WHETHER HAND DELIVERY OF FINANCIALS TO SHAREHOLDERS EVERY YEAR IS PERMISSIBLE AND WHETHER IT WILL BE CONSIDERED AS NOT SENDING THE FINANCIALS AS REQUIRED UNDER SEC 136?
ROC , MUMBAI VS OM SHYAMJI FOODS PRIVATE LIMITED
FACTS OF THE CASE
The Company did not serve the copies of Annual Reports for FY 2018-19 to its members. The Company vide its reply dated 31.03.2023 admitted that being a private company, the Annual report was sent to the members by hand delivery, in accordance with their oral understanding since incorporation.
This was never questioned by the members since incorporation. The Company has started the practice of sending the Annual Reports by Indian Post since FY 2020-21. Thus, the IO concluded that Company had failed to serve the Annual Reports for FY 2019-20 to its members, in contravention of provisions of section 136 of the Companies Act, 2013.
INTERESTING FACT
The interesting thing is that neither the Company insisted nor the ROC himself considered the provisions of Sec 20(2) of CA2013 which allows hand delivery of documents to members.
ADMISSION BY THE COMPANY
OM SHYAMJI FOODS admitted the default on behalf of the all the notices through a PCS and submitted that the Company was a Small Company during the period of default.
ROC’S MUMBAI ORDER
The Company does not fall under definition of Section 2(85) of the Act during the relevant period. It is observed that the Company failed to serve the Annual Reports for FY 2018-19 to its members, in contravention of provisions of section 136 of the Companies Act, 2013.
Thus, the Company shall be liable to a penalty of Rs. 25,000/-(Rupees Twenty-Five Thousands only) and its Officers in default shall be liable to a penalty of Rs.5,000/- (Rupees Five Thousands only)under the provisions of Section 136(1) for default of Section 136(3) of the Act.
INTERESTING FACTS OF THIS CASE
1.
The
company claims that they were doing it since incorporation (2008) and the
members never complained about it.
2.
Despite
claiming that they sent financials through hand delivery, they accepted ROC's
view that it is not considered compliance with Sec 136, despite the provisions
of Sec 20 (2) and the fact that Sec 136 doesn't provide for any specified
manner for sending of financials.
3.
This
was purely a case of neither the ROC nor the company being aware of the
applicable provisions.
4.
As
per Secretarial Standards (SS) of ICSI
notice can be send by hand.
5. In the enquiry company has accepted that it their fault in non deliver of financial results, this aspect goes against the company in the appeal. Instead during the hearing company should not have accepted that it is their mistake in deliver of documents then definitely company can go into the appeal.
CAN THE COMPANY APPEAL TO REGIONAL DIRECTOR , MUMBAI ?
1.But tactically the default should not have been admitted by the company through its PCS. It negates the opportunity to the company to fight and go in appeal.
2. Section 20 (2) allows hand delivery .SS of ICSI also allows notice can be send by hand. There is no complaint from shareholders An appeal can be made to RD stating that it failed to present these facts to ROC hence it is appealing now.
3. There is no dispute from shareholder about non receipt of financials. This is a proof it financials have been served properly.
4.To appeal against a decision for incorrect law interpretation, company can file an appeal to Regional Director ( RD,Mumbai) similar to Special Leave Petition (SLP) under Article 136 of the for misinterpretation or procedural errors. The appeal process involves reviewing ROC’s records, highlighting legal errors, and seeking a higher forum (RD) review to ensure justice and correct the law's application.
R V SECKAR, FCS, LLB
79047 192295
