ROC Hyderabad has levied a penalty of ₹8 crore for these violations under the Companies Act, 2013, on Digilog Systems Ltd. Under the order, the company did not fulfil key regulatory obligations contained in Section 42(6) and Section 42(10) of the Act.
Key Violations
ROC held that Digilog Systems Ltd. had not:
1. Maintain a separate bank account for share application money received from private placement
2. Comply with the process to file Form PAS-3 (Return of Allotment) before utilising the funds
3. Properly segregate investor funds as required by private placement provisions.
Instead, the company allegedly accessed an existing bank account and continued using these funds before completing the relevant statutory filings, which would ordinarily be required by law.
Defense Rejected by the Company
They maintained the account was in place as it was used for the transaction, which meant it was unnecessary to keep a separate bank account. But the ROC disagreed by saying that the law clearly requires a separate account to ensure transparency and compliance with relevant regulations.
Penalty Details
- Digilog Systems Ltd: ₹2 crore
- Three defaulting officers: ₹2 crore each
- Total penalty enforced: ₹8 crore
Compliance Directions and Appeal
The ROC has ordered the company to:
- Rectify the default within 90 days.
- It can also appeal the order within 60 days of that, if it intends to do so.
Conclusion
It is a case which raises this very strong matter of regulation in the subject of private placements that is governed by the Companies Act, 2013. Regulators still insist upon a lack of discretion in accessing investor funds and adhering to procedural rules before tapping into capital.
