₹21.96 Lakh Penalty on unlisted company for not appointing full time Company Secretary.

Key Takeaways:

1. MA Kalyaneshwari Holdings Private Limited penalized ₹21.96 Lakh for non-compliance with the Companies Act, 2013.

2. Violation of Section 203(1) concerning the mandatory appointment of whole-time key managerial personnel, including a company secretary.

3. Failure to appoint a Company Secretary from 07.04.2022 to 16.04.2023 led to penalties.

4. The company rectified the non-compliance by appointing a Company Secretary on 17.04.2023.

5. The penalties imposed include ₹5,00,000 on the company and ₹4,24,000 on each of its four officers-in-default.

The Matter

The Ministry of Corporate Affairs (MCA) clamped down hard on MA Kalyaneshwari Holdings Private Limited, a company established back in 1985 and not listed on the stock exchange.

The crux of the case was a breach of Section 203(1) of the Companies Act, 2013. This law requires that certain types of companies must have full-time key managerial personnel on board, including a Company Secretary.

The Investigation

The investigation revealed that the company had failed to appoint a Company Secretary from April 7, 2022, to April 16, 2023, contravening the provisions of Section 203(1) read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Notices Issued

Despite being served with a notice of hearing under Section 454 read with Rule 3(2) of the Companies (Adjudication of Penalties) Rules, 2014, as amended by the Companies (Adjudication of Penalties) Rules, 2019, the company and its officers in default did not provide an adequate reply to contest the allegations.

Rectification Done.

During the hearing on September 15, 2023, Shri Madan Kumar Maroti, a Chartered Accountant, appeared as the authorized representative and acknowledged the non-appointment of a Company Secretary. The company subsequently rectified the non-compliance by appointing a Company Secretary on April 17, 2023, and filed a suo-moto application for adjudication of the offense under Section 203(5) for the default period.

Penalties Imposed

Exercising the powers conferred by the Companies (Amendment) Ordinance, 2019, the Adjudicating Officer, A.K. Sethi, the Registrar of Companies, West Bengal, imposed a total penalty of ₹21,96,000. This included ₹5,00,000 on the company and ₹4,24,000 on each of its four officers-in-default, pursuant to Rule 3(12) of the Companies (Adjudication of Penalties) Rules, 2014, and the proviso of the said Rule and Rule 3(13) of the Companies (Adjudication of Penalties) Rules, 2014, read with General Circular No. 1/2020 dated 02.03.2020.

The order directed the company and its directors to pay the imposed penalties within 90 days, outlining the consequences of non-payment within the prescribed time limit, including potential prosecution under Section 454(8)(i) and (ii) of the Companies Act, 2013.

FAQs:



Q1. What was the violation committed by MA Kalyaneshwari Holdings Private Limited?

A1.MA Kalyaneshwari Holdings Private Limited violated Section 203(1) of the Companies Act, 2013, read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, by failing to appoint a whole-time Company Secretary from April 7, 2022, to April 16, 2023.

Q2.What legal provisions were invoked in this case?

A2.The Registrar of Companies, West Bengal, initiated adjudication proceedings against the company and its directors under Section 454 read with Rule 3(2) of the Companies (Adjudication of Penalties) Rules, 2014, as amended by the Companies (Adjudication of Penalties) Rules, 2019.

Q3.What was the penalty imposed on MA Kalyaneshwari Holdings Private Limited and its directors?

A3.The Adjudicating Officer imposed a total penalty of ₹21.96 lakh – ₹5,00,000 on the company and ₹4,24,000 on each of its four officers-in-default.

Q4. How was the penalty amount calculated? A4.The penalty amount was determined based on the provisions of Section 203(5) of the Companies Act, 2013, which prescribes a penalty of ₹5 lakh on the company and ₹50,000 on each officer in default, subject to a maximum of ₹5 lakh for each officer.

Q5.What are the implications of this case for companies and directors

A5.This case emphasizes the importance of strict compliance with corporate governance norms, particularly the mandatory appointment of key managerial personnel as required by the Companies Act, 2013, and the associated rules. Companies and their directors must exercise due diligence in ensuring adherence to statutory requirements to avoid penalties and legal repercussions.