Cme India Technology And Support Services Private Limited, In Re

Ashok Kumar Mishra, Member (Technical):— This Application is filed by Ms. Priya Manoj Jaswani, Company Secretary of the Company on behalf of the Applicants under section 134 of the Companies Act, 2013 with a prayer for compounding of the violation committed under provisions of 441 of the Companies Act, 2013.

2. The averments made in the Company Application are briefed hereunder:—

(1) The 1 Applicant Company was incorporated under the Companies Act, 2013 on 17 June 2015 as a Private Limited Company under the name and style of “CME India Technology and Support Services Private Limited” vide Registration No. CIN U74900KA2015FTC080943. The Registered Office of the company is situated at Level-8 (corresponding to Seventh Floor), Tridib B, Block-A, Bagmane Tech Park, C.V. Raman Nagar, Bangalore-560093.

(2) The latest Authorized Share Capital of the 1 Applicant Company is Rs. 9,50,00,000/- divided into 95,00,000 of Equity Shares of Rs 10/- each and the paid up share capital of the Company is Rs. 9,50,00,000/- divided into 95,00,000 of Equity Shares of Rs 10/- each.

(3) The Main objects of the 1 Applicant Company is to carry on the business of software design, development, customization, implementation, maintenance, testing and benchmarking and to provide information technology or information technology enabled services including data processing, data analytics, data warehousing, database management and software and infrastructure and technology operations support to any person, firm, company, trusts, association, institution, society, body corporate, government department, public or local authority globally and to provide consultancy services in all above mentioned areas etc. Details of the objects of the 1 Applicant Company are mentioned in the Memorandum and Articles of Association.

(4) It is averred that, the is Applicant Company is regular in complying with all the provisions, Rules and Regulations as laid down in Companies Act, 2013, whereas in pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors should have to disclose in the Board's Report statement stating that:

a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) The directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) The directors had prepared the annual accounts on a going concern basis; and

e) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

f) Accordingly, the Board of Directors of the company in their Boards' Report for the Financial year ending 31 March 2016 had stated the above mentioned statements and had accordingly adopted the said Boards' Report at their Board Meeting held on 29/11/2016.

g) Further the said Boards' Report was also placed before the Shareholders of the Company at the First Annual General Meeting held on 9 December 2016 for the Financial Year ending 31 March 2016 and the same was approved by the Shareholders of the Company. The copy of the Financial Statements for the financial year ending 31 March 2016 alougwith the Boards' Report forming part of the Financials containing the Directors Responsibility Statement are shows as Annexure-3.

h) The financials of the company together with the Boards' Report containing the factual statements on the Directors Responsibility for the financial year ending 31 March 2016 was also filed with the Registrar of Companies vide E-form AOC-4 vide SRN G32637381 dated 10 January 2017. Copy of the same is shown as Annexure-4 & Form MGT-7 (Annexure-5).

i) Whereas, as a part of Group policy and standard, the company had initiated a due diligence on the compliance of various laws and regulations applicable to the Company as a matter of Good Corporate Governance to understand the level of compliances made by the Company for the period beginning since incorporation i.e., 17 June 2015 till 31 March 2017. The intent of the due diligence was to determine the level of compliances made and to report on the risk factors if any, attached to the conduct of the business of the Company. In the said process, the management identified a few instances of inadequacy in certain compliance requirements.

j) As an outcome of the due diligence report made for the period since incorporation i.e., 17 June 2015 till 31 March 2017, the Board of Directors of the company took note of the inadequacy in certain minor compliances under employment laws which are applicable to the Company. In the said situation, the Board of Directors took note of the fact, that the statement declared by them in the Directors Responsibility for the financial year ending 31 March 2016 to the effect that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively for the financial year ending 31 March 2016 will not be appropriate and deem that the said statement may be misleading and be construed as false statement made to Shareholders and the Statutory Authorities.

k) However, it is submitted that the Board of Directors of the company at the time of declaring the Directors Responsibility statement for the financial year ending 31 March 2016 on 29 November 2016 had made such statements with all bonafide intent believing that the company had complied with all the applicable provisions of the law and had strongly opined that the systems were adequate to check the level of compliances and thus had made the said statements.

l) Thus in the above circumstances, the company may be viewed as to have violated the provision of section 134 of the Companies Act, 2013 for disclosing the statements which at the time of preparation of Board's Report was meant to be true and fair.

m) Whereas upon reading the report of the due diligence on the Labour Law Compliances of the Company, in the best interest of the Company and to be a better corporate governance driven company, it was decided by the Board of Directors of the Company at their meeting held on 28 November 2017 to voluntarily compound the contraventions committed under Section 134 read with Section 441 of the Companies Act, 2013 and hence the present application is being made for Compounding.

n) In order to make good the non-compliance before compounding the offence committed, the Board of Directors in their subsequent Directors' Responsibility Statement for the Financial year ending 31 March 2017 has stated the true facts in their report as below:

“The Directors have initiated the process of devising/strengthening proper systems to ensure compliance with all the provisions of all applicable laws and that such systems once implemented will be adequate and operating effectively”.

Thus, the 1 Applicant Company had contravened section 134 of the Companies Act, 2013. The 1 Applicant Company and its Director suo-moto filed this application admitting violation and prayed for compounding by taking a lenient view. Thus there was violation of provisions of section 134 of the Companies Act, 2013 which reads as follows:—

(1) The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board at least by the chairperson of the company where he is authorised by the Board or by two directors out of which one shall be managing director and the Chief Executive Officer, if he is a director in the company, the Chief Financial Officer and the company secretary of the company, wherever they are appointed, or in the case of a One Person Company, only by one director, for submission to the auditor for his report thereon.

Violation of this proviso is punishable under section 134(8) of the Companies Act, 2013, which reads as follows:

“If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both”.

We have heard the Practicing Company Secretary for the Applicants, who contended that, the Board of Directors of the 1 Applicant Company in their Board Meeting held on 28 November 2017 has resolved that, in order to make good the noncompliance before compounding the offence committed, the Board of Directors in their subsequent Directors' Responsibility Statement for the Financial year ending 31 March 2017 has stated the true facts in their report, and thereby made, good the default in question and further contended that, under the circumstances the default was occurred beyond its control and thereby contravened the provisions of section 134 of the Companies Act, 2013 during the financial year 2015–2016. He would further contend that, this is a suo-moto application filed by the Company and its Director for compounding of violation and prayed the Tribunal for taking a lenient view while compounding the fee.

The Registrar of Companies, Karnataka, Bangalore vide its letter bearing No. ROCB/DM/Sec. 629A & 441/80943/2018 dated 2 May 2018 has stated in his report that, the Company has admitted the violation suo-moto and has made good the offence and has offered to compound the offence and further made an observation that, the Compounding Application may be decided on merits.

We have seen the certified copy of the Boards' report for the financial year ending 31 March, 2017 dated 26 September 2017 of the 1 Applicant Company. We have also seen the certified copy of the Board Resolution dated 28 November 2017 for filing compounding Application before the Tribunal. After considering the materials on record and after taking into account the submissions made by the Practicing Company Secretary that, a lenient view may be taken, we hereby levy compounding fee under section 134 of the Companies Act, 2013 on the Applicants as shown in the table given below:—

Sl. No. Particulars Violation of Sec. 134 of Companies Act, 2013 Total Rs. 1 1st Applicant Company 1,00,000/- 1,00,000/- 2 2nd Applicant - Director 50,000/- 50,000/- 3 3rd Applicant - Erstwhile Director 50,000/- 50,000/- 4 4th Applicant-Erstwhile Director 50,000/- 50,000/- 5 5th Applicant - Erstwhile Director 50,000/- 50,000/- 6 6th Applicant-Company Secretary 50,000/- 50,000/-

In pursuant to the order dated 13th June 2018 mentioned herein above, the Applicants have paid the compounding fee by depositing 6 Demand Drafts drawn in favour of “Pay and Accounts Officer, Ministry of Corporate Affairs, payable at Chennai” as detailed below:—

Sl. No. Particulars of Applicant Fee Amount Rs. Bank Name DD No. & Date 1 1st Applicant Company 1,00,000/- 093774 dt: 15/06/2018 2 2nd Applicant-Director 50,000/- Bank of America, EA Chambers, Express Avenue, 8th Floor, No. 49, 50L, Whites Road, Royapettah, Chennai-600014 093873 dt: 22/06/2018 3 3rd Applicant - Erstwhile Director 50,000/- 093874 dt: 22/06/2018 4 4th Applicant-Erstwhile Director 50,000/- 093875 dt: 22/06/2018 5 5th Applicant - Erstwhile Director 50,000/- 093876 dt: 22/06/2018 6 6th Applicant-Company Secretary 50,000/- 093877 dt: 22/06/2018

As the compounding fee has been remitted by the Applicants, the offence stated in the petition is compounded. A copy of this Order be sent to Registrar of Companies, Karnataka, Bangalore for appropriate action.