ROC DELHI IMPOSES ₹5.5 CRORE PENALTY ON HINDUSTAN COCA-COLA HOLDINGS FOR SECTION 42 VIOLATION AS SUBSCRIPTION MONEY BEING RECEIVED FROM THE WRONG BANK ACCOUNT DURING A 2019 PREFERENTIAL ALLOTMENT
ROC DELHI VS HINDUSTAN COCA-COLA HOLDINGS
FACTS OF THE CASE
In a preferential allotment approved on 30 March 2019,
subscription money for 31,48,71,754 equity shares allotted to Bharat Coca-Cola
Overseas Holdings Pte. Ltd. was received from the bank account of Hindustan
Coca-Cola Overseas Holdings Pte. Ltd., instead of the subscriber’s own account.
LEGAL CONTEXT
SECTION 42 (PRIVATE PLACEMENT):
Requires strict compliance with rules on subscription
money, designated bank accounts, and disclosures.
SECTION 42(10):
Provides for penalties if a company, its promoters, or
directors contravene private placement provisions.
SECTION 454:
Governs adjudication of penalties by ROC-appointed
officers.
PENALTY BREAKDOWN
|
Hindustan
Coca-Cola Holdings Pvt. Ltd. |
₹1.5 crore |
|
Two
Directors |
₹1 crore
each |
|
Two
Promoters |
₹1 crore
each |
|
Other Two
Directors |
No monetary
penalty |
IMPLICATIONS FOR CORPORATE GOVERNANCE
PROCEDURAL LAPSES:
Even technical deviations (like funds coming from the
wrong account) can attract heavy penalties.
PROMOTER & DIRECTOR LIABILITY:
Penalties are
not limited to the company; individuals in charge also face personal liability.
PRECEDENT:
Reinforces MCA’s strict stance on private placement
compliance, similar to other recent adjudications against companies for
PAS-4/MGT-14 lapses.
TAKEAWAY FOR COMPLIANCE PROFESSIONALS
·
Always
ensure subscription money is received from the subscriber’s own bank account.
·
Maintain
designated bank accounts for private placement funds.
·
File PAS-3,
PAS-4, and MGT-14 accurately and on time.
·
Conduct
internal compliance audits before filing suo motu adjudication applications.
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