Failure To Maintain Separate Register Of Members: RoC Chennai Fines Subam Benefit Fund Nidhi Limited And Director Rs. 3.5 Lakh

Section 88 of the Companies Act, 2013 mandates that companies must maintain certain registers, including the register of members, and keep them at the company's registered office.

Brief Facts:

The matter pertained to M/s. Subam Benefit Fund Nidhi Limited with its registered office located in Tamil Nadu. The company is subject to the provisions of the Companies Act, 2013. Section 88 of the Companies Act mandates that every company must maintain specific registers, including a register of members, a register of debenture-holders, and a register of any other security holders. These registers must be kept in the prescribed form and manner, including an index of the names included therein. Failure to maintain these registers as required attracts penalties: the company may face a penalty of up to fifty thousand rupees, and any officer in default is also liable to the same penalty.

An inspection of the company's books and accounts, conducted under Section 206(5) of the Companies Act, 2013, revealed that the company had not maintained separate registers for its members, nor were the required registers kept at the company's registered office. The inspecting officer noted that the company's failure to maintain these records was a violation of Section 88 of the Companies Act, 2013. Consequently, the Adjudicating Authority issued an Adjudication Notice to the company and its directors.

In response, the Managing Director of the company submitted a letter stating that during the inspection, details for the years 2018-19, 2019-20, and 2020-21 were provided. These details were maintained in an Excel format. The letter also argued that the company complied with Section 88 of the Companies Act, 2013.

Observations by the RoC:

The RoC noted that the company, being classified as a Nidhi company, does not meet the criteria of a "small company" under Section 2(85) of the Companies Act, 2013. Consequently, the provisions for imposing a lesser penalty as outlined in Section 445(b) were not applicable to the company.

The RoC reviewed the facts and circumstances surrounding the case and found that the company failed to maintain its Registers as required by Section 88 of the Companies Act, 2013. Given this non-compliance, both the company and its Managing Director were held liable for penalties according to Section 88 of the Companies Act.

Accordingly, a penalty was imposed in line with Sub-section 5 of Section 88 of the Companies Act, 2013. M/s. Subam Benefit Fund Nidhi Limited was fined Rs. 3,00,000/-, and Shri. Subramanian Kannan, the Managing Director, was fined Rs. 50,000/-. In total, a penalty amounting to Rs. 3,50,000/- was levied by the RoC for the violation of Section 88.

Further, exercising the powers vested under Section 454(1) & (3) of the Companies Act, 2013, the RoC mandated that the company rectify its default by properly maintaining the required registers. The company was directed to submit proof of compliance and the necessary documents to the RoC office within 15 days from the date of the order.

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