RoC Imposed penalty for delay in appointing whole time Company Secretary of whopping INR 21 Lacs
in the matter of First Data (India) Private Limited
By Office of the Registrar of Companies, Mumbai
The Registrar of the Company imposed a penalty on a Private Limited of Massive amount of INR 21 Lacs on delay in appointment of the Whole Time Company secretary. The Company delayed in appointment of a whole time Company Secretary by 66 months and 10 days (24th October, 2014 to 4th May, 2020) due to difficulty in finding a suitable candidate. The RoC, Mumbai imposed a penalty of INR 10,00,000 on the company and INR 5,50,000 on both the directors of the company for non-compliances of provisions of Section 203 of Companies Act.
RoC Mumbai held that period of 24th October, 2014 to 1st November, 2018 is compoundable in nature. However, a penalty was imposed for the period of 2nd November, 2018 to 3rd May, 2020.
The Judgment is discussed below in details:
1. Brief Facts of the Case
- M/s First Data (India) Private Limited (“The Company”) filed a suo-moto application for adjudication of violation of the provisions of Section 203 of the Companies Act, 2013.
- The Company was required to appoint a Company Secretary under Section 203 of Companies Act on 24th October, 2014 only.
- However, The Company failed to appoint Company Secretary till 4th May, 2020. Therefore, the company delayed the appointment of Company secretary by 66 months and 10 days due to the difficulty in finding a suitable candidate.
2. Legal Extract
Relevant provisions of Section 203 of Companies Act, 2013 is reiterated below for ready reference:
“Section 203: Appointment of Key Managerial Personnel
(1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel, -
(i) managing director, or chief executive o wer or manager and in their absence, a whole-time director;
(ii) company secretary; and
(iii) Chief Financial Officer.
…
(4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a sorting of the Board within a period of six months from the date of such vacancy.
(5) If any company makes any default in complying with the provisions of this section such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is continuing one with further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.”
3. Contention of the Company
With respect to violation of the provisions of Section 203 of companies Act:
- In opportunity of being heard, the Company gave consent to adjudicate and pass necessary orders for imposition of penalty:
- The Company contended that the Company delayed in appointment of Whole time Company Secretary. Therefore, there is a violation of provisions of Section 383A and Section 203 of the Companies Act, 2013.
- Delay in filing up the casual vacancy was caused due to the difficulty in finding a suitable candidate. However, There was no mens rea and default was committed due to unavoidable circumstances and the company was not having mala fide intention.
- The Company has suo-moto applied to rectify the non-compliance.
- Further, the default is not of such a nature as to prejudice the interest of members or creditors or others dealing with the Applicant Company.
4. Findings of the Registrar of Company
The Hon’ble Registrar of Company, Mumbai made the following analysis:
- Factors to be considered by the Adjudicating Officer:
The adjudicating officer shall consider the following factors while determining the penalty under Section 203(5) of the Act:
- The amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of default.
- The amount of loss caused to an investor or group of investors as a result of the quantifying the unfair advantage made by the Noticee or the loss caused to the investors in a default of this nature.
- Period under Compounding
The Adjudicating officer stated that the period of default from 24.10.2014 to 01.11.2018 is compoundable in nature. Henceforth, such period shall not form part of adjudication and the same shall be compounded with the appropriate authority u/s 441 of the Companies Act, 2013.
The period from 2.11.2018 to 03.05.2020 shall be taken up for non-compliance of provisions of section 203 of the Companies Act, 2013.
5. Order by Hon’ble Registrar of Company
Considering the facts and circumstances, the Hon’ble RoC imposed the following penalty on the company and every director and key managerial personnel of the company who is in default for delay of 548 days:
- The Company and key managerial personnels may file an appeal against adjudicating order within a period of 60 days from the date of receipt of order in Form ADJ setting forth the grounds of appeal accompanied by a certified copy of this order.
- Further, as per Section 454(8)(ii) of the Companies Act, 2013, If penalty is not paid within a period of 90 days from the date of the receipt of the copy of the order, officer in default shall be punishable with imprisonment which may extend to 6 months or fine of minimum INR 25,000 which may extend to INR 1,00,000 or both.
- If The Company does not pay the penalty within a period of 90 days from the date of the receipt of the copy or the order, the company shall be punishable with fine of minimum INR 25,000 but which may extend to INR 5,00,000.
6. Conclusion
The Ministry of Corporate Affairs is getting strict with the Compliance with provision of Companies Act, 2013. Various companies, Key Managerial personnels and auditors are facing massive amount of penalties for non-compliances. The MCA has taken strict regulatory action against First Data (India) Private Limited for the delayed appointment of a Company Secretary. This action may act as a serious alarm for other companies to comply with regulatory requirements to avoid financial repercussions.
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