Challenge to Increased Company Secretary Requirement Upheld

The challenge to the amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, requiring private companies with a paid-up share capital of Rs.10 crores or more to have a whole-time company secretary, was upheld by the Court. The increase in the threshold was deemed justifiable to counter inflation and promote ease of doing business. The Court emphasized that economic policy matters should be left to expert bodies and unless shown arbitrary, capricious, or lacking nexus with the objective, the increase cannot be deemed unconstitutional under Article 14 of the Constitution of India. Other prayers related to corporate governance enforcement and the formation of a High Power Committee were considered unwarranted, with the Court highlighting steps taken to address fraudulent activities. The petition was dismissed, and pending applications were disposed of.

---

---

Issues involved: Challenge to amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, guidelines for enforcement of corporate governance, formation of a High Power Committee to look into lapses leading to closure of more than 6 lakh companies, non-issue/non-compliance of E-FORM INC-22A (ACTIVE).

Challenge to Amended Rule 8A:
The amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, requiring every private company with a paid-up share capital of Rs.10 crores or more to have a whole-time company secretary, was challenged. The Court noted that the increase in the threshold from Rs.5 crores to Rs.10 crores was to nullify the effect of inflation and enhance ease of doing business. Referring to legal precedents, the Court emphasized that matters of economic policy should be left to expert bodies and unless the increase is shown to be arbitrary, capricious, or lacking nexus with the objective, it cannot be held unconstitutional under Article 14 of the Constitution of India.

Enforcement of Corporate Governance and High Power Committee:
The prayers regarding enforcement of corporate governance guidelines and the formation of a High Power Committee to investigate lapses leading to closure of numerous companies were considered by the Court as far-fetched and not warranting detailed consideration. The counter-affidavit by the Union of India highlighted steps taken to de-register paper companies and shell companies involved in wrongful activities. The Companies Act, 2013, provisions for dealing with fraud cases, establishment of the Serious Fraud Investigation Office (SFIO), and stringent penalty provisions were cited. The Court held that relief cannot be granted to defaulting companies as approaching the Court with unclean hands due to non-compliance with the law is not permissible.

Non-Issue/Non-Compliance of E-FORM INC-22A (ACTIVE):
The petitioner, Suman Kumar, raised concerns regarding non-issue/non-compliance of E-FORM INC-22A (ACTIVE) due to mismatch, but the Court made no specific comment on this matter. Suman Kumar was advised to make a representation or file appropriate proceedings, which would be decided in accordance with the law. The writ petition was ultimately dismissed, and pending applications were disposed of accordingly.

---