Articles
Adjudicating Order for Violation of Section 42(7) of the Companies Act, 2013 Relating to Public Advertisement in Process of Private Placement of Securities
Reference to Section 42 of the Companies Act, 2013 (‘Act’)
Section 42(2) of the Act: Meaning of private placement:
A private placement shall be made only to a selected group of persons who have been identified by the Board (herein referred to as “identified persons”), whose number shall not exceed two hundred in aggregate in a financial year (excluding the qualified institutional buyers and employees of the Company being offered securities under a scheme of Employees Stock Option).
Section 42(7) of the Act: Restriction on public advertisement:
No Company issuing securities under this section shall release any public advertisements or utilize any media, marketing or distribution channels or agents to inform the public at large about such an issue.
Section 42(10) of the Act: Penalty for violation:
Subject to sub-section (11), if a Company makes an offer or accepts monies in contravention of this section, the Company, its promoters and directors shall be liable for a penalty which may extend to the amount raised through the private placement or two crore rupees, whichever is lower, and the Company shall also refund all monies with interest as specified in sub-section (6) to subscribers within a period of thirty days of the order imposing the penalty.
Section 446B of the Act: Lesser penalties for One Person Companies or Small Companies:
Notwithstanding anything contained in this Act, if penalty is payable for non-compliance of any of the provisions of this Act by a One Person Company, Small Company, Start-up Company or Producer Company, or by any of its officers in default, or any other person in respect of such Company, then such Company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a Company and one lakh rupees in case of an officer who is in default or any other person, as the case may be.
Facts of the case
On the basis of the information which came to the notice by Registrar, it was seen that the subject Company had issued its Compulsorily Convertible Debentures (herein after referred as "CCDs") using the website https://www.tykeinvest.com (herein after referred as "Tyke").
On the website of Tyke, it was noted that the subject Company collected the investment under the brand name "DECIWOOD" and the campaign for raising fund closed on 25th July 2021. Other details as enlisted on the website of Tyke are as follows:
Total number of Subscribers 28 Average per Subscriber Rs. 51786 Percentage Raised 145.00 % Type of Instrument CCD The above-mentioned information was cross-verified with the e-form PAS-3 filed with ROC which revealed the following information:
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