Need Prior Approval of the Members and Filing of MGT-14 to Convert the Loan to be Received from the Directors

Need Prior Approval of the Members and Filing of MGT-14 to Convert the Loan to be Received from the Directors. MCA Adjudication under Section 454 of the CA 2013 for non-compliance of Section 117 for non filing of form MGT-14
Corporate law compliance in India plays a vital role in maintaining the discipline and transparency of the corporate sector. The Companies Act, 2013 has created a well-structured legal framework that requires companies to file their important resolutions, agreements, and decisions within specific timelines. This mechanism ensures that the company’s affairs remain transparent, its decision-making process accountable, and the rights of shareholders safeguarded.
Among these obligations, the filing of resolutions particularly special resolutions is extremely significant. Such filings are made through Form MGT-14, and the law requires them to be submitted to the Registrar of Companies (ROC) within 30 days of passing. The intention is to create an authentic public record of decisions taken by the company, thereby protecting the interests of investors, creditors, regulators, and the general public.In the present case, the ROC Ahmedabad dealt with non-compliance by BMRAJ Industries Private Limited. The company passed a special resolution in its Annual General Meeting (AGM) but failed to file it within the statutory limit. Instead, the filing was delayed by nearly 1943 days, which is more than five years. Such a prolonged delay represents a serious breach of compliance norms and defeats the purpose of timely disclosures under company law.
This case brief explains the facts, legal provisions, adjudication process, penalties imposed, and the wider significance of this order in ensuring strict adherence to corporate law compliance in India.
Facts of the case
This case relates to a serious statutory non-compliance committed by BMRAJ Industries Private Limited, a private company (registered under Companies Act, 2013). The registered office of the Company is situated at Silvassa, Dadra & Nagar Haveli.
On 7 September 2019, the Company conducted its Annual General Meeting (AGM) in which the members passed a special resolution under Section 62(3) of the Companies Act, 2013. The main objective of the resolution was that loans given to the Company by its directors and their relatives could be converted into fully paid-up equity shares with voting rights in future, provided required approvals and consents are obtained. This decision directly impacts the capital structure and shareholder interests of the Company, hence its timely filing was mandatory.
As per Section 117(1) read with Section 117(2), every special resolution has to be filed with the ROC in Form MGT-14 within 30 days. The main purpose of this filing is to make major decisions of the company available in the public domain and maintain regulatory transparency. But the company ignored this mandatory requirement. The filing of the resolution was not done on time and finally it was filed on 1st January 2025 (through SRN AB2305574). The filing was almost 1943 days late – which adds up to a delay of almost 5 years 4 months. This was clearly a major compliance lapse.
Later, on 13 January 2025, the company itself submitted a physical application to ROC under Section 454, in which delay was admitted and adjudication was requested. Thereafter, ROC Ahmedabad considered the matter and initiated adjudication proceedings against the company as well as its 3 directors. Upon proving default, ROC passed an order imposing penalty.
Legal Provisions Involved
Section 117 of the Companies Act, 2013: Section 117 is an important compliance provision that ensures the major decisions of a company are made available in the public record.
Sub-section (1): Under this, every special resolution, certain specified board resolutions, and certain agreements must be filed with the ROC. The filing is done through Form MGT-14, and the prescribed time limit is 30 days.
Sub-section (2): If a company fails to file its resolution or agreement within the stipulated time, a penalty is imposed. The penalty structure is as follows:

On the Company: Rs.10,000 + Rs.100 per day of delay (maximum up to Rs.2,00,000).

On Officers in Default (such as Directors): Rs.10,000 + Rs.100 per day of delay (maximum up to Rs.50,000).

This provision is mainly designed to maintain transparency and accountability, so that shareholders and regulators are always aware of which decisions have been officially taken by the company.
Section 62(3) of the Companies Act, 2013
Section 62(3) is an enabling provision that allows a company to convert loans taken from its directors, members, or lenders into share capital (equity shares). However, there is one critical condition:

The conversion is possible only when the shareholders pass a special resolution in the AGM/EGM.

The resolution must clearly state the terms and conditions on the basis of which the loan will be converted into equity.

The purpose of this section is to ensure that the loan-to-equity conversion process is fair and transparent, and that no director or promoter gains any undue advantage. In the case of BMRAJ Industries, this provision was directly relevant, since the company had passed a resolution to convert loans taken from directors into equity.
Section 454 of the Companies Act, 2013
Section 454 empowers the Ministry of Corporate Affairs (MCA) to appoint an Adjudicating Officer (such as the ROC or another officer) to adjudicate penalties for violations under the Act.

The Adjudicating Officer issues a notice and provides the company/directors an opportunity to explain their position.

If the violation is proved, a penalty is imposed in accordance with the relevant provisions of the Act.

If the company or its directors are not satisfied with the order, they have the right to appeal before the Regional Director (RD) within 60 days of the order.

This section creates a quasi-judicial mechanism to ensure that compliance failures are penalized in a timely manner without involving regular courts.
Findings of ROC Ahmedabad
In this case, BMRAJ Industries Private Limited, a private company registered under the Companies Act of 2013, has committed grave legal violations. Silvassa, Dadra & Nagar Haveli is home to the company's registered office. In accordance with Section 62(3) of the Companies Act of 2013, the members of the company passed a special resolution at its Annual General Meeting (AGM) on September 7, 2019.
The resolution permitted, subject to the required approvals and consents, the conversion of loans made to the company by its directors and their family members into fully paid-up equity shares with future voting rights. Timely filing is crucial because this decision impacts the company's capital structure and shareholder interests. Every special resolution must be submitted to the Registrar of Companies (ROC) in accordance with Sections 117(1) and 117(2).
Penalty Imposed
Based on the findings of non-compliance under section 117(2) and after considering the statutory framework of section 454, ROC Ahmedabad imposed penalty on BMRAJ Industries Pvt Ltd and its directors/defaulters. The penalty was calculated taking into account the continuous failure (delay of 1943 days) and the maximum limit prescribed under the Act.
Details of penalty

Name of Person / Entity

Default Rectification Required

Penalty Amount

Maximum Limit for Penalty

BMRAJ Industries Pvt. Ltd.

File MGT-14

1,00,000

2,00,000

Bhumiraj Surma Hemendrasinh (DIN 07762973)

Ensure company compliance

25,000

50,000

Dipikaben Surma Hemendrasinh (DIN 07762978

Ensure company compliance

25,000

50,000

Hemendrasinh Chandrasinh Surma (DIN 09213841)

Ensure company compliance

25,000

50,000

Key notes regarding penalty

Payment instructions: The penalty has to be paid by the company and the directors within 90 days through the e-adjudication portal, and the directors have to pay the penalty from personal sources/income.

Company's liability: BMRAJ Industries was fined to the maximum extent as filing was not statutory The penalty was passed outside the timelines and the delay was long.

Personal liability of directors: The juvenile directors were given the penalty as personal liability, as the responsibility of the compliance officer-in-default falls under their personal liability.

Continuing default: The RoC has not considered continuing default, but additional penalty per day will not be imposed, as the maximum limit is already high.

The ROC’s objective is clear to enforce a strict compliance culture and send a message of timely discharge of statutory duties. This order highlights that legal consequences are inevitable even for rectifying long-pending lapses.
Directions Issued
The following instructions were given to BMRAJ Industries Pvt. Ltd. and its officers-in-default by ROC Ahmedabad in light of the adjudication proceedings and non-compliance findings:
1. Fixing the Default: In order to formally correct the default, the company and the officers-in-default must finish filing the special resolution (Form MGT-14).
2. Penalty payment:

Within 90 days of receiving the order, the directors and the company are required to pay the penalty.

The e-Adjudication portal is the only way to make payment. The directors' personal funds must be used to cover the penalties.

A copy of the paid challan/SRN needs to be uploaded to the e-Adjudication portal following payment.

3. Director Personal Liability:

Under the provisions pertaining to personal accountability, each director bears independent liability and is liable for paying the penalty on their own.

4. Right of Appeal :

Within 60 days of receiving the order, the officers or the company may file an appeal with the Regional Director (RD), Ahmedabad, if they feel that the order is unfair.

A certified copy of the order and Form ADJ, which outlines the grounds of appeal, must be included with the appeal.

5. Repercussions for Failure to Pay:

Section 454(8) of the Companies Act, 2013 states that failure to pay the penalty within the allotted time may result in further legal repercussions and interest.

6. Compliance Culture:

The ROC reiterated that statutory compliance is necessary and that noncompliance may lead to monetary fines and individual liability.

Companies and directors must continue to adhere to proper governance protocols and timely filing in order to avoid such defaults in the future.

This makes it very clear that statutory compliance needs to be taken seriously and that directors' personal accountability is essential under the Companies Act.
Final Note of the Article
An important reminder that statutory compliance under the Companies Act, 2013 is non-negotiable is provided by the adjudication order in ROC Ahmedabad v. BMRAJ Industries Pvt. Ltd. The company was considered to have committed a serious and ongoing default when it failed to file its special resolution within the allotted 30-day period under Section 117(2), resulting in a delay of nearly 1943 days.
The idea that corporate officers are personally responsible for compliance violations is reinforced by ROC Ahmedabad's use of its authority under Section 454, which not only fined the company but also held its directors personally liable. This case also demonstrated the importance of Section 62(3), which mandates that shareholder approval be obtained through a special resolution and timely filing in order to convert loans into equity.
This order highlights the following three key takeaways:

Timeliness is critical in all statutory filings;

Directors’ personal liability cannot be avoided in case of default; and

The adjudication framework is an effective enforcement mechanism that ensures transparency, shareholder protection, and accountability.

Download MCA Adjudication Order

MCA Adjudication under Section 454 of the CA 2013 for non-compliance of Section 117 for non filing of form MGT-14

Corporate law compliance in India plays a vital role in maintaining the discipline and transparency of the corporate sector. The Companies Act, 2013 has created a well-structured legal framework that requires companies to file their important resolutions, agreements, and decisions within specific timelines. This mechanism ensures that the company’s affairs remain transparent, its decision-making process accountable, and the rights of shareholders safeguarded.

Among these obligations, the filing of resolutions particularly special resolutions is extremely significant. Such filings are made through Form MGT-14, and the law requires them to be submitted to the Registrar of Companies (ROC) within 30 days of passing. The intention is to create an authentic public record of decisions taken by the company, thereby protecting the interests of investors, creditors, regulators, and the general public.In the present case, the ROC Ahmedabad dealt with non-compliance by BMRAJ Industries Private Limited. The company passed a special resolution in its Annual General Meeting (AGM) but failed to file it within the statutory limit. Instead, the filing was delayed by nearly 1943 days, which is more than five years. Such a prolonged delay represents a serious breach of compliance norms and defeats the purpose of timely disclosures under company law.

This case brief explains the facts, legal provisions, adjudication process, penalties imposed, and the wider significance of this order in ensuring strict adherence to corporate law compliance in India.

Facts of the case

This case relates to a serious statutory non-compliance committed by BMRAJ Industries Private Limited, a private company (registered under Companies Act, 2013). The registered office of the Company is situated at Silvassa, Dadra & Nagar Haveli.

On 7 September 2019, the Company conducted its Annual General Meeting (AGM) in which the members passed a special resolution under Section 62(3) of the Companies Act, 2013. The main objective of the resolution was that loans given to the Company by its directors and their relatives could be converted into fully paid-up equity shares with voting rights in future, provided required approvals and consents are obtained. This decision directly impacts the capital structure and shareholder interests of the Company, hence its timely filing was mandatory.

As per Section 117(1) read with Section 117(2), every special resolution has to be filed with the ROC in Form MGT-14 within 30 days. The main purpose of this filing is to make major decisions of the company available in the public domain and maintain regulatory transparency. But the company ignored this mandatory requirement. The filing of the resolution was not done on time and finally it was filed on 1st January 2025 (through SRN AB2305574). The filing was almost 1943 days late – which adds up to a delay of almost 5 years 4 months. This was clearly a major compliance lapse.

Later, on 13 January 2025, the company itself submitted a physical application to ROC under Section 454, in which delay was admitted and adjudication was requested. Thereafter, ROC Ahmedabad considered the matter and initiated adjudication proceedings against the company as well as its 3 directors. Upon proving default, ROC passed an order imposing penalty.

Legal Provisions Involved

Section 117 of the Companies Act, 2013: Section 117 is an important compliance provision that ensures the major decisions of a company are made available in the public record.

Sub-section (1): Under this, every special resolution, certain specified board resolutions, and certain agreements must be filed with the ROC. The filing is done through Form MGT-14, and the prescribed time limit is 30 days.

Sub-section (2): If a company fails to file its resolution or agreement within the stipulated time, a penalty is imposed. The penalty structure is as follows:

On the Company: Rs.10,000 + Rs.100 per day of delay (maximum up to Rs.2,00,000).
On Officers in Default (such as Directors): Rs.10,000 + Rs.100 per day of delay (maximum up to Rs.50,000).

This provision is mainly designed to maintain transparency and accountability, so that shareholders and regulators are always aware of which decisions have been officially taken by the company.

Section 62(3) of the Companies Act, 2013

Section 62(3) is an enabling provision that allows a company to convert loans taken from its directors, members, or lenders into share capital (equity shares). However, there is one critical condition:

The conversion is possible only when the shareholders pass a special resolution in the AGM/EGM.
The resolution must clearly state the terms and conditions on the basis of which the loan will be converted into equity.

Section 454 of the Companies Act, 2013

Section 454 empowers the Ministry of Corporate Affairs (MCA) to appoint an Adjudicating Officer (such as the ROC or another officer) to adjudicate penalties for violations under the Act.

The Adjudicating Officer issues a notice and provides the company/directors an opportunity to explain their position.
If the violation is proved, a penalty is imposed in accordance with the relevant provisions of the Act.
If the company or its directors are not satisfied with the order, they have the right to appeal before the Regional Director (RD) within 60 days of the order.

This section creates a quasi-judicial mechanism to ensure that compliance failures are penalized in a timely manner without involving regular courts.

Findings of ROC Ahmedabad

In this case, BMRAJ Industries Private Limited, a private company registered under the Companies Act of 2013, has committed grave legal violations. Silvassa, Dadra & Nagar Haveli is home to the company's registered office. In accordance with Section 62(3) of the Companies Act of 2013, the members of the company passed a special resolution at its Annual General Meeting (AGM) on September 7, 2019.

The resolution permitted, subject to the required approvals and consents, the conversion of loans made to the company by its directors and their family members into fully paid-up equity shares with future voting rights. Timely filing is crucial because this decision impacts the company's capital structure and shareholder interests. Every special resolution must be submitted to the Registrar of Companies (ROC) in accordance with Sections 117(1) and 117(2).

Penalty Imposed

Based on the findings of non-compliance under section 117(2) and after considering the statutory framework of section 454, ROC Ahmedabad imposed penalty on BMRAJ Industries Pvt Ltd and its directors/defaulters. The penalty was calculated taking into account the continuous failure (delay of 1943 days) and the maximum limit prescribed under the Act.

Details of penalty

Name of Person / Entity	Default Rectification Required	Penalty Amount	Maximum Limit for Penalty
BMRAJ Industries Pvt. Ltd.	File MGT-14	1,00,000	2,00,000
Bhumiraj Surma Hemendrasinh (DIN 07762973)	Ensure company compliance	25,000	50,000
Dipikaben Surma Hemendrasinh (DIN 07762978	Ensure company compliance	25,000	50,000
Hemendrasinh Chandrasinh Surma (DIN 09213841)	Ensure company compliance	25,000	50,000

Key notes regarding penalty

Payment instructions: The penalty has to be paid by the company and the directors within 90 days through the e-adjudication portal, and the directors have to pay the penalty from personal sources/income.
Company's liability: BMRAJ Industries was fined to the maximum extent as filing was not statutory The penalty was passed outside the timelines and the delay was long.

Personal liability of directors: The juvenile directors were given the penalty as personal liability, as the responsibility of the compliance officer-in-default falls under their personal liability.
Continuing default: The RoC has not considered continuing default, but additional penalty per day will not be imposed, as the maximum limit is already high.
Payment instructions: The penalty has to be paid by the company and the directors within 90 days through the e-adjudication portal, and the directors have to pay the penalty from personal sources/income.

Directions Issued

The following instructions were given to BMRAJ Industries Pvt. Ltd. and its officers-in-default by ROC Ahmedabad in light of the adjudication proceedings and non-compliance findings:

1. Fixing the Default: In order to formally correct the default, the company and the officers-in-default must finish filing the special resolution (Form MGT-14).

2. Penalty payment:

Within 90 days of receiving the order, the directors and the company are required to pay the penalty.
The e-Adjudication portal is the only way to make payment. The directors' personal funds must be used to cover the penalties.
A copy of the paid challan/SRN needs to be uploaded to the e-Adjudication portal following payment.

3. Director Personal Liability:

Under the provisions pertaining to personal accountability, each director bears independent liability and is liable for paying the penalty on their own.

4. Right of Appeal :

Within 60 days of receiving the order, the officers or the company may file an appeal with the Regional Director (RD), Ahmedabad, if they feel that the order is unfair.
A certified copy of the order and Form ADJ, which outlines the grounds of appeal, must be included with the appeal.

5. Repercussions for Failure to Pay:

Section 454(8) of the Companies Act, 2013 states that failure to pay the penalty within the allotted time may result in further legal repercussions and interest.

6. Compliance Culture:

The ROC reiterated that statutory compliance is necessary and that noncompliance may lead to monetary fines and individual liability.
Companies and directors must continue to adhere to proper governance protocols and timely filing in order to avoid such defaults in the future.

This makes it very clear that statutory compliance needs to be taken seriously and that directors' personal accountability is essential under the Companies Act.

Final Note of the Article

An important reminder that statutory compliance under the Companies Act, 2013 is non-negotiable is provided by the adjudication order in ROC Ahmedabad v. BMRAJ Industries Pvt. Ltd. The company was considered to have committed a serious and ongoing default when it failed to file its special resolution within the allotted 30-day period under Section 117(2), resulting in a delay of nearly 1943 days.

The idea that corporate officers are personally responsible for compliance violations is reinforced by ROC Ahmedabad's use of its authority under Section 454, which not only fined the company but also held its directors personally liable. This case also demonstrated the importance of Section 62(3), which mandates that shareholder approval be obtained through a special resolution and timely filing in order to convert loans into equity.

This order highlights the following three key takeaways:

Timeliness is critical in all statutory filings;
Directors’ personal liability cannot be avoided in case of default; and
The adjudication framework is an effective enforcement mechanism that ensures transparency, shareholder protection, and accountability.