RD HYDERABAD DELETS PENALTIES TOTALING ₹4.73 CRORE LEVIED ON DIGILOGIC SYSTEMS LIMITED AND ITS DIRECTORS FOR VIOLATIONS FOR NOT DEPOSITING APPLICATION MONEY IN A SEPARATE BANK ACCOUNT

 RD HYDERABAD DELETS PENALTIES TOTALING ₹4.73 CRORE LEVIED ON DIGILOGIC SYSTEMS LIMITED AND ITS DIRECTORS FOR VIOLATIONS FOR NOT DEPOSITING APPLICATION MONEY IN A SEPARATE BANK ACCOUNT

Earlier , I have reported levy of ₹4.73 CRORE by ROC Hyderabad on DIGILOGIC SYSTEMS LIMITED AND ITS DIRECTORS as penalty for not depositing share application money in a separate bank account in a right issue . You can read the full case study in https://rvseckarcompanylaw.blogspot.com/2026/04/private-placement-violation-mca-imposed.html

APPEAL TO RD HYDERABAD AGAINST THE PENALTY BY ROC HYDERABAD

An appeal was made under section 454 of Companies Act, 2013 by the appellant DIGILOGIC SYSTEMS LIMITED in reference to the subject cited above.

COMPANY ARGUED THAT IT MAINTAINED A SEPARATE BANK FOR RIGHT ISSUE APPLICATION MONEY

The company has informed that it has passed resolution to keep the amount of the issue in a separate bank account specifying the account. The company has two bank accounts, one for its daily operations and the other was opened earlier for statutory requirements. The company had deposited the amount collected in the said designated account and no other transactions took place from the account till the allotment of shares. Only thereafter the funds were transferred to the bank account used for daily operations and used for business of the company.

MANAGING DIRECTOR CONTENDED THAT HE WAS MISGUIDED BY PROFESSIONALS

Managing director stated that he is a technical person from the defense sector and he was wrongly advised to file GNL-2 by some professional. However, later on when proper guidance has taken from professionals, it was found that there is no violation.

VERDICT

In view of the submissions made and perusal of the bank statement attached to the appeal. The RD is of the view that the company has complied with the requirement of law and there is no violation. Hence the order of the ROC Hyderabad is set aside.

KEY TAKEAWAYS

Due to strong documentary evidence and proof of no harm to investors, DigiLogic successfully argued that it substantially complied with Section 42 and the lapse was inadvertent.

The company had  proved that it deposited the amount collected in the said designated account and no other transactions took place from the account till the allotment of shares by producing the bank statements.

The company saved the fine of  ₹4.73 CRORE levied by ROCA Hyderabad by appealing to RD , Hyderabad under section 454 of Companies Act, 2013.

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