ROC PENALISES CHIRAHARIT LIMITED FOR FAILURE TO OPEN A SEPARATE BANK ACCOUNT FOR PREFERENTIAL ALLOTMENT:

 ROC PENALISES CHIRAHARIT LIMITED FOR FAILURE TO OPEN A SEPARATE BANK ACCOUNT FOR PREFERENTIAL ALLOTMENT: 

CHIRAHARIT LIMITED VS ROC,HYDERABAD  

 

FACTS OF THE CASE 

1. Chiraharit Limited, a public company, made a preferential allotment of equity shares through private placement. 

2. As per law, when a company makes a private placement, it must open a separate bank account in a scheduled bank to receive the application money. 

3. The application money should not be used for any purpose other than: 

1. adjustment against allotment of securities, or 

2. refund if allotment is not made. 

4. The company, however, failed to open a separate bank account and deposited the application money into its regular account. 

5. 
   

The company filed the application suo moto, admitting the lapse as inadvertent. MCA has imposed a penalty on the Company and four directors. 

• Company Penalty: ₹2,00,000 

• Penalty on Officers in Default (each): ₹50,000 

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INSTANCES WHERE SEPARATE BANK ACCOUNTS HAVE TO OPENED UNDER COMPANIES ACT,2013 

• Share application money (Sec 42). 

• Public issue proceeds (IPO/FPO). 

• Dividend account (Sec 123(4)). 

• Unpaid dividend account (Sec 124). 

• Deposit repayment reserve account (Sec 73). 

• Liquidator’s account (during winding up). 

• 
  

KEY LEARNIGS 

This order reinforces the importance of strict compliance with procedural requirements under the Companies Act, even when the underlying transaction is bona fide and without mala fide intent. 
 
Even technical lapses in processes like preferential issues / private placement can lead to significant penalties. Robust compliance systems, internal checks, and timely legal review are critical to avoid such consequences. 
 

 

R V SECKAR, FCS,LLB 79047 19295 

 

CAN A WHOLE-TIME KEY MANAGERIAL PERSONNEL HOLD OFFICE IN MORE THAN ONE COMPANY EXCEPT IN ITS SUBSIDIARY COMPANY AT THE SAME TIME?

 CAN A WHOLE-TIME KEY MANAGERIAL PERSONNEL  HOLD OFFICE IN MORE THAN ONE COMPANY EXCEPT IN ITS SUBSIDIARY COMPANY AT THE SAME TIME? 

SHANTI INORGANICS LIMITED Vs ROC, AHAMADABAD 

 

FACTS OF THE CASE 

 The company has changed its name from SHANTI INORGO CHEM (GUJ) LIMITED to SHANTI INORGANICS LIMITED w.e.f. 06.05.2025.  

In this case, for F.Y. 2024-25, the company had appointed Mr. Avanishkumar Patel as Chief Financial Officer (CFO) of the company w.e.f. 19.12.2024. 

 However, Mr. Avanishkumar Patel was already appointed as a Managing Director of Jagjanani Textiles Limited a BSE listed company.  

After the appointment as a CFO immediately, he has given his resignation from the Post of CFO w.e.f. 25.01.2025 and then after Mr. Avanishkumar Patel was appointed as a Whole Time Director of the company.  

Mr. Avanishkumar Patel was a whole-time director of the company w.e.f. 25.01.2025. However, Mr. Avanishkumar Patel was already appointed as the Managing Director of Jagjanani Textiles Limited, a BSE listed company. Immediately. 

 On the knowledge of Section 203 (3) of the Companies Act, 2013, the designation of Mr. Avanishkumar Patel has been changed to Joint Managing Director of the company w.e.f. 28.01.2015.  

The company has filed suo moto adjudication application for non-compliance of section 203(3) of the C.A. 2013. 

 

SECTION 203(3) OF THE C.A. 2013 

Section 203(3) of the Companies Act, 2013: 

• Every whole-time key managerial personnel (KMP) of a company shall not hold office in more than one company except in its subsidiary company at the same time. 

• However, a company may appoint or employ a person as its Managing Director, if he is the Managing Director or Manager of one, and not more than one, other company, provided the Board approves by resolution. 

The company has violated under Section 203(3) of the C.A. 2013 for the period from 19.12.2024 to 28.01.2025. 

Nature of Violation 

In this case, Shanti Inorganics Limited was found guilty of violation of Section 203(3) because: 

• The appointed CFO / director / other KMP was holding office in more than one company simultaneously, without adhering to the statutory exceptions. 

Thus, the company and its officers were in default. 

PENALTY 

ROC, Ahamadabad levied a penalty of Rs 8,60,000 on the company and directors of the company for the violation of section 203(3) of the C.A. 2013. 

KEY TAKEAWAY 

• A KMP cannot hold office in more than one company simultaneously (except subsidiary) unless specifically permitted under law. 

 

ROLE OF COMPLIANCE OFFICERS 

 

• Companies’ compliance officers  must carefully ensure compliance to avoid monetary penalties. 

R V SECKAR, FCS,LLB 79047 19295