Registrar Of Companies, Mumbai Imposes Rs. 1.08 Lakh Penalty On William Hill Ltd For Late Submission Of Beneficial Interest Declaration

Section 89(2) of the Companies Act, 2013 mandates that any person who acquires a beneficial interest in shares of a company, but whose name is not entered in the register of members, must file a declaration with the company disclosing such interest.

Brief Facts:

M/s William Hill Ltd, a foreign body corporate, referred to here as the "Beneficial Owner," filed E-form GNL-1 electronically with the Ministry of Corporate Affairs (MCA) seeking adjudication under Section 454 of the Companies Act, 2013. The adjudication was requested for an offense under Section 89(2) read with Rule 9(2) of the Companies (Management and Administration) Rules, 2014. The Beneficial Owner also submitted a physical copy of the adjudication application through its authorized representative, Nakul Pratap Singh, on February 6, 2024.

William Hill Ltd holds beneficial ownership of one share in M/s Nimverge Tech India Pvt Ltd, a private limited company. The interest in the share was created on August 5, 2022, and a share certificate was issued on September 30, 2022. According to Section 89(2) of the Companies Act, 2013, read with Rule 9(2) of the Companies (Management and Administration) Rules, 2014, a person who acquires a beneficial interest in shares of a company must make a declaration to the company, specifying the nature of the interest and the particulars of the registered shareholder. This declaration must be filed with the company in Form MGT-5 within thirty days of acquiring the beneficial interest.

The company contended that it submitted the declaration in Form MGT-5 to the company on June 22, 2023, which was beyond the stipulated thirty-day period. During the hearing held before the Adjudicating Officer and Registrar of Companies, Mumbai, the company made several submissions.

It acknowledged the delay in submitting Form MGT-5, as the form was filed beyond the thirty-day period required by law. It noted that under Section 89(6) of the Companies Act, 2013, the company must record the declaration in its register and file a return with the Registrar within thirty days of receiving the declaration. The company complied with this requirement by filing Form MGT-6 on July 19, 2023.

Observations by the RoC:

The RoC noted that according to the provisions of Section 89(2) of the Companies Act, read in conjunction with Rule 9(2) of the Companies (Management and Administration) Rules, 2014, any person who acquires a beneficial interest in shares of a company, but whose name is not entered in the register of members, must file a declaration disclosing such interest in Form MGT-5. This declaration must be submitted within thirty days of acquiring the beneficial interest.

It noted that the company acquired beneficial interest in the shares of the company on August 5, 2022. However, the company did not submit the required Form MGT-5 until June 22, 2023. This submission was well beyond the thirty-day limit specified in the relevant provisions. The delay in filing the form constituted a breach of the regulations set forth under Section 89(2) of the Companies Act and Rule 9(2) of the Companies (Management and Administration) Rules.

Given these circumstances, the RoC exercised the powers conferred by the Notification dated March 24, 2015. After reviewing the case, including the company's response, the RoC held that a penalty was warranted for the non-compliance. The penalty calculation was guided by Section 89(5) of the Companies Act.

For the first default, the penalty was calculated based on the time period of the default. The penalty imposed was Rs. 50,000 for the initial period, with an additional Rs. 58,000 calculated for the extended delay period. This resulted in a total penalty of Rs. 1,08,000, which is the aggregate of the penalties for each default period. The maximum allowable penalty under the applicable regulations is Rs. 5,00,000, but the imposed penalty on the company was Rs. 1,08,000.

Therefore, M/S William Hill Ltd was required to pay a total penalty of Rs. 1,08,000 for its delayed submission of Form MGT-5.

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