2021 (3) TMI 308 - HC - Companies Law

Court dismisses writ petitions seeking permission to file INC-22A without Company Secretary, emphasizes Companies Act compliance.

The Court dismissed the writ petitions filed by Companies seeking permission to file e-form ACTIVE, INC-22A without appointing a whole-time Company ... Appointment of whole-time Company Secretary - e-form ACTIVE (INC-22A) - non-compliance with Section 203 - penalties for default under Section 203 - power to proceed under the Companies Act - interim permissionE-form ACTIVE (INC-22A) - appointment of whole-time Company Secretary - interim permission - Petitioners permitted, on a provisional basis, to file e-form ACTIVE (INC-22A) without insisting on appointment of a whole-time Company Secretary. - HELD THAT: - The court recorded that interim orders had earlier been passed permitting the petitioners to file e-form ACTIVE, Form PAS-03 and Form DIR-12 without insisting on appointment of a whole-time Company Secretary provisionally pending further orders (record of earlier interim relief). While noting the existing rules obliging companies with paid-up capital above the specified threshold to appoint a whole-time Company Secretary, the court sustained the provisional permission to file the e-form without deciding the legality of the requirement. The court expressly clarified that the interim orders are provisional and do not constitute a determination on the merits of Section 203 or Rule 8A. [Paras 5, 9]Provisional permission to file e-form ACTIVE (INC-22A) without a whole-time Company Secretary maintained; interim character of relief affirmed.Non-compliance with Section 203 - penalties for default under Section 203 - power to proceed under the Companies Act - Respondents are entitled to proceed against the petitioner-companies for non-compliance with Section 203 in accordance with law; legality of Section 203 and Rule 8A not adjudicated. - HELD THAT: - The court observed that the petitioner-companies have not adhered to the statutory requirement concerning appointment of Key Managerial Personnel and noted the statutory penal consequences for default under Section 203, including company and officer-level penalties and continuing default penalties. On that basis the court disposed of the petitions while granting liberty to the respondents to initiate proceedings against the companies if so advised. The court explicitly refrained from pronouncing on the merits or legality of Section 203 or Rule 8A, leaving those questions open for determination in appropriate proceedings. [Paras 9, 10]Liberty granted to the respondents to proceed against the petitioners for alleged violations of Section 203; no adjudication on the legality of Section 203 or Rule 8A.Final Conclusion: Writ petitions disposed: provisional interim permission to file e-form ACTIVE (INC-22A) without a whole-time Company Secretary is maintained as interim relief, while the respondents are granted liberty to take action for non-compliance with Section 203; the court did not decide the legality of Section 203 or Rule 8A. Issues:Petitioners seeking permission to file e-form ACTIVE, INC-22A without appointing a whole-time Company Secretary; Challenge on the restriction imposed on filing e-form ACTIVE; Non-compliance with Section 203 of the Companies Act; Penalty provisions for non-compliance; Central Government's argument on the mandatory appointment of Company Secretaries for Companies with paid-up capital exceeding &8377; 5 Crores; Legal consequences of non-appointment of Company Secretary; Adherence to Companies Act provisions; Disposal of writ petitions with liberty for the respondents to take action against petitioner-Companies.Analysis:The petitioners, Companies incorporated in Kerala, filed writ petitions seeking permission to file e-form ACTIVE, INC-22A without mandating the appointment of a whole-time Company Secretary, challenging the restriction imposed. They argued that the Ministry of Corporate Affairs rejected their e-form ACTIVE submissions due to paid-up capital exceeding &8377; 5 Crores without a whole-time Company Secretary, deeming it arbitrary and illegal. The petitioners highlighted their compliance with the Act using part-time Company Secretaries and Auditors, avoiding penalty proceedings historically.The Central Government Counsel contended that the petitioners must appoint whole-time Company Secretaries as per existing rules, emphasizing the mandatory nature for Companies with paid-up capital surpassing &8377; 5 Crores. Failure to appoint a Company Secretary constitutes an offense under Section 383A (1A) of the Companies Act, with potential fines for non-compliance. The Court acknowledged the provisional permission granted to file e-form ACTIVE but noted the petitioners' non-adherence to Section 203 of the Companies Act, empowering the respondents to take legal action against them.The judgment emphasized the consequences of non-compliance with Section 203, highlighting penalties for Companies and Key Managerial Personnel. Despite the interim relief, the Court disposed of the writ petitions, allowing the respondents to proceed against the petitioner-Companies for violating Section 203. It clarified that the interim orders did not determine the legality of Section 203 or Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, leaving room for further legal action based on compliance issues.