NON APPOINTMENT OF COMPANY SECRETARY STATUTORILY REQUIRED
NON APPOINTMENT OF COMPANY SECRETARY STATUTORILY REQUIRED
The expression ‘Company Secretary’ is defined under section 2(24) of Companies Act, 2013 (‘Act’ for short) as a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 (a member of the Institute of Company Secretaries of India) who is appointed by a company to perform the functions of a company secretary under this Act.
Company Secretary – key managerial personnel
Section 203 (1) of the Act provides that every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,-
According to this section the Company Secretary is a key managerial personnel for the company. The following companies are to appoint a Whole Time Company Secretary mandatorily-
The company which acquires the above said threshold limit for appointment of Whole Time Company Secretary is to appoint Company Secretary in the first Board meeting after reaching the said threshold limit.
Functions of Company Secretary
Section 205 of the Act provides the list of functions that are to be performed by the Whole Time Company Secretary which shall include the following functions-
Generally the following are the functions of the Company Secretary-
Section 203(4) provides that if the office of Whole Time Company Secretary is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.
Section 203(5) provides that if any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of Rs. 5 lakhs and every director and key managerial personnel of the company who is in default shall be liable to a penalty of Rs.50,000/- and where the default is a continuing one, with a further penalty of Rs.1,000/- for each day after the first during which such default continues but not exceeding Rs. 5 lakhs.
Consequences of non appointment
If the company, which is required to appoint Whole Time Company Secretary mandatorily fails to appoint the Whole Time Company then the said company is liable to be initiated penal proceedings for such non compliance.
In PUTHENPURAKAL PROPERTIES PRIVATE LTD., VKL HOMES INDIA PRIVATE LTD. VERSUS UNION OF INDIA, REGISTRAR OF COMPANIES - 2021 (3) TMI 308 - KERALA HIGH COURT the petitioners contend that they have part-time Company Secretaries and Auditors to properly look after the affairs of their Companies and for the last so many years, they have been functioning well within the provisions of the Act without giving any room for initiating any penalty proceedings. On these premises, the petitioners contend that they should not be forced to appoint a whole-time Company Secretary and should be permitted to file e-form ACTIVE, INC-22A without insisting on the appointment of a whole-time Company Secretary. The respondents argued that as per the existing rules, the petitioners are bound to appoint whole-time Company Secretaries, as their paid up capital is more than ₹5 Crores. The petitioners cannot be granted any exemption from the Rules.
The High Court held that the petitioner-Companies have not adhered to the provisions of the Companies Act, especially Section 203 thereof. In such circumstances, the respondents are empowered to proceed against the petitioner-Companies, in accordance with law.
Adjudication of penalties
Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 provides that the Central Government may appoint any of its officers, not below the rank of Registrar, as adjudicating officers for adjudging penalty under the provisions of the Act.
Ministry of Corporate Affairs vide their Gazette Notification No. A42011/112/2014-Ad.II, dated 24.03.2015 appointed the Registrar of Companies as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
The procedure involved in adjudication is as below-
In no case, the penalty imposed shall be less than the minimum penalty prescribed, if any, under the relevant section of the Act. The Penalty shall be paid through Ministry of Corporate Affairs portal only. All sums realized by way of penalties under the Act shall be credited to the Consolidated Fund of India.
The penalty imposed shall be paid within 90 days from the date of receipt of order. If the said penalty is not paid within the stipulated period the Officer-in-Default shall be punishable with imprisonment which may be extended to 6 months or with fine not less than Rs.25,000/- which may be extended up to Rs.1 lakh or with both. The company shall be liable to penalty of not less than Rs.25,000/- but may be extended to Rs.5 lakhs.
Orders of RoC
In IN RE : BEAM GLOBAL SPIRITS & WINE (INDIA) PRIVATE LIMITED - 2021 (2) TMI 1311 - MINISTRY OF CORPORATE AFFAIRS, OFFICE OF REGISTRAR OF COMPANIES, the Company Secretary of the company, Mr. Anshu Kumar Chakravoarty had resigned from his office w.e.f. 28.02.2019. The company has appointed Ms. Richa Manuja as Company Secretary of the company w.e.f. 27.11.2019 with a delay of 91 days. Therefore the Company along with its Directors have suo-moto filed application vide e-form GNL-1 for adjudication of penalty under the provisions of section 454 of the Act and rules there under. The company prayed that delay in complying with the provisions of section 203 of the Act be condoned or any other relief or reliefs may deem fit be granted.
The Adjudicating Officer held that The company and its officers, who have defaulted the provisions of section 203(1) r/w 203(4) of the Act for non- appointment of Whole-Time Company Secretary are liable for penalties under section 203(5) of the Act with effect from 28th August, 2019 to 26th November, 2019. The Adjudicating Officer imposed penalty on the Company a penalty of Rs.5,00,000/- and continuing penalty @ Rs.1000/- for 91 days. Similarly the Adjudicating Officer imposed penalty on the Directors of the Companies a penalty of Rs.50,000/- and continuing penalty @ Rs.1000/- for 91 days.
In IN RE : ELANCO INDIA PRIVATE LIMITED - 2022 (11) TMI 58 - MINISTRY OF CORPORATE AFFAIRS OFFICE OF THE REGISTRAR OF COMPANIES the company Elanco India Private Limited filed an application for adjudication for violation of provisions of Section 203 of the Act. The Company Secretary of the company resigned on 20.03.2021. The Company appointed another Company Secretary on 20.01.2022 after a delay of 122 days as it could not find a suitable candidate. The Adjudicating Officer held that the company has violated the provisions of Section 203 of the Act and the rules made there under.
The Adjudicating Officer imposed penalty on the company Rs.5,00,000 + continuing penalty @ Rs.1000/- per day for 122 days. The penalty was also imposed on the Directors of the Company Rs.50,000/- and continuing penalty @ Rs.1000/- per days for 122 days. The total penalty comes to Rs.11,38,000/-
Appeal, against the order of Adjudicating Officer, imposing penalty on the company or its Directors or both, may be filed with the Regional Director of that region within a period of 60 days from the date of receipt of the order in Form ADJ setting forth the grounds of appeal accompanying with the certified copy of the order.
By: Mr. M. GOVINDARAJAN - November 1, 2022