2022 (8) TMI 1117 - Tri - Companies Law

Company Secretary's Authority Upheld in Petition Filing under Companies Act

The tribunal held that the company secretary had the authority and locus standi to file the petition, emphasizing his role as a key managerial personnel ... Power to Company secretary to initiate suit or any other legal proceedings in the absence of specific authorization - locus standi of the Company Secretary in the main application - fulfilment of requiremnt of section 90 - that every individual who holds beneficial interest over the company shall make a declaration specifying the nature of the interest in form No. BEN-1 within a period of 90 days - officer in default - section 2(60) of the Companies Act, 2013 - HELD THAT:- There is no idealistic overstatement in holding that company secretary is required to act not only with adequate diligence but with proper and necessary diligence while discharging his duties by sounding the knell in order to alert all concerned including the board of directors on occasions where he apprehends deviations from sound corporate principles and prudent governance practice in the best interest of the company and its stakeholders. The clause (f) of sub-section (5) of section 134 read with sub-section (5) makes it a mandatory prescription to devise and put in place proper system to ensure the compliance with all applicable laws and that such systems are adequate and operating effectively, the violation of which will drag the company and every officer in default to penal consequences including penalty up to Rs. 24 lakhs for the company and imprisonment to the officer in default for a term up to three years or with a fine up to Rs. 5 lakhs or with both - The company secretary in the instant situation has acted diligently and promptly to ensure compliance with the mandatory provisions by moving this Tribunal. To answer the question put forward whether the company secretary has the locus standi to file such application, the same is answered in affirmative by virtue of the above position of law, it is fairly clear that the company can be represented by the company secretary since he is a key managerial person under section 2(51) of the Companies Act, 2013, officer in default as per section 2(60) as per Companies Act, 2013 and as per the power given under section 205(1)(c) read with rule 10 clause 4 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 it is abundantly clear that the company secretary can represent before various regulators and other authorities under the Act in connection with discharge of various duties under the Act. Application dismissed. Issues Involved:1. Maintainability of Company Petition No. 75(CHE) of 2021.2. Authority and locus standi of the company secretary to file the petition.3. Compliance with provisions of the Companies Act, 2013, specifically section 90.4. Allegations of professional misconduct against the company secretary.Issue-Wise Detailed Analysis:1. Maintainability of Company Petition No. 75(CHE) of 2021:The applicant, Mr. Mayank Agarwal, filed an interlocutory application (I.A. No. 2 of 2021) seeking to declare that Company Petition No. 75(CHE) of 2021 is not maintainable and should be dismissed. The argument centered around whether the company secretary had the authority to file the petition without a board resolution authorizing him to do so.2. Authority and Locus Standi of the Company Secretary:The applicant argued that the company acts through its board of directors, and the company secretary did not have the board's approval to file the petition. The applicant cited judgments (Nibro Ltd. v. National Insurance Co. Ltd. and State Bank of Travancore v. Kingston Computers (I) P. Ltd.) to support the claim that legal proceedings require a valid board resolution. In contrast, the respondent-company secretary argued that he had the locus standi based on a board resolution appointing him as the company secretary and compliance officer, which empowered him to perform duties under the Companies Act, 2013. He also cited Order 29, Rule 1 of the Code of Civil Procedure, 1908, and the case of United Bank of India v. Naresh Kumar, which allows a principal officer to sign and verify pleadings on behalf of the corporation.3. Compliance with Provisions of the Companies Act, 2013, Specifically Section 90:The main petition (C.P. No. 75/CHE/2021) was filed to ensure compliance with section 90 of the Companies Act, 2013, which mandates the identification and declaration of significant beneficial owners (SBOs). The company secretary had sent notices to the respondents to disclose their ultimate beneficial ownership (UBO) of shares held, as required by the Act. The tribunal noted that the provisions regarding significant beneficial ownership were newly introduced and emphasized the duty of key managerial personnel to seek information and ensure compliance.4. Allegations of Professional Misconduct Against the Company Secretary:The applicant alleged professional misconduct by the company secretary. However, the tribunal focused on the statutory duties and responsibilities of the company secretary, highlighting that he is a key managerial personnel and an 'officer in default' under sections 2(51) and 2(60) of the Companies Act, 2013. The tribunal underscored the company secretary's role in ensuring compliance with statutory requirements and protecting corporate governance principles.Conclusion:The tribunal held that the company secretary acted diligently and promptly to ensure compliance with mandatory provisions by moving the tribunal. It affirmed that the company secretary has the locus standi to file such applications, given his role as a key managerial personnel and officer in default. The tribunal dismissed the interlocutory application (I.A. No. 2 of 2021) and scheduled the main petition (C.P. No. 75(CHE) of 2021) for final hearing on August 25, 2022, directing both parties to file their written submissions within one month.Order:The prayer to declare the main petition not maintainable was answered in the negative, and I.A. No. 2 of 2021 was dismissed. The main petition was listed for final hearing, with directions for both parties to submit their written submissions.