In a recent legal ruling, the Ministry of Corporate Affairs (MCA) imposed a penalty of ₹19.92 Lakh on R.R. Lifesciences Pvt. Ltd. for failing to appoint a Company Secretary within the stipulated time frame. The penalty comes under the violation of Section 203 of the Companies Act, 2013.
Analysis: As per Section 203 of the Companies Act, 2013, every prescribed company is required to have whole-time key managerial personnel, including a company secretary. This particular case unfolded as R.R. Lifesciences Pvt. Ltd. was observed to have a vacant company secretary position for a prolonged period. Despite the company providing reasons related to the global pandemic’s impacts, the Adjudicating Officer remained unmoved, underlining that other companies had managed to comply with the statutory provisions during the same period.
R.R. Lifesciences and its directors were found in violation of Section 203 and were, thus, held liable for penalties under Section 203(5) of the Act. The ruling has affirmed the seriousness with which the MCA views compliance with the Companies Act, 2013.
Conclusion: This verdict by the MCA underscores the importance of timely appointment of key managerial personnel, specifically the role of a Company Secretary, in maintaining corporate governance. It also serves as a wake-up call for companies to ensure compliance with the statutory provisions of the Companies Act, 2013 to avoid such hefty penalties.
BEFORE THE ADJUDICATING OFFICER
REGISTRAR OF COMPANIES CUM OFFICIAL LIQUIDATOR, CHHATTISGARH
In the matter of Companies Act, 2013
And
In the matter of adjudication proceeding under Section 454
And
Sub-section (4) of Section 203 of the Companies Act, 2013.
And
In the matter of M/s. R.R. LIFESCIENCES PRIVATE LIMITED
(CIN: U85100CT2011PTCO22389)
Di No.455 to 459
1. Appointment of Adjudicating Officer: –
Ministry of Corporate Affairs vide its Gazette Notification No A-42011/112/2014-Ad.II dated 24.03.2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Company: –
(a) Whereas Company M/s. R.R. LIFESCIENCES PRIVATE LIMITED (U8510CT2011PTCO22389)[herein after known as Company] is a registered company with this office under the provisions of Companies Act, 1956/2013 having its registered address at M/s Hotel Sagar International Railway Station, Station Road, Durg, Durg, Chhattisgarh,491001, India
(b) Based on the company’s paid-up capital and turnover, it is observed that the company does not fall under the definition of a small company as per the provisions of section 2(85) of the Companies Act, 2013. Therefore, the provisions of imposing lesser penalty as per the section 446B of the Act shall not be applicable in this case.
3. Facts about the Case: –
(a) Whereas as per section 203(1) of Companies Act, 2013, every company belonging to such class or classes of companies as may be prescribed shall have whole-time key managerial personnel and as per Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every company other than a company covered under rule 8 which has a paid-up share capital of Rs. 5 crore or more shall have a whole-time company secretary and this threshold was further increased to Rs. 10 crore or more applicable in respect of financial years commencing on or after 01.04.2020.
(b) Whereas as per section 203(4) of Companies Act, 2013, if the office of any whole-time key managerial personnel 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.
(c) Whereas the paid-up capital of the company is Rs.50,00,00,000 and it is required to comply with the above-mentioned statutory provisions.
(d) Whereas the company has filed a copy of an application with this office u/s 13(4) of the Companies Act, 2013 r.w. rule 30 of Companies (Incorporation) Rules, 2014 regarding proposed shifting of the registered office of the company from state of Chhattisgarh to the State of Uttar Pradesh, which is received by this this office on 06.06.2023.
(e) Whereas during the examination of profile of the company, it is observed that the office of the company secretary of the company was vacant since 31.07.2020, as Mr. Yogesh Kumar Chauhan, had resigned w.e.f. 31.07.2020. The company ought to have appointed a company secretary on or before 31.01.2021. However, the company appointed Ms. Akanksha Handoo as the company secretary w.e.f. 25.04.2022 only i.e., with a delay of 448 days. Hence the company and its officers in default have violated the provisions of section 203 of the Companies Act, 2013 for delay as mentioned above and are liable to penalty under section 203(5) of Companies Act, 2013.
Show cause notice, reply and personal hearing: –
4. Therefore, for the above-mentioned violation this office has issued Show cause notice vide this office letter No. ROC-cum-OL-C.G./203/ R.R. LIFESCIENCES /2023/223 to 226 dated 02.06.2023 u/s 203(5) of the Companies Act, 2013.
5. Thereafter, company has submitted its reply dated 15.06.2023, duly signed by Shri Sharan Bihari Agrawal (director of the company), received in this office on 16.06.2023 to the afore-mentioned Show cause notice which is reproduced as under:
Kindly note that the during the month of March 2020 the coronavirus (covid-19) pandemic spread rapidly in india and across the world. The restrictions imposed by various governments across the world, the arrest the spread of the pandemic to protect human life, caused large scale disruption to businesses. The Indian government also has enforced a stringent lockdown of all economic and social activities with effect from 22nd march, 2020.
The company R.R.Lifesciences private limited (formerly known as Ramratan Real Estate Private Limited) was in the business of trading of goods to the companies belongs to IRCTC Catering services. The Indian Railways has completely stopped the catering services in the train and also in Railway station. The ban was imposed on catering services in the Train throughout the financial year 2021. This has resulted the completely shut down the business of the company during the entire financial year 2020-21.
The then company secretary was resigned from the company on 31st July, 2020. As the business of the company was completely shut down during the financial year 202021 and because of various restriction imposed by the Indian Government regarding the physical movements and one to one meetings, the Management of the Company was not able to appoint the company secretary during the financial year 2020-21.
However, some relaxation was given by the Indian Government and India Railway in the year 2021, but again the country was hit the second waves of Covid-19 which was more severe than the first wave of Corona Virus. Resulted the Government has again imposed the complete lock-down throughout the Country. The Government has unlocked the business in the phase manner but the catering the hospitality business continued to be adversely impacted by the pandemic till the mid of August, 2021. As a result, the revenue of the company has also sharply down to more than 90% before the Covid-19 era.
Once the business activities of the company gradually started, the management has searches for the right candidates for the post of Company Secretary and finally appointed Ms. Akanksha Handoo on 25th April, 2022 as Company Secretary of the Company.
6. Thereafter, for providing an opportunity of being heard, a “Notice of Inquiry” vide. letter No. ROC-cum-OL-C.G./203/ R.R. LIFESCIENCES /2023/405 to 408 dated 21.06.2023 was issued to the Company and its officers in default i.e., Shri Sharan Bihari Agrawal (herein after referred as Noticee-1), Shri Rahul Agrawal (herein after referred as Noticee-2) and Shri Manish Kumar who was holding office of Director during 01.10.2020 to 31.01.2023, (herein after referred as Noticee-3) and the date of hearing was fixed on 03rd July,2023, at 04:00 P.M. in the 0/o Registrar of the Companies, Chhattisgarh, Ist Floor, Late Shri Ashok Pingley Bhawan of Municipal Corporation Nehru Chowk, Bilaspur, Chhattisgarh-495001.
7. Shri Yogesh Kumar Chouhan authorized representative of the Company had appeared on the date so fixed and submitted the Board Resolution dated 24.06.2023 of the company authorizing him to represent company. However, none appeared for Noticee-1, Noticee -2 & Noticee -3. Further this office has asked the representative to submit his reply in writing before this office. Consequently, he has submitted his representation in writing on 03.07.2023 which is identical to the company’s reply dated 15.06.2023.
8. I have carefully perused reply submitted by the company and its authorised representative and found that the submissions made by them, are not tenable as other companies had complied the provisions of section 203 of the act and appointed the company secretary during the same period. Therefore, I am of the opinion that company and its directors viz. Shri Sharan Bihari Agrawal (Noticee-1), Shri Rahul Agrawal (Noticee-2) and Shri Manish Kumar (Noticee-3) have not complied with the provision of section 203 of the act and are liable for the penalty in accordance with section 203(5) of the Act.
9. Therefore, in view of the above said violation of non-appointment of a company secretary under the provisions of section 203(4) of the Companies Act, 2013 read with Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,and in exercise of the powers vested under Section 454(3) of the Companies Act 2013, I do hereby impose penalty in the following manner on the company and all the directors / key managerial personnel in default during the period of offence committed from 01.02.2021 to 24.04.2022.
Order
In view of the above, it is concluded that the Company and its officers in default are liable for penalty as prescribed under Section 203(5) of the Act for noncompliance of Section 203(4) of the Act for 448 days i.e. with effect from 01.02.2021 to 24.04.2022 in terms of Section 203(5) of the Companies Act, 2013.
Accordingly, I am inclined to impose penalty as prescribed under Section 203(5) of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:
Nature of Default |
Relevant section under the Companies Act,2013 |
Name of persons on whom penalty is imposed |
No. of
|
Penalty for 1st default |
Per day penalty for continuing default |
Total
|
Maximu m Penalty |
Final Penalty imposed |
NON APPOINTM EMENT OF COMPANY SECRETARY |
S.203(4) & S.203(5) |
ON COMPANY |
448 |
5,00,000 |
5,00,000 |
5,00,000 |
5,00,000 |
|
SHRI SHARAN BIHARI AGRAWAL (DIRECTOR) |
448 |
50,000 |
1,000 |
50,000+4,47,000=4,97,000 |
5,00,000 |
4,97,000 |
||
SHRI RAHUL AGRAWAL (DIRECTOR) |
448 |
50,000 |
1,000 |
50,000+4,47,000=4,97,000 |
5,00,000 |
4,97,000 |
||
SHRI MANISH KUMAR (DIRECTOR) |
448 |
50,000 |
1,000 |
50,000+4,47,000=4,97,000 |
5,00,000 |
4,97,000 |
I. I am of the opinion that penalty is commensurate with the aforesaid failure committed by the Noticees and penalty so imposed upon them shall be paid from their personal sources/ income.
II. The company and officers in default shall pay the said amount of penalty through online mode by using the website mca.gov.in (Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, Mumbai, payable at Mumbai, within 90 days of receipt of this order, and file form INC-28 attaching a copy of order and payment challans. The notice shall pay the said amount of penalty online by using website www.mca.gov.in (miscellaneous head) specifying the details of this order and the name of the noticee who is paying the penalty. It is further directed that penalty imposed shall be paid through the Ministry of Corporate Affairs portal only pursuant to Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019.
III. Appeal against this order may be filed in writing with the Hon’ble Regional Director (NWR), Ministry of Corporate Affairs, Ahmedabad within a period of sixty days from the date of receipt of this order, in Form ADJ (available on Ministry website mca.gov.in setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. (Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014).
IV. Your attention is also invited to Section 454(8)(i) and 454(8)(ii) of the Companies Act, 2013, which state that in case of non-payment of penalty amount ,the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees and officer in default shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty five thousand rupees but which may extend to one lakh rupees or both.
