Penalized Rs. 25 Lakh for Not Appointing Whole Time Company Secretary

The Indian corporate landscape is governed by a comprehensive legal framework that emphasizes transparency, accountability, and adherence to statutory requirements. At the forefront of this framework is the Companies Act, 2013, which outlines stringent guidelines for corporate governance and the appointment of key managerial personnel.

In a recent adjudication order, the Ministry of Corporate Affairs (MCA) has taken decisive action against Delta International Ltd., a listed company incorporated on November 9, 1977, with its registered office located at 4, Council House Street, Kolkata. The company was found in violation of Section 203(1) of the Companies Act, 2013, read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, for failing to appoint a whole-time Company Secretary from January 17, 2015, to September 9, 2022.

The adjudication process commenced with the issuance of an adjudication notice under Section 454(4) read with Section 161 of the Companies Act, 2013, and Rule 3(2) of the Companies (Adjudication of Penalties) Rules, 2014, as amended in the Amendment Rules, 2019. The company and its officers-in-default were given ample opportunities to respond and attend scheduled hearings, but they failed to provide an adequate justification for the non-imposition of penalties.

During the final hearing on September 15, 2023, Shri Madan Kumar Maroti, a Chartered Accountant representing the company, acknowledged the appointment of a Company Secretary on September 10, 2022, covering the period of vacancy from January 17, 2015, to September 9, 2022. The company cited the challenging circumstances during the COVID-19 pandemic as a reason for the delay in compliance.

However, the adjudicating officer, A.K. Sethi, found the company and its officers-in-default liable for the violation under Section 203(5) of the Companies Act, 2013. In the order dated November 8, 2023, a substantial penalty of Rs. 25 lakh was imposed, comprising Rs. 5 lakh on the company and Rs. 5 lakh on each of its four officers-in-default – Bhagawan Yadav, Dipak Kejriwal, Tapas Kumar Chowdhury, and Laldev Kumar Singh.

The penalty must be paid within 90 days from the receipt of the order through e-payment on the Ministry's website. Failure to comply within the specified time may result in further consequences as per Section 454(8)(i) and (ii) of the Companies Act, 2013.

FAQs:

Q1. What was the primary violation committed by Delta International Ltd. and its officers?

A1.Delta International Ltd. and its officers were found in violation of Section 203(1) of the Companies Act, 2013, read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, for failing to appoint a whole-time Company Secretary from January 17, 2015, to September 9, 2022.

Q2. What is the significance of the adjudication order?

A2.The adjudication order underscores the Ministry of Corporate Affairs' commitment to ensuring compliance with statutory provisions, even during challenging times like the COVID-19 pandemic. It serves as a reminder of the importance of adhering to corporate governance standards and the consequences of non-compliance.

Q3.What were the specific sections of the Companies Act, 2013, violated in this case?

A3.The company and its officers violated Section 203(1) of the Companies Act, 2013, read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and were penalized under Section 203(5) of the Act. Q4. What is the penalty imposed on Delta International Ltd. and its officers?

A4.The adjudication officer imposed a total penalty of Rs. 25 lakh, with Rs. 5 lakh on the company and Rs. 5 lakh on each of its four officers-in-default – Bhagawan Yadav, Dipak Kejriwal, Tapas Kumar Chowdhury, and Laldev Kumar Singh.

Q5. What are the consequences of non-payment of the penalty?

A5.The company and its officers have been given a 90-day window to pay the penalty through e-payment on the Ministry of Corporate Affairs website. Failure to pay the penalty within the prescribed time limit may result in consequences outlined in Section 454(8)(i) & (ii) of the Companies Act, 2013.

Q6.What is the appeal process available to the company and its officer

A6.The company and its officers can file a written appeal with the Regional Director (ER), Ministry of Corporate Affairs, Kolkata, within 60 days of receiving the order, setting forth the grounds of appeal and accompanied by a certified copy of the adjudication order.