2022 (11) TMI 58 - Other - Companies Law

Company fined for not appointing Company Secretary on time under Companies Act, 2013

The Adjudicating Officer appointed by the Ministry of Corporate Affairs found ELANCO INDIA PRIVATE LIMITED in violation of Section 203 of the Companies ... Failure to appoint Whole time Company Secretary within a period of six months from the date of vacancy of previous Whole-time Company Secretary, who had resigned - Section 203 of the Companies Act 2013 read with Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 - HELD THAT:- The Company failed to appoint a Whole time Company Secretary from 20.09.2021 till 20.01.2021 with a delay of 122 days thereby contravening the provisions of Section 203 of the Companies Act, 2013. As per Section 203(5) of the Companies Act, 2013. Further, Section 203(5) of the Companies Act, 2013 prescribes a penalty of Rs. 50,000/- and Rs. 1,000/- per day for continuing offence for every director and KMP - appointment Key Managerial Person is the collective responsibility of the entire Board. Further, a Whole-time Director is included in the definition of “Officer in Default” and Key Managerial Personnel as per Sec. 2(60) r/w Sec. 2(51) and thus the MD and Wholetime Directors are liable for penalty. The penalty is imposed on the Company and its Officers in default as per table below for violation of provisions of Section 203 of the Companies Act, 2013 for delay of 122 days. It is opined that, the penalty is commensurate with the aforesaid failure committed by the Notice. Application disposed off. Issues:1. Appointment of Adjudicating Officer.2. Violation of provisions of Section 203 of the Companies Act, 2013 by a company.Issue 1: Appointment of Adjudicating OfficerThe Ministry of Corporate Affairs appointed the undersigned as the Adjudicating Officer under the Companies Act, 2013, to adjudicate penalties as per the Companies (Adjudication of Penalties) Rules, 2014.Issue 2: Violation of provisions of Section 203 of the Companies Act, 2013 by a companyThe case involved a company, ELANCO INDIA PRIVATE LIMITED, which failed to appoint a Whole-time Company Secretary within the stipulated time frame, resulting in a violation of Section 203 of the Companies Act, 2013. The company appointed a new Company Secretary with a delay of 122 days from the date of vacancy, thus breaching the statutory requirement.Analysis:The Company's failure to appoint a Whole-time Company Secretary within the specified period led to a contravention of Section 203 of the Companies Act, 2013. The relevant sections 203(1), 203(4), and 203(5) were cited to establish the legal framework for the case. The responsibility of appointing key managerial personnel lies with the Board, and the failure to do so attracts penalties as per the Act.During the hearing, the Company's representative argued for lesser penalties, attributing the default to the Managing Director. However, the Adjudicating Officer found the Company and its officers in default liable for penalties as per the provisions of Section 203(5) of the Companies Act, 2013. The penalty structure was detailed, imposing fines on the Company and individual officers for the violation.The final order imposed penalties on the Company and its officers in default, totaling Rs. 11,38,000 for the delay in appointing the Company Secretary. The order mandated the payment of the penalty within 30 days and outlined the appeal process. Non-payment within the stipulated time could lead to prosecution under Section 454 of the Companies Act, 2013, with potential imprisonment or fines for the defaulting officers or the Company itself.In conclusion, the judgment addressed the violation of statutory provisions by the company, emphasizing the importance of compliance with key managerial personnel requirements under the Companies Act, 2013. The penalty imposition served as a deterrent against future non-compliance and highlighted the legal consequences of such violations in the corporate domain.