Big Question – MGT 9 or MGT 7 or Both in Annual Report?

Gaurav Kumar Pandit

ACC Ltd has provided link of MGT 7 in their Annual Report. Infosys Ltd and Ambuja Cements Ltd has given MGT 9 (Extract of Annual Return) in Annual Report. TCS has given MGT 9 (Extract of Annual Return) in Annual Report and also given the link of website of the same in its Annual Report. CRISIL Ltd has done both i.e. MGT 9 (Extract of Annual Return) in Annual Report and link of website on which Complete Annual Return is available.

These are the days when Companies are in the process of preparing and finalising their Annual Report for the financial year 2018-19. While finalising Annual Report, a question come across in the mind that whether now Companies are required to provide link of its website where MGT 7 (Annual Return) of the company is uploaded instead of annexing MGT 9 (Extract of Annual Report) with Board’s Report. Or, companies are required to annex MGT 9 with Board’s Report and provide link of website where MGT 7 (complete Annual Return) is uploaded.

After reading above, one more question will arise in the minds of the reader that what is the reason behind such confusion. The answer is, certain provisions the Companies (Amendment) Act, 2017 which are yet to be notified by Ministry of the Corporate Affairs (MCA) and the rule 12 of the Companies (Management and Administration) Rules, 2014 which are still in existence even when the powers to make rules pertaining to such specific provisions have been deleted but not made effective till date.

So, let’s identify the confusion in details and critically analyse the applicable provisions of the Companies Act, 2013.

The Companies (Amendment) Act, 2017 (hereinafter referred as “Amendment Act”) has been passed by the parliament, received the assent of the President on the 3rd January, 2018, and published in the Gazette of India on the same day. As per the section 1 of the Amendment Act, the provisions of Amendment Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of Amendment Act.

Section 92(3) of the Companies Act, 2013 (hereinafter also referred as “Principle Act”) has been amended by section 23(ii) of the Amendment Act. By virtue of said amendment in section 92(3) of the Principle Act, the words “An extract of the annual return in such form as may be prescribed shall form part of the Board’s report” has been replaced with “Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board’s report”. It is pertinent to note that various provisions of the Amendment Act has been made effective by virtue of section 1 of the Amendment Act by the Central Government (MCA) but provision of aforesaid section 23(ii) of the Amendment Act has not been made effective till date. The reason for not making the provision of amended section 92(3) is not disclosed by MCA but it could be that MCA is planning to amend the MGT – 7 or MCA is forget to notify the said provisions, as the similar amendment made in section 134(3)(a) of the Principal Act has made effective with effect from July 31, 2018.

Although, the reference regarding “Extract of Annual Report” is no more in the Companies Act, 2013 but, rule 12 of the Companies (Management and Administration) Rules, 2014 pertaining to Extract of Annual Return is still in existence and effective. It is pertinent to note that the power to make rules given by the parliament to the Central Government in section 92(3) of the Companies Act, 2013 before amendment viz “An extract of the annual return in such form as may be prescribed shall form part of the Board’s report” is no more in the Books of Law.

And, now by considering the principles and precedents of Administrative Laws, the question arise what is the validity of the subordinate law i.e. rule 12 of the Companies (Management and Administration) Rules, 2014 when no power is in existence in the Principal Law for the Central Government to make Rules, although such amended provisions of section 92(3) are not made effective till now.

Further, Section 134(3)(a) of the Principal Act has been amended by the Amendment act by section 36(b)(i) of the Amendment Act. By virtue of said amendment in section 134(3)(a), the words “the extract of the annual return as provided under sub-section (3) of section 92” has been replaced with “the web address, if any, where annual return referred to in sub-section (3) of section 92”. The said amendment has been made effective with effect from July 31, 2018.

Some people will say that as amended section 92(3) has not been made effective hence applicability of provisions of section 134(3)(a) can be debated. But, it is pertinent to note that section 134(3)(a) emphasis on the word “Annual Return” as referred in section 92(3) and section 92(3) requires that company shall upload Annual Return on the website of the Company and provide link in Board’s Report. The provisions relating to Annual Return is given in the other sub section of section 92. Therefore, if can be concluded that for enforceability of section 134(3)(a), there is no requirement to have enforceability of section 93(3).

Now, the question arise how should we deal with the situation and what other Big Corporate are doing. If I talk about what other Corporate are practically doing then the answer will be that some corporate like ACC Ltd has provided link of MGT 7 in their Annual Report. Infosys Ltd and Ambuja Cements Ltd has given MGT 9 (Extract of Annual Return) in Annual Report. TCS has given MGT 9 (Extract of Annual Return) in Annual Report and also given the link of website of the same in its Annual Report. CRISIL Ltd has done both i.e. MGT 9 (Extract of Annual Return) in Annual Report and link of website on which Complete Annual Return is available.

The content of this article is intended to provide a general guide to the subject matter. In case of any clarification, discussion, suggestion etc, Author may be contacted at [email protected]