MCA PROPOSES MANY NEW AMENDMENTS TO THE COMPANIES ACT 2013, PUNISHING COMPANIES THAT FAILED TO SPEND 2% CSR AND “FIT AND PROPER” CRITERIA FOR DEBARRING DIRECTORS FROM HOLDING BOARD POSITION.

 MCA PROPOSES MANY NEW AMENDMENTS TO THE COMPANIES ACT 2013, PUNISHING COMPANIES THAT FAILED TO SPEND 2% CSR AND “FIT AND PROPER” CRITERIA FOR DEBARRING DIRECTORS FROM HOLDING BOARD POSITION.

BAN ON HOLDING BOARD POSITIONS

The move is a fallout of the IL&FS scandal, where the government was forced to supersede the board and take control but realised that it can do little to bar the disqualified directors, including some top names of the corporate sector, from holding board positions as the new Companies Act did not provide for such as action.

APPLICATION TO NCLT TO BAR DIRECTORS FOR 5 YEARS

As a result, it has decided to go back to the Companies Act 1956, which allowed the Centre to not just seek the removal of persons concerned with the management of a company and suspected of “fraud, misfeasance, persistent negligence or default in carrying out his obligations under the law or breach of trust” but also barred them from being appointed board members for five years from the date of removal. Under the new law the government will have to move an application before the NCLT.

LEVY OF PENALTY THAT DO NOT SPEND 2% TOWARDS CSR

MCA proposes to levy penalty on companies that do not meet the mandated 2% spending requirement towards corporate social responsibility (CSR).

The move to introduce a penalty on companies not meeting the CSR obligation was inserted as over 40% of the entities were not complying with the requirement, with close to a fifth not spending any money. “Companies have been given five years now. It is high time they start complying with the rules.

DISCLOSURE ON SBO

Companies now have to disclose the details of significant beneficial ownership, an obligation that was so far cast on shareholders. The government saw it as a loophole and has sought to plug it. The rules mandate that details of all shareholders with interest of 10% or more in a company, either direct or indirect, have to be disclosed.

MANDATORY DEMATERILISATION OF SHARES FOR ALL CATEGORY OF COMPANIES

The government has sought powers to mandate dematerialization of shares for all category of companies, a move that was recently extended to public unlisted companies. The step is seen to be crucial to identify the real owners of unlisted companies, which often remain hidden or can be benami holdings.

SPEEDING UP THE PROCESS FOR LISTING FOR COMPANIES

The government has proposed amendments to company law to strengthen the regulatory framework relating to the SFIO and NFRA, while simultaneously introducing measures to accelerate the listing process for companies.

NEW CSR IMPLEMENTATION OPTIONS

·      MCA has also amended Schedule VII to allow CSR spending via Zero Coupon Zero Principal (ZCZP) instruments issued by registered Not-for-Profit Organizations on Social Stock Exchanges.

·      Companies can allocate up to 10% of their CSR expenditure through these instruments.

·      This aims to ease compliance and provide transparent funding channels for NGOs.

BROADER AMENDMENTS IN THE BILL

DECRIMINALISATION OF OFFENCES:

Several violations will now attract civil penalties instead of imprisonment.

SIMPLIFIED COMPLIANCE:

·      Electronic service of documents permitted.

·      AGMs can be held virtually, but at least one physical meeting every 3 years is mandatory.

Certain companies may be exempted from appointing auditors.

·      Small company definition expanded: Paid-up capital limit raised to ₹20 crore; turnover limit raised to ₹200 crore.

Merger/amalgamation approvals: Threshold reduced from 90% to 75% shareholder/creditor approval.

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

LIC STAKE IN RAJESH EXPORTS SPARKS SCRUTINY AFTER SEBI FRAUD PROBE

 LIC STAKE IN RAJESH EXPORTS SPARKS SCRUTINY AFTER SEBI FRAUD PROBE

REGULATOR'S MASSIVE ALLEGATION:

SEBI claims Rajesh Exports inflated 97-99% of its revenue between FY21 and FY25, totaling ₹15.15 lakh crore, and obstructed investigations.

LIC'S INVESTMENT QUESTIONED:

LIC’s 10.8% stake has drawn political criticism, with opposition parties asking if the purchase was influenced by the ruling establishment.

SEBI'S UNPRECEDENTED ₹15.15 LAKH CRORE CHARGE

SEBI’s interim order alleges Rajesh Exports misrepresented almost its entire consolidated revenue between FY21 and FY25, largely through overseas subsidiaries like Valcambi SA. The regulator cited missing records, unverified foreign transactions, and non-cooperation from both the company and its auditors, who failed to provide promised working papers. It has barred Chairman Rajesh Mehta from the securities market, ordered a new forensic audit, and referred audit lapses to the NFRA.

FROM SHAREHOLDER TIP-OFF TO REGULATORY CRACKDOWN

The probe began after a March 2024 shareholder complaint flagged unusually large trade receivables outstanding for over two years. SEBI’s preliminary review led to a formal investigation spanning April 2020 to March 2024, with BDO India appointed as forensic auditor. The findings, described as “egregious and unheard of,” have since wiped out significant shareholder value and triggered a collapse in Rajesh Exports’ share price.

GOVERNANCE CONCERNS GROW:

 Experts say the episode exposes gaps in LIC’s due diligence and highlights systemic risks in institutional investment governance.

POLITICAL AND MARKET FALLOUT FOR LIC

LIC’s 10.8% holding in Rajesh Exports has prompted Congress to question whether the investment was politically influenced, given the scale of alleged fraud. LIC shares fell over 1% following the SEBI order, while Rajesh Exports dropped 5%. The controversy has intensified scrutiny of LIC’s investment decisions, especially its role as a custodian of policyholders’ funds

GOVERNANCE RED FLAGS AND SYSTEMIC LESSONS

Governance experts argue LIC failed to act on red flags and needs stronger due diligence and forensic reviews for investee companies. The case underscores broader concerns about corporate governance, auditor oversight, and institutional investor accountability in India. Analysts warn that other LIC portfolio companies may face similar undiscovered risks if oversight mechanisms are not strengthened.

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

ATANU CHAKRABORTY, INDEPENDENT DIRECTOR OF HDFC QUIT ON MARCH 18, 2026, CITING PRACTICES “NOT IN CONGRUENCE” WITH HIS VALUES- WHAT ARE THE PRACTICES NOT IN CONGRUENCE” WITH ATANU’S VALUES PERSUED BY HDFC BANK?

 ATANU CHAKRABORTY, INDEPENDENT DIRECTOR OF HDFC QUIT ON MARCH 18, 2026, CITING PRACTICES “NOT IN CONGRUENCE” WITH HIS VALUES- 

WHAT ARE THE PRACTICES NOT IN CONGRUENCE” WITH ATANU’S VALUES PERSUED BY HDFC BANK?

WHAT HDFC BANK’S INTERNAL VIGILANCE PROBE FOUND?

HDFC Bank’s internal vigilance probe (March–April 2026) confirmed that ₹45 crore in “differential interest” payments to Maharashtra State Road Development Corporation (MSRDC) were disguised as marketing spend via fake road safety sponsorships. The scandal coincided with Chairman Atanu Chakraborty’s resignation citing ethics, raising serious governance concerns.

KEY FINDINGS FROM THE PROBE

AMOUNT INVOLVED:

₹45 crore in extra interest payments to MSRDC deposits.

MECHANISM:

 Instead of crediting MSRDC directly, the money was routed through HDFC Bank’s marketing department and booked as “road safety campaign sponsorships” via four local vendors.

AUDIT TRIGGER:

An internal audit (FY2024–25) flagged the marketing department’s performance as “unsatisfactory,” prompting the Audit Committee to order a formal vigilance investigation on March 12, 2026.

LEADERSHIP INVOLVEMENT:

Internal records suggest HDFC BANK’S MD & CEO Sashidhar Jagdishan, CFO Srinivasan Vaidyanathan, and CMO Ravi Santhanam were aware of discussions on compensating MSRDC. Santhanam admitted the department acted as a “facilitator to camouflage” the payments.

CHAIRMAN’S RESIGNATION:

Atanu Chakraborty resignation on March 18, 2026, citing practices “not in congruence” with his values. His exit preceded public disclosure of the probe.

MARKET & REGULATORY IMPACT

STOCK REACTION:

HDFC Bank shares fell 2–2.5% on May 27, 2026, after reports surfaced.

REGULATORY ANGLE:

The arrangement potentially violated RBI rules on deposit interest rates and HDFC Bank’s own anti-bribery/governance policies.

REGULATORY BREACHES:

 1. RBI Master Directions violated

 2. Anti-bribery policy breached

 3. Vendor invoices inflated

WHY THIS MATTERS

GOVERNANCE BREACH:

Routing interest payments through marketing spend undermines transparency and raises questions about internal controls.

ETHICS VS. COMPLIANCE:

The chairman’s resignation highlights a clash between personal ethics and institutional practices.

INVESTOR CONFIDENCE:

Even relatively small sums (₹45 crore vs. HDFC’s scale) can trigger sharp stock declines due to governance fears.

                           RECOMMENDATION

RBI Should issue additional master circular to prevent this type of frauds in the Indian banking system to instill the investor’s confidence on the Indian banking system.

Will the SEBI take an action against HDFC Bank as it has ordered in the Suzlon’s Energy accounting fraud?

 

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

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,