SEBI FINED INDEPENDENT DIRECTORS ₹10 LAKHS EACH, IN THE LEEL ELECTRICALS CASE-I AM NOT A FINANCE EXPERT" IS NOT A DEFENSE SAYS SEBI

 SEBI FINED INDEPENDENT DIRECTORS ₹10 LAKHS EACH, IN THE LEEL ELECTRICALS CASE-I AM NOT A FINANCE EXPERT" IS NOT A DEFENSE SAYS SEBI

LEEL ELECTRICALS VS SEBI

BACKGROUND

LEEL Electricals sold its consumer durable business to Havells India in 2017 for ₹1,550 crore. Complaints later alleged diversion of funds and misuse of sale proceeds. A forensic audit revealed irregularities.

INDEPENDENT DIRECTOR’S DEFENSE

They were retired professionals (a doctor, an Air Force officer) who claimed they didn't understand the complex financial jugglery.

INDEPENDENT DIRECTORS’ ROLE:

SEBI found that the independent directors did not act diligently in overseeing financial transactions and protecting shareholder interests.

FIDUCIARY DUTY:

SEBI stated that as independent directors, they had a fundamental fiduciary duty to safeguard the interests of minority shareholders. By failing to exercise due diligence, ask probing questions, and raise red flags during a period of significant financial misconduct, they had neglected their core responsibilities.

PENALTY:

Each was fined ₹10 lakhs for negligence in fulfilling their responsibilities.

WHY THIS MATTERS

SEBI’S RULING WAS RUTHLESS BUT CLEAR:

If you don't understand the accounts, you shouldn't be on the Audit Committee.

Resigning after the fact didn't save them.

•     SEBI is signaling that independent directors cannot be passive. Their role is not ceremonial — they are expected to actively monitor, question, and ensure compliance.

•     The case underscores that ignorance or lack of expertise is not a defense. Independent directors must seek professional advice if needed, but they cannot abdicate responsibility.

•     It sets a precedent: Regulators will hold directors accountable for lapses in governance, even if they are not directly involved in fraud.

WAKE-UP CALL

This ruling is a wake-up call for corporate boards in India — independent directors are guardians of governance, not figureheads.

In addition to the independent directors, SEBI also imposed heavy fines and market bans on the company's promoter and other key managerial personnel for their roles in the fraud.

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PROPOSED CSR AMENDMENTS UNDER THE NEW COMPANIES AMENDMENT BILL LIKELY TO BE TABLED IN MARCH 2026

 PROPOSED CSR AMENDMENTS UNDER THE NEW COMPANIES AMENDMENT BILL LIKELY TO BE TABLED IN MARCH 2026

OVERVIEW OF THE PROPOSED CSR AMENDMENTS UNDER THE UPCOMING COMPANIES AMENDMENT BILL EXPECTED IN MARCH 2026

KEY PROPOSED CSR CHANGES

•     Lower thresholds for CSR applicability

·      Mandatory inclusion in company's CSR Committee of at least one director with "extensive experience" in planning and implementing CSR projects

• ·      Change in the CSR Reporting Format

WHAT IS THE NEW CHANGE ?

ASPECT	CURRENT LAW (PRE-2026)	PROPOSED AMENDMENT (2026)
NET WORTH THRESHOLD	₹500 crore	₹100 crore
TURNOVER THRESHOLD	₹1,000 crore	₹500 crore
NET PROFIT THRESHOLD	₹5 crore	₹3 crore
CSR COMMITTEE REQUIREMENT	Only large companies	Expanded to mid-sized firms
REPORTING & COMPLIANCE	Basic disclosures	Stricter, standardized, impact-focused

 

IMPLICATIONS FOR COMPANIES

BROADER COVERAGE:	Mid-sized firms will now be required to set up CSR Committees.
HIGHER ACCOUNTABILITY	Listed companies face tighter scrutiny on CSR disclosures.
OPERATIONAL IMPACT:	Firms may need to restructure CSR budgets and governance frameworks.

MANDATORY CSR EXPERTISE ON THE BOARD

Currently, the law dictates the size and independence of a CSR Committee, but it does not require the members to have specific background knowledge. The new Bill introduces a strict qualitative governance requirement:

THE EXPERT DIRECTOR:	The CSR Committee must now include at least one director with extensive experience and expertise in planning and implementing CSR projects.
THE OBJECTIVE:	This ensures CSR is treated as a strategic, outcome-oriented function rather than a basic capital allocation or a peripheral compliance exercise.

 

CASE STUDIES ON NEW AMENMENT IMPACT THE BOTTOM LINE OF THE COMPANIES

KRM AYURVEDA:

·      In FY24, the company reported a Net Profit of ₹3.41 crore (with a turnover of ₹67.57 crore and net worth of ₹11.78 crore).

Current Law:	Fails to meet the ₹5 crore profit trigger. No CSR liability is generated for the subsequent year based on FY24 performance.
Proposed Law:	Crosses the new ₹3 crore trigger. This would immediately mandate the formation of a CSR committee and a legal obligation to deploy funds.

RODEC PHARMA:

While Rodec reported a healthy FY25 Profit After Tax (PAT) of ₹18.25 crore, looking back at its earlier growth phases reveals a similar story.

 In FY22, its PAT was ₹4.60 crore. Under the current Companies Act, it skirted the mandate. Under the proposed amendments, it would have been required to implement CSR protocols years earlier.

PROJECTED FINANCIAL IMPACT & OBLIGATION CALCULATION

If a company like KRM Ayurveda triggers the mandate under the new ₹3 crore baseline, the actual monetary spend is calculated as 2% of the average net profits of the preceding three financial years.

Let's project KRM Ayurveda's CSR liability using their historical data:

HISTORICAL PAT

FY23 (₹7.60 cr) + FY24 (₹3.41 cr) + FY25 (₹12.10 cr)

Average Net Profit (3 Years): ₹23.11 crore / 3 = ₹7.70 crore

Mandatory 2% CSR Spend: ₹7.70 crore x 2% = ₹15.4 Lakhs

RODEC PHARMA

For Rodec Pharma, utilizing their recent data (FY23: ₹5.68 cr, FY24: ₹11.61 cr, FY25: ₹18.25 cr), the 3-year average sits at ₹11.84 crore, yielding a mandatory annual CSR spend of approximately ₹23.6 Lakhs.

KEY TAKEAWAYS

The lower thresholds mean CSR will no longer be limited to India’s largest corporates. Mid-sized firms across IT, manufacturing, and retail will need to institutionalize CSR governance.

For industries like healthcare and finance, the amendments push CSR toward measurable, impact-driven initiatives rather than token contributions.

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

CENTRE ACCORDS ROCs MORE POWERS TO REDUCE THE WORKLOAD OF NCLTs

 CENTRE ACCORDS ROCs MORE POWERS TO REDUCE THE WORKLOAD OF NCLTs

EFFECTIVE FROM FEBRUARY 16, 2026

The Ministry of Corporate Affairs (MCA) has officially empowered Registrars of Companies (RoCs) with adjudication powers. This move, effective from February 16, 2026, designates RoCs as Adjudicating Officers under Section 454 of the Companies Act, 2013 and Section 76A of the LLP Act.

KEY HIGHLIGHTS

ADJUDICATION POWERS:	RoCs can now conduct inquiries and impose monetary penalties on companies and LLPs for statutory non-compliances.
REDUCED BURDEN ON NCLT:	The step is aimed at easing the heavy caseload of the National Company Law Tribunal (NCLT).
DECRIMINALIZATION OF DEFAULTS	By shifting adjudication to RoCs, minor defaults are expected to be handled more efficiently without escalating to tribunals.
REVISED FRAMEWORK:	The new notification supersedes earlier ones (2015 and 2019), creating a more structured jurisdictional framework for adjudication.

WHY THIS MATTERS

FOR BUSINESSES:

Faster resolution of compliance issues, fewer delays, and reduced litigation costs.

FOR REGULATORS:

 Streamlined enforcement and better access through expanded regional directorates.

FOR GOVERNANCE:

Strengthens corporate accountability while promoting ease of doing business.

NOT APPLICABLE  SERIOUS FRAUD OR CRIMINAL MATTERS

The new MCA notification has clarified the scope of violations that Registrars of Companies (RoCs) can now adjudicate under Section 454 of the Companies Act, 2013. These are generally procedural and compliance-related defaults, not serious fraud or criminal matters.

CATEGORY	EXAMPLES OF VIOLATIONS	REMARKS
FILING & DISCLOSURE LAPSES	Delay in filing annual returns (MGT-7), financial statements (AOC-4), or other statutory forms	These are among the most frequent defaults handled by RoCs
REGISTERED OFFICE COMPLIANCE	Not maintaining a registered office or failing to notify change of address	Penalties have already been imposed in past adjudication orders
BENEFICIAL OWNERSHIP	Non-disclosure of Significant Beneficial Ownership (SBO	RoCs have issued penalty orders for lapses in SBO filings
CORPORATE SOCIAL RESPONSIBILITY (CSR)	Failure to spend or disclose CSR contributions properly	Treated as a compliance lapse, not a criminal offence
Board & Governance Defaults	Non-appointment of key managerial personnel (KMP), failure to hold board meetings as required	These are adjudicated as monetary penalties
LLP Act Violations	Delay in filing LLP returns, non-compliance with LLP agreements	Covered under Section 76A of the LLP Act

WHAT ROCS DO NOT HANDLE

•     Fraud, misrepresentation, or serious offences → These remain under NCLT or special courts.

•     Matters requiring judicial interpretation → Still handled by tribunals.

EXAMPLES OF ROC PENALTY ORDERS (2025–2026)

DATE & ROC	COMPANY	VIOLATION	PENALTY IMPOSED
14 Oct 2025 – ROC Delhi	Hexafun Private Limited (Order ID: PO/ADJ/10-2025/DL/00771)	Violation of Section 42(10) of the Companies Act, 2013 (related to private placement procedures)	Monetary penalty under Section 454 adjudication powers
05 Feb 2025 – ROC Guwahati	Moonlight Associates Limited	Failure to file Annual Returns (Section 92) for multiple years (FY 2014–15 to 2021–22)	Penalties ranging from ₹90,000 to ₹2,10,000 per year on the company; ₹60,000 per year on one director

BREAKDOWN OF THE MOST COMMON PENALTY RANGES IMPOSED BY REGISTRARS OF COMPANIES (ROCS) UNDER THEIR ADJUDICATION POWERS:

Violation Type	Section	Penalty Range (Company)	Penalty Range (Officers/Directors
Delay in filing Annual Return (MGT-7)	Sec. 92	₹50,000 – ₹2,00,000	₹25,000 – ₹50,000
Delay in filing Financial Statements (AOC-4)	Sec. 137	₹50,000 – ₹2,00,000	₹25,000 – ₹50,000
Registered Office non-compliance	Sec. 12	₹1,00,000 – ₹2,00,000	₹25,000 – ₹50,000
Significant Beneficial Ownership (SBO) lapses	Sec. 90	₹1,00,000 – ₹5,00,000	₹25,000 – ₹2,00,000
CSR non-compliance	Sec. 135	₹50,000 – ₹25,00,000	₹25,000 – ₹2,00,000
Private Placement lapses	Sec. 42	₹10,000 – ₹2,00,000	₹10,000 – ₹50,000

CONCLUDING THOUGHTS

·      In FY 2024–25 alone, over 1,150 adjudication orders were issued by RoCs across India.

·    ROCs now can handle first-level enforcement, aiming to cut NCLT backlogs.

·      Empowering ROCs will likely result in them playing a bigger role –rather than just administrative work-to dispose off cases faster, reduce the burden on the NCLT, decriminalize offenses and facilitate ease of doing business.

·      MCA has increased RD offices from 7 to 10 covering Ahmadabad, Bengaluru and Chandigarh which will make adjudication easier.

·      Dual reforms enhance adjudication capacity, reduce jurisdictional confusion.

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

FINANCIAL YEAR-END COMPLIANCE CHECKS (BEFORE 31ST MARCH) UNDER THE COMPANIES ACT 2013 AND GST

FINANCIAL YEAR-END COMPLIANCE

 CHECKS (BEFORE 31ST MARCH) UND

ER THE COMPANIES ACT 2013 AND GST

FINANCIAL YEAR-END COMPLIANCE CHECKLIST

UNDER COMPANIES ACT, 2013:

1	Ensure minimum Board Meetings are held (Sec 173)
2	Director disclosures (MBP-1 & DIR-8)
3	Check related party transaction approvals required before start of next financial year (Sec 188)
4	Review loans & investments compliance (Sec 185/186)
5	Review CSR obligation & unspent amount (Sec 135), if applicable
6	Update statutory registers & minutes books
7	Reconcile share capital & verify pending ROC filings
8	Review charge filings, if any
9	Statutory Audit preparation- Books of accounts must be finalized for audit

Under Companies Act 2013, focus on board meetings, audits, and statutory filings.

UNDER GST

1	Reconcile GSTR-1, GSTR-3B with books
2	ITC reconciliation & vendor mismatch follow-up-- Match ITC with GSTR-2B and books
3	Payment of GST liabilities- Ensure no pending dues.
4	Filing of GSTR-9 (Annual Return)-- Mandatory for taxpayers > ₹2 crore turnover.
5	Filing of GSTR-9C (Reconciliation Statement)- Required if turnover > ₹5 crore.
6	Review of e-Invoices & e-Way Bills

Under GST, ensure reconciliation of returns, ITC, and timely filing of annual returns.

Completing these before 31st March avoids penalties and ensures smooth transition into the next financial year. 

COMPLIANCE CALENDAR (JAN–DEC)

Month	Companies Act 2013	GST
January – February	Conduct Board Meetings for review of accounts-Prepare draft financial statements--Update statutory registers	Reconcile GSTR-1 & GSTR-3B--Match ITC with GSTR-2B---Review e-Invoices & e-Way Bills
March (Before 31st March)	Finalize books of accounts-- Complete statutory audit preparation---Draft Director’s Report	Clear pending GST liabilities---Final ITC reconciliation---Ensure outward supplies match returns
April – June	Hold Board Meeting to approve audited accounts--Prepare AGM agenda & notices	Continue monthly GST filings---Review compliance for new FY
July – September	Conduct AGM (by 30th Sept)---File AOC-4 (within 30 days of AGM)--- File MGT-7 (within 60 days of AGM)	Continue monthly GST filings
October – December	Secretarial Audit (if applicable)-- Internal compliance review	File GSTR-9 (Annual Return) by 31st Dec--- File GSTR-9C (Reconciliation Statement) if turnover > ₹5 crore--- GST Audit (if applicable)

 

YOUR COMPLIANCE PARTNER – R V SECKAR FCS, LLB

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