUZLON ENERGY, FORMER EXECUTIVES OVER TRANSFER OF ITS OPERATIONS & MAINTENANCE SERVICES (OMS) DEAL IRREGULARITIES

 SEBI IMPOSES RS 29 CR PENALTIES ON SUZLON ENERGY, FORMER EXECUTIVES OVER TRANSFER OF ITS OPERATIONS & MAINTENANCE SERVICES (OMS) DEAL IRREGULARITIES

FACTS OF THE CASE

SEBI has imposed penalties totaling over ₹29 crore on Suzlon Energy and several former executives for irregularities in the transfer of its Operations & Maintenance Services (OMS) business, including misstatements in financials and circular fund transactions.

Suzlon Energy itself faces a fine of ₹15.95 crore, while key former leaders such as Vinod R. Tanti and Girish R. Tanti were also penalized

ORIGIN:

 An anonymous complaint in December 2019 flagged concerns about investments, loans, impairment accounting, and related-party disclosures.

INVESTIGATION PERIOD:

 FY2014–15 to FY2019–20, plus the first three quarters of FY2020–21.

AUDIT:

Forensic audit conducted by Sarath & Associates.

TRANSACTION IN QUESTION:

In March 2014, Suzlon Energy sold its OMS business to its wholly-owned subsidiary, Suzlon Global Services Ltd (SGSL), for ₹2,000 crore.

The stated value of the business was only ₹77.08 crore.

Suzlon booked an exceptional gain of ₹1,922.92 crore in FY2013–14.

IRREGULARITIES FOUND:

·      ₹1,300 crore of the sale consideration was not received within 90 days.

·      Funds were allegedly routed through circular transactions between Suzlon Energy and SGSL in March 2017.

·      SGSL’s asset base expanded significantly despite limited prior operations.

·      Later, SGSL’s stake was sold to Suzlon Structures in FY2016 for ₹927.83 crore, generating another gain of ₹829.78 crore

ALLEGED REGULATORY VIOLATIONS BY SUZLON

·      PFUTP Regulations (2003): Prohibition of Fraudulent and Unfair Trade Practices.

·      LODR Regulations (2015): Listing Obligations and Disclosure Requirements.

·      SEBI concluded that Suzlon misrepresented financials and engaged in transactions that misled investors.

RISKS & IMPLICATIONS

CORPORATE GOVERNANCE:

Highlights weak oversight in related-party transactions.

INVESTOR CONFIDENCE:

Such penalties can erode trust in Suzlon’s financial reporting.

FUTURE COMPLIANCE:

 Suzlon will need stricter internal controls and transparent disclosures to avoid further regulatory action.

 

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

TO WHICH AUTHORITY WE HAVE TO APPEAL EITHER TO NCLT OR HIGH COURT AGAINST THE PENALTY ORDER PASSED BY ROC OR REGIONAL DIRECTOR OF MCA ?

 TO WHICH AUTHORITY WE HAVE TO APPEAL EITHER TO NCLT OR HIGH COURT AGAINST THE PENALTY ORDER PASSED BY ROC OR REGIONAL DIRECTOR OF MCA ?

APPEAL TO REGIONAL DIRECTOR

You must appeal to the Regional Director (RD) of the Ministry of Corporate Affairs (MCA) to challenge a penalty order passed by the Registrar of Companies (ROC). Neither the NCLT nor the High Court has jurisdiction as the first appellate authority for ROC penalty orders.

ROC ADJUDICATION ORDERS (PENALTY ORDERS UNDER SECTION 454)

Where the ROC acts as an Adjudicating Officer and imposes penalties:

·      Appeal lies to the Regional Director (RD) under Section 454(5).

·      The appeal must generally be filed within 60 days.

In such cases:

·      Direct appeal to NCLT is not provided under Section 454.

·      After the RD passes the appellate order, the usual remedy is:

·      Writ Petition before the High Court under Article 226/227 of the Constitution.

ROC ORDERS WHICH ARE DIRECTLY APPEALABLE TO NCLT

CERTAIN ROC ACTIONS ARE SPECIFICALLY APPEALABLE TO NCLT UNDER OTHER PROVISIONS OF THE COMPANIES ACT. EXAMPLES:

·      Strike off of company name under section 248

·      Appeal/restoration petition before National Company Law Tribunal under Section 252.

·      Refusal of registration/rectification matters in some cases.

·      Compounding and oppression/mismanagement related proceedings.

So, not every ROC order goes to RD first.

NO SECOND APPEAL

There is presently no statutory second appeal to NCLT/NCLAT against an RD order under Section 454.

RD ORDERS

RD orders are generally:

Final administrative appellate orders under the Act.

Usually challenged through:

High Court writ jurisdiction.

·      Only where the Companies Act specifically provides a further appeal mechanism can the matter go to NCLT/NCLAT.

PRACTICAL SITUATION

TYPE OF ORDER	FIRST APPEAL	FURTHER REMEDY
ROCpenalty/adjudication order under Section 454	RD	High Court (writ)
ROC strike-off order under Section 248	NCLT	NCLAT → Supreme Court
Certain RD administrative orders	Usually no statutory appeal	High Court

IMPORTANT CASE LAWS ON MAINTAINABILITY OF WRIT AGAINST RD ORDERS

Some important judgments dealing with the maintainability of writ petitions against orders of the Regional Director (RD) / Registrar of Companies (ROC) under the Companies Act are as follows:

1.M/S KHETAN INDUSTRIES PVT. LTD. V. UNION OF INDIA — DELHI HIGH COURT

The Delhi High Court held that a writ petition is maintainable against an RD order where:

·      the order is non-speaking,

·      principles of natural justice are violated,

·      or the authority fails to exercise jurisdiction properly

2. MUKUT PATHAK & ORS. V. UNION OF INDIA — DELHI HIGH COURT

This is one of the leading cases on ROC disqualification actions under Sections 164 and 167.

The Court entertained writ petitions directly against ROC actions because:

·      the dispute involved statutory violations,

·      civil remedies were ineffective,

·      and fundamental procedural safeguards were allegedly breached.

3. Madras Techno Marine Enterprises Ltd. v. Regional Director — Madras High Court

The Madras High Court entertained a writ against actions/circulars involving ROC and RD under the Companies Act.

Principle Where:

·      the challenge concerns ultra vires exercise of power,

·      unconstitutional circulars,

·      or arbitrary administrative action,

the High Court can exercise writ jurisdiction notwithstanding alternative remedies.

4. THE DELHI HIGH COURT  STAYED PENALTY ORDERS OF ₹27.1 LAKH IMPOSED BY ROC NEW DELHI AGAINST MICROSOFT & LINKEDIN OVER ALLEGED VIOLATIONS OF SIGNIFICANT BENEFICIAL OWNERSHIP (SBO) DISCLOSURE NORMS.

ROC NEW DELHI VS MICROSOFT & LINKEDIN

Yes. A stay can be obtained from the High Court against an ROC order or Regional Director (RD) order by filing a writ petition under Article 226 of the Constitution of India.

However, grant of stay is discretionary and depends on the facts of the case.

Situations Where High Courts Commonly Grant Stay

High Courts are more likely to grant interim stay where:

·      the ROC/RD acted without jurisdiction,

·      principles of natural justice were violated,

·      no proper hearing was granted,

·      the order is ex facie illegal,

·      penalty is disproportionately imposed,

·      the authority ignored statutory provisions,

·      serious civil consequences arise,

·      recovery/coercive steps are imminent.

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

THE DELHI HIGH COURT STAYED PENALTY ORDERS OF ₹27.1 lakh IMPOSED BY ROC NEW DELHI AGAINST MICROSOFT & LINKEDIN OVER ALLEGED VIOLATIONS OF SIGNIFICANT BENEFICIAL OWNERSHIP (SBO) DISCLOSURE NORMS.

THE DELHI HIGH COURT  STAYED PENALTY ORDERS OF ₹27.1 lakh IMPOSED BY ROC NEW DELHI AGAINST MICROSOFT & LINKEDIN OVER ALLEGED VIOLATIONS OF SIGNIFICANT BENEFICIAL OWNERSHIP (SBO) DISCLOSURE NORMS.

ALLEGATIONS

Microsoft & LinkedIn Executives allegedly failed to disclose significant beneficial ownership (SBO) in LinkedIn India under Sections 89 & 90 of the Companies Act, 2013.

RoC argued that Nadella and Roslansky were SBOs due to their leadership roles and indirect control over LinkedIn India.

PENALTY

Penalty of  ₹27.1 lakh imposed by the Registrar of Comnpanies (RoC), upheld by MCA’s Regional Director

SBO UNDER INDIAN LAW

LEGAL BASIS:

Sections 89 & 90 of the Companies Act, 2013 + Companies (Significant Beneficial Owners) Rules, 2018.

DEFINITION:

An SBO is any individual who, directly or indirectly, holds ≥10% shares, voting rights, or significant influence/control in a company.

DISCLOSURE REQUIREMENT:

·      SBOs must file Form BEN-1 with the company.

·      The company must file Form BEN-2 with the Registrar of Companies (RoC).

PURPOSE:

To prevent benami holdings (hidden ownership) and improve transparency in corporate structures.

EXAMPLE:

If a person owns 12% of shares in an Indian company through another entity, they must disclose themselves as an SBO.

DEFENSE ARGUMENTS

Disclosures already filed: Petitioners claim they submitted required declarations on January 29, 2024.

MISAPPLICATION OF LAW:

Authorities allegedly misinterpreted Sections 89 & 90.

IMPROPER RELIANCE ON U.S. SEC FILINGS:

Petitioners argued that U.S. securities law disclosures cannot be equated with India’s SBO framework.

LEGAL SIGNIFICANCE

INDIAN VS. U.S. DISCLOSURE FRAMEWORKS:

The case highlights the tension between global corporate reporting standards and India’s SBO rules.

CORPORATE GOVERNANCE PRECEDENT:

The outcome could set a benchmark for how multinational executives are treated under Indian disclosure laws.

INTERIM RELIEF:

The stay prevents enforcement of penalties until the matter is fully adjudicated.

FINAL THOUGHTS

The petitioners further contended that the ROC improperly relied upon disclosures made before the United States Securities & Exchange Commission (SEC) by the Chief Executive Officer of Microsoft Corporation.

According to the petitioners, disclosures made under the US regulatory framework were distinct from the disclosure obligations applicable under the Indian Companies Act in relation to significant beneficial owners.

The Court pointed out that, “The disclosure made before the United States SEC are different and distinct from those applicable to the Significant Beneficial Owners [SBOs] under the Indian statute.”

 

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

ONWARD TECHNOLOGIES FINED ₹10 LAKH FOR DELAY IN FILING 270 SOFTEX FORMS (MANDATORY FILINGS FOR SOFTWARE EXPORT TRANSACTIONS) WITH SEEPZ-SEZ AUTHORITIES

 ONWARD TECHNOLOGIES FINED ₹10 LAKH FOR DELAY IN FILING 270 SOFTEX FORMS (MANDATORY FILINGS FOR SOFTWARE EXPORT TRANSACTIONS) WITH SEEPZ-SEZ AUTHORITIES

FACTS OF THE CASE

Onward Technologies has been fined ₹10 lakh by SEEPZ-SEZ authorities for delays in filing 270 SOFTEX forms related to export transactions.

The penalty is procedural, with no issues in export proceeds realization or fund diversion, and the financial impact is limited to the fine amount.

WHAT IS A SOFTEX FORM?

SOFTEX forms are filed with designated authorities to certify software export transactions.

They ensure compliance with RBI and SEZ regulations by documenting export value and realization.

Delays in filing can attract penalties, even if there are no issues with actual export proceeds.

LEGAL REQUIREMENT

Indian software and IT/ITeS exporters must file SOFTEX forms within 30 days of the invoice date (or 30 days from the close of the month in which the invoice was raised). Additionally, export proceeds must be realized within 15 months of the invoice date

NATURE OF ISSUE:

Procedural delays only; all export proceeds were duly realized

OUTCOME:

 Authority condoned the delays and closed the matter after imposing the fine

IMPACT ON COMPANY:

Limited to the penalty amount; no material operational or financial impact.

RISKS & IMPLICATIONS

REGULATORY COMPLIANCE:

Even procedural lapses can lead to penalties, highlighting the importance of timely filings.

REPUTATION:

While no wrongdoing was found, repeated lapses could affect investor confidence.

Financial Impact:

 Minimal in this case, but larger delays or repeated violations could lead to stricter scrutiny.

KEY LEARNING

Onward Technologies’ ₹10 lakh penalty is a compliance-related fine with no operational or financial disruption. Investors and stakeholders can view this as a one-off procedural issue rather than a sign of deeper problems. The company has reiterated its commitment to timely and transparent disclosures going forward.

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

REMOVAL OF STATUTORY AUDITOR FOR ALLEGED FRAUD IN THE AFFAIRS OF NETWEALTH AGROTECH INDIA LTD WAS DECLINED BY NCLT AS THE NECESSARY INGREDIENTS OF SECTION 140(5) OF THE COMPANIES ACT, 2013 ARE NOT MET AT THIS STAGE

 REMOVAL OF STATUTORY AUDITOR FOR ALLEGED FRAUD IN THE AFFAIRS OF NETWEALTH AGROTECH INDIA LTD WAS DECLINED BY NCLT AS THE NECESSARY INGREDIENTS OF SECTION 140(5) OF THE COMPANIES ACT, 2013 ARE NOT MET AT THIS STAGE

NCLT MUMBAI VS NETWEALTH AGROTECH INDIA LTD

FACTS OF THE CASE

The NCLT  Mumbai has disposed of the MCA petition under Section 140(5) of the Companies Act, 2013, which sought the removal of the statutory auditor of Netwealth Agrotech India Ltd.

 The Tribunal held that the “necessary ingredients of Section 140(5) are not met at this stage and hence Auditor cannot be removed.”

KEY POINTS FROM THE JUDGEMENT

SECTION 140(5) CONTEXT:

This provision empowers the Tribunal to direct removal of an auditor if it is satisfied that the auditor has acted in a fraudulent manner or abetted fraud in relation to the company’s affairs.

NCLT’S OBSERVATION:

The NCLT noted that the threshold requirements under Section 140(5) were not satisfied at this stage of proceedings.

IMPLICATION:

The statutory auditor will not be removed based on the current petition. The MCA’s allegations of fraud against Netwealth Agrotech India Ltd. and its auditor did not meet the evidentiary standard required for removal.

SECTION 140(5) – CORE REQUIREMENTS

For the Tribunal to remove a statutory auditor under this provision, the following must be established:

FRAUD ALLEGATION

There must be a specific allegation that the auditor has directly acted in a fraudulent manner or has abetted or colluded in fraud in relation to the company’s affairs.

PRIMA FACIE EVIDENCE

The Tribunal must be satisfied, at least on a prima facie basis, that such fraud exists. Mere suspicion, general allegations, or ongoing investigation are not enough.

CONNECTION TO AUDITOR’S ROLE

The fraud must be linked to the auditor’s professional duties — e.g., manipulation of accounts, concealment of material facts, or deliberate misstatements.

CONCLUDING THOUGHTS

This shows that Section 140(5) is not a preventive tool to remove auditors based on suspicion; it is a remedial provision triggered only when fraud is demonstrably linked to the auditor. Until then, regulators may need to rely on other mechanisms like:

· Section 140(1) (auditor resignation/removal by shareholders)

·      Section 447 (punishment for fraud)

·      SFIO/ROC investigations for deeper inquiry

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

ROC KOLKATA FINED AUDITOR FOR NON-DISCLOSURE OF RS 37 CRORES INVESTMENT DETAILS IN THE FINANCIAL STATEMENTS ROC KOLKATA VS PINGAL SALES PRIVATE LIMITED

 ROC KOLKATA FINED AUDITOR FOR NON-DISCLOSURE OF RS 37 CRORES INVESTMENT DETAILS IN THE FINANCIAL STATEMENTS

ROC KOLKATA VS PINGAL SALES

 PRIVATE LIMITED

FACTS OF THE CASE

The company had disclosed investments worth over ₹37.46 crore but failed to provide mandatory particulars such as classification of investments, security details, book value, market value, and names of associated entities as required under Section 129 read with Part I of Schedule III of the Companies Act, 2013.

The auditor was also found to have failed in reporting this non-compliance under Section 143 read with Section 129(1). Despite issuance of show cause notice and reminder, no reply was submitted by the auditor. Consequently, ROC Kolkata imposed a penalty of ₹10,000 on the auditor and directed rectification of default within 90 days, with liberty to appeal before the Regional Director.

SECTION 143 READ WITH SECTION 129(1) OF THE COMPANIES ACT 2013

Section 143 read with Section 129(1) of the Companies Act 2013 creates a statutory framework requiring statutory auditors to ensure that financial statements give a true and fair view of the company’s state of affairs and comply with all notified Accounting Standards and Schedule III requirements

LESSONS LEARNED

ROC Kolkata’s action against Pingal Sales Pvt Ltd and its auditor underscores the serious consequences of non-disclosure and non-compliance under the Companies Act, 2013.

 This case is a reminder for auditors and directors to maintain strict adherence to statutory obligations to avoid personal penalties and reputational damage.

 

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

THE COMPANY CONVERTED LOAN INTO EQUITY BY PASSING A RESOLUTION UNDER SECTION 62(1)(C) INSTEAD OF SECTION 62(3) AND ROC IMPOSED A PENALTY OF ₹2.50 LAKH ON THE COMPANY AND ITS DIRECTORS. ROC , NEW DELHI VS GAME CHANGERS TEXFAB LIMITED

 THE COMPANY CONVERTED LOAN INTO EQUITY BY PASSING A RESOLUTION UNDER SECTION 62(1)(C) INSTEAD OF SECTION 62(3) AND ROC IMPOSED A PENALTY OF ₹2.50 LAKH ON THE COMPANY AND ITS DIRECTORS.

ROC , NEW DELHI VS GAME CHANGERS TEXFAB LIMITED

FACTS OF THE CASE

Company converted its ‘‘Loan into Equity’’ by passing a Special Resolution (SR) erroneously u/s ''62(1)(c)'' instead of Section ''62(3)'' of the Companies Act 2013, resulting, ROC imposed a penalty of ₹2.50 lakh on the Company and its directors.

SECTION 62 OF THE COMPANIES ACT, 2013

Section 62(1)(c): Deals with issue of shares to persons other than existing shareholders, through preferential allotment, subject to compliance with Section 42 (private placement).

Section 62(3): Specifically covers conversion of loans or debentures into equity shares, provided this option was approved by a special resolution at the time of issuing the loan/debenture.

PASSING OF SPECIAL RESOLUTION

Company passed a SR on 01.07.2015 through its shareholders approving a loan amounting to ₹3,01,49,600 from its Holding Company and decided that if the Company fails to repay the loan, it will be converted into Equity.

FAILED TO FILE MGT-14

➡️Additionally, as per the provisions, Company is required to file MGT-14 for passing SR, as required u/s 117 r/w Section 180(1)(c) of the Companies Act, 2013, but the Company failed to do so

CONVERSION OF LOAN INTO EQUITY

Later, the Company decided to convert its loan into equity by passing SR on 15.12.2017 and converted its debt amount into 5,798 equity shares u/s 62(1)(c) of the Companies Act, 2013 instead of section 62 (3).

The Company accepted its mistake and stated that it occurred due to an “Inadvertent Oversight.” Further company submitted High Court judgment in

CTM INDIA LIMITED & ANR. VS ROC, DELHI & HARYANA,

CTM India Limited & Anr. vs ROC, Delhi & Haryana, wherein Court held that benefit of decriminalization of punishment should be extended in favour of the accused, which was accepted by the ROC.

REJECTION BY ROC

Additionally, company stated that default u/s 62(3) is not continuing in nature and is limited to mentioning of incorrect section in the resolution, therefore one-time penalty should be imposed. However, ROC rejected this contention.

CONCLUDING REMARKS

For loan-to-equity conversion: Always rely on Section 62(3).

Ensure the special resolution authorizing conversion was passed at the time of loan agreement and MGT-14 is filed within due date.

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