TaxTMI 
TaxTMI 
2018 (8) TMI 1480
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....of the Company Secretaries Act, 1980 (hereinafter referred to as the "Act") read with rule 19 (1) of the Company Secretaries (Procedure of Investigations of Professional and Other Misconduct of Cases) Rules, 2007 (hereinafter referred to as the "Rules"), Mr. Sital Prasad Swain has filed this appeal under Section 22E of the Act challenging the Impugned Order. 2. The original proceedings started with filing of the complaint dated 10th September, 2011 by Mr. Pramod Khosla (hereinafter referred to as complainant) wherein, it was alleged that professional misconduct has been committed by the Appellant while practicing as a Company Secretary for M/s. Khosla Steel Industries Private Ltd. (hereinafter referred to as Company). It was alleged that in the Board of Directors meeting held on 10th August, 2011, while Mr. Bishendra Singh was appointed only as an Additional Director of the Company with effect from 10th August, 2011 under section 260 of the Companies Act, 1956, and was to hold his office up to the conclusion of the next Annual General Meeting (AGM), in Form - 32, signed by Mr. Kishor Khosla (KK), a Director of the Company and verified by the Appellant, wherein, the appointment o....
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....hri Pramod Khosla and Ms. Sarita Khosla under section 283 (1) (g) of the Companies Act, 1956. With these averments, the complainant submitted that the Appellant while working as Company Secretary for the company did not exercise due diligence in verifying and certifying Form-32 on both the occasions. 3. On the aforesaid complaint, the Director (Discipline) formed a 'Prima-Facie Opinion' (PFO) that there had been laxity on the part of the Appellant while certifying Form-32 and observed that he was Prima Facie Guilty of Professional Misconduct under item (7) of Part-I of the Second Schedule of the Act having not exercised due diligence and being grossly negligent in the conduct of professional duties. 4. The matter was finally decided by the Disciplinary Committee holding Appellant guilty of committing misconduct under item (7) of Para-I of Second Schedule of the Company Secretaries Act, 1980, for not exercising due diligence in the conduct of his professional duties and awarded the punishment of (i) reprimand and (ii) a fine of Rs. 5,000/- (Rupees Five Thousand Only). 5. The Appellant than filed an appeal against the said order before this Authority which at the relevant ti....
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....y the Complainant that the Board of Directors in its meeting held on 10.08.2011, had approved the appointment of Shri Bishernder Singh as an Additional Director of the Company, in terms of Section 260 of the Companies Act, 1956. The Additional Director appointed by the Board of Directors shall hold office only upto the date of next Annual General Meeting of the Company. In the Form - 32 certified by the Appellant for the appointment of Shri Bishender Singh he has not been shown as an Additional Director as approved by the Board of Directors but has been shown as Director under the category of "Promoter" Director. 35. The Promoter Director concept can be inferred from the Companies Act, 1956, and as well as by prevailing practice in the companies. The Promoter Director is a person who is instrumental in the formation of the company, incorporates the company, brings the capital and commences its business or who has taken the control of the company and whose name has been identified as Promoter Director and accepted by the Board of Directors. The second situation in the course of affairs generally emerges in listed or public companies where the change of management happens. ....
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....ecretary, while certifying the form for appointment of a Director who was appointed in an Extra Ordinary General Meeting, is required to verify the following for his diligence and keep copies in his custody of the following: (i) Copies of the notice of the Extra Ordinary General meeting. (ii) Evidence not only of dispatch but of service of such notices within stipulated time. (iii) Copy of the extract of minute/minute of the meeting. (iv) Explanatory Statement. (v) Copy of the Resolution for appointment/authority. (vi) Agenda of Extra Ordinary General meeting. 41. In the present case, the Appellant has submitted only an extract of the Resolution of the Extra Ordinary General Meeting held on 10th August, 2011 signed by Ms. Neelam Khosla but the Form 32 was certified by Shri Kishore Khosla. 42. The Appellant, by affixing his signature on the said Form 32, endorsed the authority of Shri Kishore Khosla to sign the form though, the copies of the resolution are not mandatory attachments but certain documents are required to be maintained by the Practising Company Secretary for his diligence and also for the records o....
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....efore, the AGM could not be held on a date prior to the date of signing of the Annual Accounts by the statutory Auditors. In response to this contention, the Complainant has stated that the Annual Accounts could not be adopted in the AGM on 30.08.2011 as the Statutory Auditors did not sign the Annual Accounts in connivance with the other side, though these accounts had been sent to him. The item relating to the consideration and adoption of the Annual Accounts had to be postponed. 47. The averments of the complainant are not borne out by the minutes of the 25th AGM of the company held on 30.08.2011. In the aforesaid minutes it is recorded as under; "The Chairman expressed his hope that the member present have gone through the audited accounts for the FY 2010-11, auditor's report and the Directors' Report for the year which were sent to them along with notice calling the Annual General Meeting. Mr. Kishore Khosla stated that let the Notice calling the Annual General meeting, annual audited accounts for FY 2010-11, auditor's report thereon and the Director's Report for the year be treated as read. The members discussed the reports, accounts ....
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....d by the Board of Directors. The alleged removal of the Complainant and his wife from the directorship of the Company in the Board of Directors meeting held on 27.02.2012 was on the ground of absence from three consecutives Board meetings stated to have been held on 11.11.2011, 13.12.2012, 09.01.2012. He has alleged that the Appellant did not take into account the Board of Directors meeting held on 20.12.2011, and consequently the appellant is guilty of not exercising due diligence. 52. The Disciplinary Committee considered the arguments of the representatives of the Complainant and the appellant on 2nd December, 2016 and examined all the documents submitted by the Complainant vide letter dated 6th December, 2016 and by the appellant vide email dated 6th December, 2016. It has been observed that the dispatch proof has been submitted by the appellant with respect to the Board Meeting held on 27th February, 2012 addressed to Jamshedpur. The frequency of Board meetings was so regular within the span of 3 months with regular and routine items of business. The fact that the Complainant is not available was also known to the appellant because of non-bailable warrants issued agai....
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....em under Para (58 to 61) of the Impugned Order and again hold the Appellant guilty and awarded the same punishment which was awarded earlier in Para (62) of the order which reads as under:- After considering the pleadings, material on record detailed submissions of both the parties, hearing arguments at length and totality of all the facts and circumstances, the Disciplinary Committee reiterates its earlier decision passed vide order dated 22nd July, 2015 wherein the Appellant was held guilty of professional or other misconduct for not exercising due diligence and passed the following Order under Section 21(B) (3) of the Company Secretaries Act, 1980 read with proviso to Rule 19(1) of the Company Secretaries Procedure (Procedure of Investigations of Professional or Other misconduct and Conduct of Cases) Rules, 2007: (i) Reprimand and; (ii) Fine Rs. 5000/- 11. It is against the aforesaid order; the Appellant approached us by filing the present appeal. 12. During the course of hearing, we were confronted with basic controversy regarding filing of Form-32, regarding resolutions dated 10th August, 2011 and 20th December, 2011. We, therefore, thought it appropria....
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....orms by the Appellant? 4. Based on the above, therefore, we hereby direct the Appellant to file an affidavit mentioning specifically the details as to the observations made by us under Para (3) of this Order, within two weeks from the date of receipt of this Order. An advance copy of the affidavit to be filed before this Authority shall also be provided by the Appellant to Respondent No.2 well before at least one week from the next date of hearing of this matter. 5. Further, in case the appellant has copies of the original minutes in his possession, we also grant the liberty to him to annex the copy of the same with other relevant documents on which he relied before certifying and filing Forms-32 along-with the requisite affidavit. " 14. It is pained to note that none of the parties filed the original minute books or the resolution passed which are the subject matter relevant to the filing of two forms i.e. Form-32 filed for the appointment of Shri Bishender Singh as an Additional / Promoter Director and secondly, the form regarding cession of Pramod Khosla and his wife as the Directors of the Company under Section 283(1) (g) of the Companies Act, 1956. 15. ....