Company penalised for not page-numbering the minutes books

In a recent adjudication order, the Registrar of Companies, Maharashtra, Pune, has imposed penalties on a company and its officers for violating the provisions of Section 118(10) of the Companies Act, 2013. This section requires every company to observe the secretarial standards specified by the Institute of Company Secretaries of India (ICSI) and approved by the Central Government.

The Facts:

The case involved Gagan Narang Sports Promotion Foundation, a company registered under Section 8 of the Companies Act, 1956. During an inquiry, it was found that the company had failed to consecutively number the pages of the minutes of its board and general meetings, a breach of the Secretarial Standard-2 on General Meetings.

The Proceedings:

The Ministry of Corporate Affairs (MCA) took a stringent stance against this non-compliance, emphasizing the importance of adhering to the prescribed standards and procedures for conducting corporate meetings. The adjudication officer, appointed under Section 454(1) of the Companies Act, 2013, and the Companies (Adjudication of Penalties) Rules, 2014, was entrusted with adjudicating penalties under Section 118 of the Act.

After issuing an adjudication notice and considering the company's reply, the adjudicating officer imposed the following penalties:

1. Gagan Narang Sports Promotion Foundation: ₹25,000

2. Gagan Narang (Director): ₹5,000

3. Pawan Kumar Singh (Director): ₹5,000

4. Nana Gajanan Patekar (Director): ₹5,000

The penalties were imposed in accordance with Section 118(11) of the Companies Act, 2013, which states that if any default is made in complying with the provisions of this section, the company shall be liable to a penalty of twenty-five thousand rupees, and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

The adjudication order highlights the importance of meticulous documentation practices, such as the consecutive numbering of minutes, which is crucial for transparency and accountability in corporate governance.

FAQs:

Q1.What are the implications of this adjudication order for companies

A1.This order serves as a clear message from the Ministry of Corporate Affairs about the seriousness of complying with secretarial standards under Section 118(10) of the Companies Act, 2013. It emphasizes the broader commitment to good corporate governance practices and the legal consequences of non-compliance.

Q2.Why is the consecutive numbering of meeting minutes important?

A2.The consecutive numbering of meeting minutes is crucial for maintaining transparency and accountability in corporate governance. It ensures that the minutes are complete, organized, and easily traceable, preventing any potential tampering or manipulation.

Q3. What steps should companies take to ensure compliance with secretarial standards?

A3.Companies should regularly review their compliance with secretarial standards, train their officers and secretarial staff on these requirements, implement robust processes for preparing and maintaining meeting documentation, and engage professionals to audit and verify compliance. Prompt rectification of any identified non-compliance is also recommended.

Q4.What are the consequences of non-payment of the imposed penalty

A4.Section 454(8)(ii) of the Companies Act, 2013, outlines the consequences of non-payment of the penalty within the prescribed time limit of 90 days from the date of receipt of the order. Companies and officers in default should ensure timely payment to avoid further legal implications.

Q5.Can the adjudication order be appealed?

A5.Yes, the adjudication order can be appealed under Section 454(5) of the Companies Act, 2013. The appeal must be filed in writing with the Regional Director (Western Region), Ministry of Corporate Affairs, within 60 days from the date of receipt of the order, using Form ADJ and setting forth the grounds of appeal.