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