₹1.39 CRORE UNSPENT CSR PENALTY: ROC MUMBAI-II TAKES ACTION AGAINST ROYAL FOODSTUFFS LIMITED ROC,MUMBAI II VS ROYAL FOODSTUFFS LIMITED

 ₹1.39 CRORE UNSPENT CSR PENALTY: ROC MUMBAI-II TAKES ACTION AGAINST ROYAL FOODSTUFFS LIMITED

ROC,MUMBAI II VS ROYAL FOODSTUFFS LIMITED

CASE SUMMARY

ROC Mumbai-II imposed a cumulative ₹1,38,86,023 penalty on Royal Foodstuffs Limited and its two directors for defaults relating to unspent CSR obligations across five financial years. The proceedings concerned non-compliance with Section 135(5) and attracted penalties under Section 135(7) of the Companies Act, 2013

𝟭. 𝗧𝗵𝗲 𝗱𝗲𝗳𝗮𝘂𝗹𝘁 𝗰𝗼𝗺𝗽𝗼𝘂𝗻𝗱𝗲𝗱 𝗼𝘃𝗲𝗿 𝘆𝗲𝗮𝗿𝘀

𝟮. 𝗦𝘂𝗼-𝗺𝗼𝘁𝗼 𝗱𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲 𝘀𝘁𝗶𝗹𝗹 𝗰𝗼𝘀𝘁𝘀

3.𝗧𝗵𝗲 𝗽𝗲𝗻𝗮𝗹𝘁𝘆 𝗺𝗮𝘁𝗵 𝗶𝘀 𝘂𝗻𝗳𝗼𝗿𝗴𝗶𝘃𝗶𝗻𝗴 Section 135(7) penalizes the company at 2x the unspent amount (capped at ₹1 crore) and every officer in default at 1/10th of the unspent amount (capped at ₹2 lakh). In the worst year here (FY 2022-23, a complete ₹0 spend), the director-level penalty hit its statutory cap.

𝟰. 𝗢𝗳𝗳𝗶𝗰𝗲𝗿𝘀 𝗶𝗻 𝗱𝗲𝗳𝗮𝘂𝗹𝘁 𝗮𝗿𝗲 𝗽𝗲𝗿𝘀𝗼𝗻𝗮𝗹𝗹𝘆 𝗼𝗻 𝘁𝗵𝗲 𝗵𝗼𝗼𝗸 The order explicitly directs that penalties on the Whole-time Director and Managing Director be paid from personal sources — not the company's funds.

₹1.39 CRORE IN PENALTIES FOR UNSPENT CSR OBLIGATIONS FOR FIVE YEARS UNDER SECTION 135(5) OF THE COMPANIES ACT, 2013

The Registrar of Companies, Mumbai-II vs Royal Foodstuffs Limited and its two directors

KEY DETAILS OF THE ADJUDICATION

Company:	Royal Foodstuffs Limited
Officers in Default:	1.Nilima Avinash Phirke (Whole-time Director)  2. Shivsharan Hanumantappa Sakkargi (Managing Director)
Nature of Violation	Non-compliance with Section 135(5)—failure to transfer unspent CSR funds (relating to other than ongoing projects) to a fund specified in Schedule VII (such as the PM CARES Fund) within six months from the close of the financial year (i.e., by September 30).
Origin of Proceedings:	Suo-motu adjudication applications filed by the company disclosing shortfall and delay across multiple financial years

 

STATUTORY PENALTY FORMULA:

Under Section 135(7) of the Companies Act, 2013

COMPANY:

Twice the unspent amount required to be transferred or ₹1 Crore, whichever is less.

ON OFFICERS IN DEFAULT:

 1/10^th of the unspent amount required to be transferred or ₹2 Lakh, whichever is less, per defaulting officer.

FINANCIAL YEAR-WISE PENALTY BREAKDOWN

The cumulative penalties across the multiple default years totaled ~₹1.39 Crore, calculated strictly according to statutory proportions:

ENTITY/ PERSON	Statutory Multiplier / Limit	Penalty Imposed
ROYAL FOODSTUFFS LIMITED	2timesUnspent Amount(capped at ₹1 Cr per year)	Major Share ₹1.25+ Cr
NILIMA AVINASH PHIRKE (DIRECTOR)	1/10th times UnspentAmount (capped at ₹2 Lakh/year)	₹7 Lakh
SHIVSHARAN H. SAKKARGI (DIRECTOR)	1/10th times UnspentAmount (capped at ₹2 Lakh/year)	₹7 Lakh
TOTAL CUMULATIVE PENALTY		₹1.39 Crore

KEY LEGAL TAKEAWAYS

BELATED REMEDIATION DOES NOT ERASE DEFAULT:

 Although the company remitted the unspent amounts to the PM CARES Fund prior to/during the adjudication proceedings, the ROC held that post-facto rectification does not absolve the company or directors of statutory penalties for the period of non-compliance.

SECTION 446B BENEFIT DENIED:

 The company did not qualify for lesser penalties as a small company under Section 446B. 

PERSONAL LIABILITY OF OFFICERS:

Directors cannot use corporate funds to satisfy their individual personal penalties levied under Section 135(7).

# Your Knowledge partner R V Sekar 79047 19295,