₹1.39 CRORE UNSPENT CSR PENALTY: ROC MUMBAI-II TAKES ACTION AGAINST ROYAL FOODSTUFFS LIMITED ROC,MUMBAI II VS ROYAL FOODSTUFFS LIMITED

 ₹1.39 CRORE UNSPENT CSR PENALTY: ROC MUMBAI-II TAKES ACTION AGAINST ROYAL FOODSTUFFS LIMITED

ROC,MUMBAI II VS ROYAL FOODSTUFFS LIMITED

CASE SUMMARY

ROC Mumbai-II imposed a cumulative ₹1,38,86,023 penalty on Royal Foodstuffs Limited and its two directors for defaults relating to unspent CSR obligations across five financial years. The proceedings concerned non-compliance with Section 135(5) and attracted penalties under Section 135(7) of the Companies Act, 2013

𝟭. 𝗧𝗵𝗲 𝗱𝗲𝗳𝗮𝘂𝗹𝘁 𝗰𝗼𝗺𝗽𝗼𝘂𝗻𝗱𝗲𝗱 𝗼𝘃𝗲𝗿 𝘆𝗲𝗮𝗿𝘀

𝟮. 𝗦𝘂𝗼-𝗺𝗼𝘁𝗼 𝗱𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲 𝘀𝘁𝗶𝗹𝗹 𝗰𝗼𝘀𝘁𝘀

3.𝗧𝗵𝗲 𝗽𝗲𝗻𝗮𝗹𝘁𝘆 𝗺𝗮𝘁𝗵 𝗶𝘀 𝘂𝗻𝗳𝗼𝗿𝗴𝗶𝘃𝗶𝗻𝗴 Section 135(7) penalizes the company at 2x the unspent amount (capped at ₹1 crore) and every officer in default at 1/10th of the unspent amount (capped at ₹2 lakh). In the worst year here (FY 2022-23, a complete ₹0 spend), the director-level penalty hit its statutory cap.

𝟰. 𝗢𝗳𝗳𝗶𝗰𝗲𝗿𝘀 𝗶𝗻 𝗱𝗲𝗳𝗮𝘂𝗹𝘁 𝗮𝗿𝗲 𝗽𝗲𝗿𝘀𝗼𝗻𝗮𝗹𝗹𝘆 𝗼𝗻 𝘁𝗵𝗲 𝗵𝗼𝗼𝗸 The order explicitly directs that penalties on the Whole-time Director and Managing Director be paid from personal sources — not the company's funds.

₹1.39 CRORE IN PENALTIES FOR UNSPENT CSR OBLIGATIONS FOR FIVE YEARS UNDER SECTION 135(5) OF THE COMPANIES ACT, 2013

The Registrar of Companies, Mumbai-II vs Royal Foodstuffs Limited and its two directors

KEY DETAILS OF THE ADJUDICATION

Company:	Royal Foodstuffs Limited
Officers in Default:	1.Nilima Avinash Phirke (Whole-time Director)  2. Shivsharan Hanumantappa Sakkargi (Managing Director)
Nature of Violation	Non-compliance with Section 135(5)—failure to transfer unspent CSR funds (relating to other than ongoing projects) to a fund specified in Schedule VII (such as the PM CARES Fund) within six months from the close of the financial year (i.e., by September 30).
Origin of Proceedings:	Suo-motu adjudication applications filed by the company disclosing shortfall and delay across multiple financial years

 

STATUTORY PENALTY FORMULA:

Under Section 135(7) of the Companies Act, 2013

COMPANY:

Twice the unspent amount required to be transferred or ₹1 Crore, whichever is less.

ON OFFICERS IN DEFAULT:

 1/10^th of the unspent amount required to be transferred or ₹2 Lakh, whichever is less, per defaulting officer.

FINANCIAL YEAR-WISE PENALTY BREAKDOWN

The cumulative penalties across the multiple default years totaled ~₹1.39 Crore, calculated strictly according to statutory proportions:

ENTITY/ PERSON	Statutory Multiplier / Limit	Penalty Imposed
ROYAL FOODSTUFFS LIMITED	2timesUnspent Amount(capped at ₹1 Cr per year)	Major Share ₹1.25+ Cr
NILIMA AVINASH PHIRKE (DIRECTOR)	1/10th times UnspentAmount (capped at ₹2 Lakh/year)	₹7 Lakh
SHIVSHARAN H. SAKKARGI (DIRECTOR)	1/10th times UnspentAmount (capped at ₹2 Lakh/year)	₹7 Lakh
TOTAL CUMULATIVE PENALTY		₹1.39 Crore

KEY LEGAL TAKEAWAYS

BELATED REMEDIATION DOES NOT ERASE DEFAULT:

 Although the company remitted the unspent amounts to the PM CARES Fund prior to/during the adjudication proceedings, the ROC held that post-facto rectification does not absolve the company or directors of statutory penalties for the period of non-compliance.

SECTION 446B BENEFIT DENIED:

 The company did not qualify for lesser penalties as a small company under Section 446B. 

PERSONAL LIABILITY OF OFFICERS:

Directors cannot use corporate funds to satisfy their individual personal penalties levied under Section 135(7).

# Your Knowledge partner R V Sekar 79047 19295,

HOW COULD A COMPANY’S MARKET CAPITALIZATION JUMP FROM ₹3 CRORES TO ₹ 4925 CRORES WHILE ITS ACTUAL BUSINESS REMAINS VERY SMALL?

 HOW COULD A COMPANY’S MARKET CAPITALIZATION JUMP FROM ₹3 CRORES TO ₹ 4925 CRORES WHILE ITS ACTUAL BUSINESS REMAINS VERY SMALL?

₹25.05 CRORE ALLEGEDLY ROUTED BY DHENU BUILDCON INFRA — BUT ₹1,000 CRORE SHOWN AS LOAN INFLOWS?

SEBI’S INTERIM ORDER

SEBI’s Interim Order dated 19 August 2026 in the matter of Dhenu Buildcon Infra Limited reveals an alleged fund-rotation mechanism that raises serious questions about how financial transactions can create the appearance of substantial funding.

SEBI’S PRIMA FACIE FINDINGS

According to SEBI’s prima facie findings, approximately ₹25.05 crore was allegedly circulated repeatedly through connected entities and ultimately reflected through cumulative loan inflows of around ₹1,000 crore.

SEBI identified 28 distinct routing patterns across 46 transaction cycles.

REPEATED CIRCULATION OF THE SAME FUNDS

The apparent mechanism was not necessarily about generating ₹1,000 crore of fresh economic funding. Rather, the allegation centers on repeated circulation of substantially the same funds, creating progressively larger cumulative transaction values.

MARKET CAPITALISATION  ROSE FROM APPROXIMATELY ₹3 CRORE TO ₹4,925 CRORE

This becomes particularly significant because, during the relevant period, Dhenu Buildcon’s market capitalisation reportedly rose from approximately ₹3 crore to ₹4,925 crore, despite its limited underlying business and negligible revenues.

THE KEY QUESTION

CAN REPEATED CIRCULATION OF THE SAME MONEY CREATE THE APPEARANCE OF MASSIVE FINANCIAL STRENGTH?

SEBI's prima facie findings suggest that this alleged mechanism may have been used to create an impression of substantial loan funding and financial activity.

₹25.05 CRORE → REPEATED ROUTING → ₹1,000 CRORE CUMULATIVE LOAN INFLOWS → ₹4,925 CRORE MARKET CAP

That is the extraordinary chain that makes the Dhenu Buildcon matter particularly important for investors, auditors, company secretaries, regulators and corporate-governance professionals.

RED FLAGS TO WATCH FOR

·     Large loans from obscure or unknown sources

·     Frequent fund movement between related parties

·     Round tripping of funds

·     Sudden spike in valuation without business growth

·     Preferential allotment to connected entities

WHAT INVESTORS AND PROFESSIONALS SHOULD ALWAYS ASK FOR?

·     Who funded the transactions?

·     Where did the money actually come from?

·     Did the money circulate?

·     Are the parties connected?

·     Does the company’s business performance justify its valuation ?

IMPORTANT:

These are SEBI's prima facie findings/allegations in an interim order, not a final adjudication of liability.

Don't just follow the share price.

# Your Knowledge partner R V Sekar 79047 19295,

HOW VINDHYA TELELINKS APPOINTS INDEPENDENT DIRECTORS WITH JUST 64.33% VOTES IN FAVOR AS AGAINST 75%

 HOW VINDHYA TELELINKS APPOINTS

 INDEPENDENT DIRECTORS WITH JUST 64.33%

 VOTES IN FAVOR AS AGAINST 75%      

Two independent directors did not get the 75% of votes a special resolution needs. The company used a proviso to Regulation 25(2A) of LoDR to appoint them. The provision lets an appointment stand if more shareholders voted for it than against, and more public shareholders voted for it than against.

The proviso was introduced for situations where more than one promoter group exists but disagreed over an ID appointment resolution. At Vindhya, 32.69% of the promoter votes went against both candidates.

ROC KARNATAKA IMPOSES ₹10 LAKH PENALTY ON SDU AGRITECH DIRECTORS FOR RELATED-PARTY RENT PAYMENT WITHOUT BOARD APPROVAL

 ROC KARNATAKA IMPOSES ₹10 LAKH PENALTY ON SDU AGRITECH DIRECTORS FOR RELATED-PARTY RENT PAYMENT WITHOUT BOARD APPROVAL

CASE FOCUS:

Section 188(1) of the Companies Act, 2013 — Rent paid to a related party without prior Board approval

KEY TAKEAWAY

Related-party transactions involving payment of rent require strict compliance with Section 188. Failure to obtain the prescribed Board approval can attract significant penalties on the company and its directors

THE KEY COMPLIANCE POINT

The key compliance point is that Section 188(1) does not merely regulate the commercial terms of a related-party transaction; it requires prior approval of the Board of Directors for specified transactions, including leasing of property. Where a company pays rent to a related party without obtaining the required Board approval, the transaction can constitute a statutory default.

KEY COMPLIANCE LESSONS

·     Identify the related party before entering into the transaction.

·     Determine whether the proposed lease/rent arrangement falls within Section 188(1).

·     Obtain the requisite Board approval before entering into the transaction.

·     Ensure proper disclosure of the transaction and the related party in the relevant records and financial disclosures.

·     Directors should not assume that an existing commercial arrangement automatically satisfies the Companies Act.

·     Procedural non-compliance can itself attract monetary consequences, even where there is no allegation of diversion of funds or commercial loss to the company.

CONCLUSION

“Commercially valid” does not necessarily mean “Companies Act compliant.”

For every related-party lease or rental arrangement, the compliance team should maintain a clear audit trail covering identification → disclosure of interest → Board approval → execution → accounting → statutory disclosure.

# Your Knowledge partner R V Sekar 79047 19295,

NCLAT DELHI VOIDS SHARE TRANSFERS MADE CONTRARY TO ARTICLES OF ASSOCIATION ANUP KUMAR KHEMANI VS BALENDRA CHOUDHURY

 NCLAT DELHI VOIDS SHARE TRANSFERS MADE CONTRARY TO ARTICLES OF ASSOCIATION

 ANUP KUMAR KHEMANI VS BALENDRA

 CHOUDHURY

FACTS OF THE CASE

COMPANY:	Assam Medical Corporation Pvt. Ltd
CORE ISSUE:	Whether shares could be transferred to outsiders without following the pre-emption procedure under Article 15 of the AOA.
NCLAT'S FINDING:	The procedure under Article 15 was not followed in toto; therefore, the transfers were contrary to the Articles and ultra vires.
IMPORTANT PRINCIPLE:	A transfer of shares made in complete violation of the Articles of Association is void.

KEY TAKEAWAY

NCLAT held that a share transfer made contrary to the Articles of Association is void and cannot be sustained merely because the Board approved it.

In this case, Article 15 of the Articles of Association contained a pre-emptive mechanism governing transfer of shares. The prescribed procedure was not followed, and objections were raised by existing shareholders. NCLAT found that the Board could not bypass the Articles and validate the transfers through its resolutions.

# Your Knowledge partner R V Seckar 79047 19295,

USE OF INNOVATIVE FINANCIAL PRODUCT BY SIYARAM SILK MILLS TO ISSUE BONUS PREFERENCE SHARES, FUNDED ENTIRELY FROM GENERAL RESERVES, TO ITS EQUITY SHAREHOLDERS

 USE OF INNOVATIVE FINANCIAL PRODUCT BY SIYARAM SILK MILLS TO ISSUE BONUS PREFERENCE SHARES, FUNDED ENTIRELY FROM GENERAL RESERVES, TO ITS EQUITY SHAREHOLDERS

FOR THE ATTENTION OF CFO’S ABOUT NEW FINANCIAL PRODUCT

FACTS

Siyaram Silk Mills has secured NCLT Mumbai’s approval under Section 230 of the Companies Act, 2013 for a unique Scheme of Arrangement that issues bonus preference shares to equity shareholders, funded entirely from general reserves. The scheme became effective on 30 July 2026, with a record date fixed as 22 August 2026.

KEY HIGHLIGHTS OF THE SCHEME

TRIBUNAL APPROVAL:

·     Sanctioned by NCLT Mumbai Bench on 21 July 2026.

·     Filed with RoC via Form INC-28, effective from 30 July 2026.

FUNDING SOURCE:

Entirely from general reserves (no cash outflow).

ENTITLEMENT STRUCTURE:

For every 1 equity share of ₹2 face value, shareholders receive:

·     Series I: 4 cumulative non-convertible redeemable preference shares (NCRPS), ₹10 face value, 9% dividend, redeemable within 3 years.

·     Series II: 3 cumulative NCRPS, ₹10 face value, 9% dividend, redeemable within 5 years.

LEGAL & REGULATORY CONTEXT

SECTION 230, COMPANIES ACT, 2013:

·     Provides for compromises/arrangements between a company and its shareholders/creditors.

·     Typically used for mergers, demergers, or restructuring; here innovatively applied for issuing bonus preference shares.

ADVANTAGES OF BONUS PREFERENCE SHARES

This approach is particularly advantageous because:

1. No cash is removed from the company at issuance; it is a book entry, not a payout. The “release of assets” occurs only at redemption.

2. Shareholders receive a listed, tradeable instrument. If they require liquidity, they can sell in the market. If not, they hold a preference share with its own rights.

3. This method directs surplus reserves to shareholders while preserving the company’s cash cushion for lenders and operations. The Tribunal specifically noted that this was not detrimental to other stakeholders.

4. It underwent the full Section 230 process, including shareholder and creditor meetings, Regional Director scrutiny, SEBI and stock exchange observation letters, making it a fully sanctioned and low-risk structure.

The significant takeaway for corporate lawyers and CFOs is that Section 230 is no longer limited to mergers, demergers and restructurings. It is increasingly being utilised as a strategic tool for capital allocation, functioning as a hybrid between a dividend and a buyback that provides companies greater control over timing and cash impact.

It is worth observing whether more financially robust listed companies begin to adopt this approach.

GOVERNANCE INSIGHT

This scheme demonstrates creative use of Section 230 beyond mergers/demergers, showing how companies can restructure reserves to reward shareholders.

 It also highlights NCLT’s willingness to sanction innovative capital structuring, provided statutory safeguards are met.

 

# Your Knowledge partner R V Sekar 79047 19295,

 

CALCUTTA HC ENDORSES RELEASE OF CHARTERED ACCOUNTANT IN COMPANY LAW CASE DUE TO LACK OF MENS REA & LIMITATION BAR REGISTRAR OF COMPANIES VS RANJAN MEGHANI (CALCUTTA HIGH COURT)

 CALCUTTA HC ENDORSES RELEASE OF CHARTERED ACCOUNTANT IN COMPANY LAW CASE DUE TO LACK OF MENS REA & LIMITATION BAR

REGISTRAR OF COMPANIES VS RANJAN MEGHANI (CALCUTTA HIGH COURT)  

FACTS OF THE CASE

The Calcutta High Court (Justice Uday Kumar, judgment dated 1 August 2026) upheld the discharge of Chartered Accountant Ranjan Meghani in Registrar of Companies v. Ranjan Meghani, ruling that prosecution failed due to absence of mens rea (criminal intent) and being barred by limitation.

The Court clarified that while CAs can be prosecuted if active complicity is shown, mere certification of statutory forms without evidence of knowing falsification does not attract liability.

KEY FACTS

The case arose from ROC’s investigation into Adorable Agrotech Ltd., which allegedly raised funds through preference shares treated as disguised public deposits.

Meghani’s role was limited to certifying statutory e-Forms (Form 2, Form 5) filed on the MCA portal.

ROC’s ALLEGATION

The ROC alleged defects in filings (missing shareholder names, mismatched allotment dates).

Complaint filed in March 2020, years after the alleged filings (2011–2013).

KEY FACTS

The case arose from ROC’s investigation into Adorable Agrotech Ltd., which allegedly raised funds through preference shares treated as disguised public deposits.

Meghani’s role was limited to certifying statutory e-Forms (Form 2, Form 5) filed on the MCA portal.

The ROC alleged defects in filings (missing shareholder names, mismatched allotment dates).

Complaint filed in March 2020, years after the alleged filings (2011–2013).

COURT’S FINDINGS

MENS REA REQUIREMENT

A CA certifying false returns can be prosecuted under Section 628 of the 1956 Act if active complicity or knowledge is proven.

In this case, no specific allegations showed Meghani knowingly connived with management.

LIMITATION BAR

The alleged offences dated back to 2011–2013.

Complaint filed in 2020 was time-barred under CrPC limitation provisions.

PROFESSIONAL INDEPENDENCE

Court emphasized that independent professionals (like CAs) are not automatically liable for company frauds unless direct involvement is established.

KEY TAKEAWAYS

CLARIFICATION OF LIABILITY:

 CAs are not immune, but liability requires proof of mens rea.

PROTECTION AGAINST OVERREACH:

Prevents ROC from using retrospective prosecutions without timely action.

CORPORATE GOVERNANCE IMPACT:

Reinforces distinction between company officers and external professionals.

# Your Knowledge partner R V Sekar 79047 19295,