In a recent adjudication order issued by the Registrar of Companies, Maharashtra, Pune, the Ministry of Corporate Affairs (MCA) has taken a stringent stance against non-compliance with secretarial standards as mandated under Section 118(10) of the Companies Act, 2013. This decision underscores the importance of adhering to the specified standards and procedures for conducting general and board meetings within the corporate governance framework.
Background and Legal Framework
The Companies Act, 2013, through Section 118(10), requires every company to observe secretarial standards specified by the Institute of Company Secretaries of India (ICSI) and approved by the Central Government. These standards, particularly Secretarial Standard-2 on General Meetings, outline the procedures and documentation practices that must be followed to ensure the legality and effectiveness of meetings.
The case in question involved Gagan Narang Sports Promotion Foundation, which was found to be in violation of these requirements. Specifically, the company failed to consecutively number the pages of minutes of board and general meetings, a breach that was identified during an inquiry by the adjudication officer.
Implications of the Order
This adjudication order brings to light several critical points for companies operating under Indian corporate law:
- Strict Enforcement: The MCA is keen on enforcing the observance of secretarial standards, signaling that deviations from statutory requirements will not be tolerated.
- Penalty Imposition: For violating Section 118(10), the company and its officers in default have been penalized, with the company facing a fine of ₹25,000 and each defaulting officer ₹5,000. This serves as a financial deterrent against non-compliance.
- Emphasis on Documentation: The case highlights the importance of meticulous documentation practices, especially the numbering of minutes, which is crucial for the transparency and accountability of corporate governance.
Steps to Ensure Compliance
Companies must take proactive steps to align with the secretarial standards to avoid penalties:
- Review and Train: Companies should regularly review their compliance with secretarial standards and train their officers and secretarial staff on these requirements to ensure understanding and implementation.
- Implement Robust Processes: Establishing robust processes for preparing, reviewing, and maintaining meeting documentation can help in avoiding oversights like non-consecutive numbering.
- Engage Professionals: Engaging company secretaries or legal professionals to audit and verify the compliance of meeting documentation with secretarial standards can provide an additional layer of assurance.
- Prompt Rectification: In cases of identified non-compliance, companies should act promptly to rectify the issues and prevent recurrence in future meetings.
Conclusion
The MCA’s recent adjudication order is a clear message to all companies about the seriousness of complying with secretarial standards under Section 118(10) of the Companies Act, 2013. It emphasizes not just the legal requirements but also the broader commitment to good corporate governance practices. Companies should view this as an opportunity to strengthen their compliance frameworks, thereby enhancing their governance and credibility in the corporate ecosystem. This case serves as a reminder and a call to action for companies to rigorously adhere to the prescribed standards and procedures, ensuring their corporate affairs are conducted in full compliance with the law.
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OFFICE OF THE
REGISTRAR OF COMPANIES
MAHARASHTRA, PUNE
MINISTRY OF CORPORATE AFFAIRS
GOVERNMENT OF INDIA
PCNTDA Green Building Block No. 1st & 2nd Floor,
Near Akurdi Railway Station, Akurdi, Pune- 411044
Phone No. 020-27651375/78
E-mail: [email protected]
Order No. RoCP/ADJ/order/Sec-118/22-23/B/2994 to 2998 Date: 20 FEB 2024
ADJUDICATION ORDER
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Adjudication Order of penalties in the matter of Gagan Narang Sports Promotion Foundation having
CIN- U92412PN2011NPL138832 under Section 454(3) read with section 118 read with
Secretarial standard-2 on General meetings of the Companies Act, 2013
Please Read:
- Companies (Adjudication Of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019 (G.S.R.131(E) ).
- Provisions of Sub-section (10) and (11) of Section 118 of the Companies Act, 2013.
- See also SS-2 (Secretarial standard on General meetings)
- Gazette Notification of Ministry of Corporate Affairs vide No. A-42011/112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015)
- General Circular No. 1/2020 dated 02.03.2020.
In respect of:
WHEREAS GAGAN NARANG SPORTS PROMOTION FOUNDATION having CIN U92412PN2011NPL138832 is a company governed by the provisions Act and registered with this office having its office at- B/ 1004, 10th Floor, Pristine Prolife Mumbai Bangalore Highway, Next Sayaji Hotel, Wakad Pune 411057, Pune, Maharashtra, India.
1. Appointment of Adjudicating Officer:
Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015) appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (herein after known as Act) r/w Rule 3(1) of Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act. The undersigned vide Companies (Amendment) Act, 2019 is entrusted to adjudicate penalties under section 118 of the Companies ACT, 2013.
2. Company:
GAGAN NARANG SPORTS PROMOTION FOUNDATION having CIN U92412PN2011NPL138832 (herein after referred as Company) is a registered company with this office under the provisions of section 8 of the Companies Act, 1956 having its registered office as per MCA21 Registry at address “at- B/ 1004, 10th Floor, Pristine Prolife Mumbai Bangalore Highway, Next Sayaji Hotel, Wakad Pune 411057, Pune, Maharashtra, India.”
3. Relevant provisions of the Companies Act, 2013:
Section 118(10) of the Act provides that “Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government;
Section 118(11) of the Act provides that If any default is made in complying with the provisions of this section in respect of any meeting, 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;
4. Facts about the Case:
a) In terms provisions of section 118(10) Companies Act, 2013, “Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government;
b) In terms of the provisions of section 118(11) of the Act, If any default is made in complying with the provisions of this section in respect of any meeting, 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;
c) An Inquiry was conducted by the JO and during the Inquiry, it was observed that pages of minutes of Board and General meetings are not consecutively numbered. Thus, the company and directors have violated provisions of section 118(1) of Companies Act, 2013 read with Secretarial Standards issued by ICSI and are liable for action under section 118(11) of the Act.
A reasonable opportunity was given to the company and its directors vide order under section 206(4) of the Companies Act, 2013 vide letter no. ROCP/INQ/2022/1263 to 1266 dated 30.09.2022. However, the reply submitted by the Company was not satisfactory and the competent authority has directed to adjudicate the matter.
d) Accordingly, the adjudication officer has issued adjudication notice vide ROCP/ADJ/ Sec-118/22-23/863-866 dated 04.07.2023 (herein after referred as Adjudication Notice) under Section 454(4) read with 118 of the Companies Act, 2013 read with Rule 3(2) Of Companies (Adjudication of Penalties), 2014 as amended in Amendment Rules, 2019, to the company and its officers in default for the violation of the provisions of the act as mentioned in para “a, b 86 c” above;
e) A reply to the Adjudication notice has been received on 21.07.2023 from the company and its Directors stating that ” It had happened inadvertently and the company will take care of mentioning the details in future.” Further, the company stated that The Company is a law-abiding entity and have complied with all the requisite compliances as per the provisions of the Companies Act, 1956 / Companies Act, 2013. On the basis of the above justifications, it is therefore, humbly prayed before the Hon’ble Registrar of Companies, Pune, not to initiate penal action under the provision of subsection (3) of Section 454 of the Companies Act, 2013.
f) Further, under section 454(4) of the Act read with Rule 3(2) of the Companies (Adjudication Of Penalties) Rules, 2014, Noticee(s) were given an opportunity to submit a reply by issuing an Adjudication Notice vide ROCP/ADJ/Sec-118/22-23/863-866 dated 04.07.2023 (herein after referred as Adjudication Notice) to why the penalty should not be imposed under the provisions of 118(11) of the Act against the Company and its officers in default for the above stated violations.
g) Hence, as the said violation has already been concluded by JO during the course of Inquiry :- no further hearing in physical is required to ascertain the violation of the said section.
Furthermore, the Noticee(s) are at liberty to file appeal against this order as per Para. 5.(e) of this order. Hence the Order-
5. ORDER:
a. The applicant company and its officers, who have defaulted the provisions of section 118(10) of the Act as it was observed during the Inquiry that the pages of minutes of Board and General meetings are not consecutively numbered.
b. In exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and after taking into account the factors mentioned herein above, I do hereby impose the penalty on the company and its officers in default pursuant to Rule 3(12) of Companies (Adjudication Of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication Of Penalties) Rules, 2014 r/w General Circular No. 1/2020 dated 02.03.2020; as per table below for violation of section 118(10) of the Act:-
| Sl. No. | Penalty imposed on company/ director(s) | Penalty Impose (In Rs) |
| 1 | Gagan Narang Sports Promotion Foundation |
₹25,000/- |
| 2 | Gagan Narang | ₹5000/- |
| 3 | Pawan Kumar Singh | ₹5000/- |
| 4 | Nana Gajanan Patekar | ₹5000/ – |
c) I am of the opinion that penalty so imposed is commensurate with the aforesaid failure committed by the notice(s).
d) The Noticee(s)/applicant(s) shall pay the penalty so imposed through Ministry of Corporate Affairs portal only as per rule 3(14) of Companies (Adjudication of Penalties) Rules, 2014.
e) Appeal against this order may be filed under section 454(5) of the Act, in writing with the Regional Director (Western Region), Ministry of Corporate Affairs 100, Everest, 5th Floor, Netaji Subhash Road, Marine Drive, Mumbai-400002, within a period of sixty days from the date of receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454 of the Act read with Companies (Adjudication of Penalties) Rules, 2014 as emended by Companies (Adjudication of Penalties) Amendment Rules, 2019.
f) Your attention is also invited to section 454(8)(ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order in terms of the provisions of section 454(8)(i) of the Act.
g) In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to GAGAN NARANG SPORTS PROMOTION FOUNDATION and all directors/officers in default mentioned herein above and also to Office of the Regional Director (Western Region) and Ministry of Corporate Affairs at New Delhi.
(Mangesh Jadhav, ICLS)
Adjudicating Officer
Registrar of Companies
Maharashtra, Pune
