The Ministry of Corporate Affairs (MCA) in India plays a pivotal role in ensuring compliance with the Companies Act, 2013. Recently, the Office of the Registrar of Companies (RoC), Goa, Daman, and Diu cum Official Liquidator issued an adjudication order concerning CMR Surgical Private Limited. This article provides a detailed analysis of the order, the violations identified, and the subsequent penalties imposed on the company and its officers.
Background
CMR Surgical Private Limited, a subsidiary of a foreign company, was found to have violated multiple provisions of the Companies Act, 2013. The violations were primarily related to the composition of the Board of Directors and the frequency of Board meetings. The adjudication order (No. ROCGDD/AO/149&173/2024/01) dated 12th April 2024 outlines the specifics of these infractions and the penalties levied.
Violations and Penalties
1. Violation of Section 149(1)(a): CMR Surgical Private Limited faced penalties for multiple violations of the Companies Act, 2013. Firstly, the company breached Section 149(1)(a) by operating with only one director between February 8th and March 21st, 2023, delaying the appointment of a second director by 41 days. Consequently, a penalty totaling INR 210,000 was imposed, with INR 70,000 each on the company, Mr. Simon Christopher Day (Director), and Mr. Padmakar Pravin Degwekar (Company Secretary).
2. Violation of Section 149(3): Secondly, CMR Surgical Private Limited violated Section 149(3) by not appointing a director residing in India for at least 182 days during the financial year. This failure led to a delay of 48 days in appointing Mr. Padmakar Pravin Degwekar. As a result, a penalty of INR 274,000 was imposed, distributed among the company, Mr. Simon Christopher Day, Mr. Padmakar Pravin Degwekar, and Ms. Rebekah Ivy Ley (Additional Director).
3. Violation of Section 173: Lastly, the company contravened Section 173 by failing to hold board meetings within the prescribed timeframe, exceeding the 120-day interval by 32 days. For this lapse, a penalty totaling INR 126,000 was imposed, with INR 42,000 each on the company, Mr. Simon Christopher Day, and Mr. Padmakar Pravin Degwekar. These penalties serve as a regulatory measure to enforce compliance with corporate governance standards and emphasize the accountability of company officers for maintaining statutory requirements.
Legal Framework
The legal framework governing corporate governance in India, particularly regarding directorship and board meetings, is primarily outlined in the Companies Act, 2013. Section 149(1)(a) of the Act mandates that every company must have a Board of Directors consisting of individuals. The section specifies the minimum number of directors required based on the type of company, such as a public company, a private company, or a One Person Company (OPC). For instance, a private company like CMR Surgical Private Limited must have a minimum of two directors.
Section 149(3) of the Companies Act, 2013, further emphasizes the importance of having directors who are residents of India. It stipulates that every company must have at least one director who has stayed in India for a total period of not less than 182 days during the financial year. This provision ensures that there is adequate oversight and decision-making capability within the company by individuals familiar with the local regulatory environment and business landscape.
Regarding the conduct of board meetings, Section 173 of the Act lays down specific requirements. It mandates that every company must hold the first meeting of its Board of Directors within thirty days of its incorporation. Subsequently, the company must conduct a minimum of four board meetings every year. Importantly, Section 173 specifies that there should not be more than 120 days between two consecutive board meetings. This provision ensures regular communication, decision-making, and oversight by the board, contributing to effective corporate governance.
Non-compliance with the provisions outlined in Sections 149(1)(a), 149(3), and 173 can lead to penalties as defined in Section 172 and Section 450 of the Companies Act, 2013. Section 172 specifies penalties for failure to comply with Section 149(1)(a) and Section 149(3). It imposes a penalty of INR 50,000 on the company and its officers in default, with further penalties for continuing failures. Additionally, Section 450 outlines penalties for contraventions of any provision of the Act or its rules. It imposes a penalty of INR 10,000 on the company and its officers in default, with further penalties for continuing contraventions.
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Government of India
Ministry of Corporate Affairs
Office of the Registrar of Companies
Goa, Daman and Diu cum Official Liquidator
High Court of Bombay at Goa
Corporate Bhawan, EDC Complex
Email: roc.goa@mca.gov.in
Phone: 0832-2438618
Order No. ROCGDD/Penalty Order/CMR/2024/31 Dated: 23 APR 2024
To,
| 1. CMR Surgical Private Limited CIN:U51909GA2019FTC013829 Navel car Pride, Ground Floor, Kadamba Chimel 403006, Goa. |
2. Shri Padmakar Pravin Diwakar, CS 0 |
| 3. Shri Simon Christopher Day | 4. Ms. Rebekah Ivy Ley |
Sub: – Forwarding Order of Adjudication of Penalty for violation of section 149(1)(a), 149(3) & 173 of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014 in the matter of CMR Surgical Private Limited – U51909GA2019FTC013829 reg.,
Sir/ Madam(s),
With reference to the above subject, kindly find enclosed herewith the copy of the Order vide no ROCGDD/AO/149&173/2024/01 dated 12.04.2024 passed by this office for compliance.
(Jayant Arya)
Registrar of Companies
Goa, Daman & Diu
End.: As above.
Copy to:-
Regional Director (WR),
Ministry of Corporate Affairs,
100, Marine Drive, Everest Building,
Mumbai-400002-(For Information).
BEFORE THE ADJUDICATING OFFICER
REGISTRAR OF COMPANIES, GOA, DAMAN & DIU
(ADJUDICATION ORDER NO: ROCGDD/A0/149&173/2024/01)
UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH
THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014.
In respect of:
CMR SURGICAL PRIVATE LIMITED
CIN: U51909GA2019FTC013829
Appointment of Adjudicating Officer:-
1. The Ministry of Corporate Affairs vide its gazette notification no. SO 831(E) dated 24.03.2015 appointed undersigned as Adjudicating Officer [hereinafter referred to as ‘the A.0.1 in exercise of the powers conferred by Section 454 of the Companies Act, 2013 [herein after known as the Act] read with the Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
Company:-
2. CMR Surgical Private Limited [herein after known as the Company] CIN: U51909GA2019FTC013829 is a registered company with the office of the Registrar of Companies, Goa, Daman and Diu and having its registered address as Navelcar Pride, Ground Floor, Kadamba Plateau, NH-4A, Chimbel, North Goa, Goa, 403006 as per records maintained by this office in online registry.
Facts of the case:-
3. The above-mentioned company has filed Suo moto application for adjudication of penalties thorough GNL-1 vide SRN F69903573 for offence under section 454 of the Companies Act,2013 for violation of section 149(1)(a), 149(3) and 173 of the Companies Act, 2013. As per the said application, it is observed that the company has failed to comply with the provisions of Section 149(1)(a), 149(3) and 173 of the Companies Act, 2013. Details of the default committed by the company is as under: –
i. Violation of section 149(1)(a) of the Companies Act, 2013: The company had only one director Mr. Simon Christopher Day during the period from 08.02.2023 till 21.03.2023 (from date of cessation of Mr. Abhishek Padmanabhan till appointment of Ms. Rebekah Ivy Ley), which resulted in delay of 41 days in appointing Ms. Rebekah Ivy Ley. Therefore, the company, Mr. Simon Christoper Day (Director) and Mr. Padmakar Pravin Degwekar(CS) has committed default in complying with provisions of section 149(1)(a) of the Companies Act, 2013 and are liable for penal action under section 172 of the Companies Act, 2013.
ii. Section 149(3) of the Companies Act, 2013: The company had only one director Mr. Simon Christopher Day during the period from 08.02.2023 till 28.03.2023 (from date of cessation of Mr. Abhishek Padmanabhan till appointment of Mr. Padmakar Pravin Degwekar) who was non-resident of India which resulted in delay of 48 days in appointing Mr. Padmakar Pravin Degwekar, Director. Therefore, the company, Mr. Simon Christoper Day, Ms. Ms. Rebekah Ivy Ley and Mr. Padmakar Pravin Degwekar(CS) have committed default in complying with provisions of section 149(3) of the Companies Act, 2013 and are liable for penal action under section 172 of the Companies Act, 2013.
iii. Section 173 of the Companies Act, 2013: The company had conducted board meeting on 21.03.2023 which had exceeded the prescribed time frame of 120 days between the two consecutive Board meetings (i.e., 19.10.2022 to 21.03.2023) which resulted in delay of 152 days in complying with provisions of section 173(1) of the Companies Act, 2013. Therefore, the company, Mr. Simon Christopher Day and Mr. Padmakar Pravin Degwekar(CS) are liable for penal action under section 450 of the Companies Act, 2013.
Provisions of the Companies Act, 2013: –
4. (i) Sub-section (1)(a) of Section 149 of the Act provides that every company shall have a Board of Directors consisting of individual as directors and shall have (a) a minimum number of three directors in the case of public company, two directors in the case of a private company, and one director in the case of a One Person Company.
(i) Sub-section (3) of Section 149 of the Act provides that every company shall have atleast one director who stays in India for a total period of not less than one hundred and eighty-two days during the financial year.
(ii) Section 172 of the Act provides that if any company fails to comply the provisions of section 149(1)(a) and 149(3) of the Act, such company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default.
5. Section 173 of the Act provides that every company shall hold the first meeting of the Board of Director within thirty days of the date of its incorporation and there-after hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board.
Section 450 of the Act provides that if a company or any other person contravenes any of the provisions of the Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in the Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the company and fifty thousand rupees in case of an officer who is in default or any other person.
ORDER
6. The said company is a subsidiary of a foreign company. Therefore, the provisions of Section 446B of the Companies Act, 2013 is not applicable in the said matter.
7. Notice under section 454 of the Companies Act, 2013 was issued to the company, its directors and Company Secretary vide ROCGDD/ ADJ/149-173/ 2023/ 702-704 and ROCGDD/ ADJ/149-173/913 dated 05.01.2024 & 06.03.2024, the reply dated 05.02.2024 & 19.03.2024 respectively, has been received by this office stating the same facts and submissions as made in the Adjudication Application filed by the company. After taking into account the factors above and as the Directors of the company have accepted the violations committed by them, the A.O. do hereby impose penalty on Company and its officer in default as per table below. The A.O. is of the opinion that penalty is commensurate with the aforesaid default committed by the Notice’s.
a. Violation of Section 149(1)(a) of the Companies Act, 2013:
| No of Days of Default * |
Penalty imposed on Company/Director |
First Default (in Rs) |
Default Continues (in Rs) |
Total penalty (in Rs) |
| 40 days | On Company | Rs.50,000/- | Rs.500 x 40 = Rs.20,000/- | Rs.70,000/- |
| Mr. Simon Christopher Day (resigned on 03.07.2023) |
Rs.50,000/- | Rs.500 x 40 = Rs.20,000/- | Rs.70,000/- | |
| Mr.Padmakar Degwekar, CS |
Rs.50,000/- | Rs.500 x 40 = Rs.20,000/- | Rs.70,000/- | |
| Total | Rs. 2,10,000/- | |||
*No. of days have been calculated from 08.02.2023 to 20.03.2023.
b. Violation of Section 149(3) of the Companies Act, 2013:
| No of Days of Default |
Penalty imposed on Company/Director | First Default (in Rs) | Default Continues (in Rs) |
Total (in Rs) |
| 47 days* | On Company | Rs.50,000/- | Rs.500 x 47 = Rs.23,500/- | Rs.73,500/- |
| Mr. Simon Christopher Day (resigned on 03.07.2023) |
Rs.50,000/- | Rs.500 x 47 = Rs.23,500/- | Rs.73,500/- | |
| Mr. Padmakar Degwekar, CS | Rs.50,000/- | Rs.500 x 47 = Rs.23,500/- | Rs.73,500/- | |
| 07 days# | Ms. Rebekah Ivy Ley, Additional Director (appointed on 21.03.2023) | Rs.50,000/- | Rs.500 x 7 = Rs.3,500/- | Rs.53,500/- |
| Total | Rs.2,74,000/- | |||
*No. of days have been calculated from 08.02.2023 to 27.03.2023.
#No. of days have been calculated from 21.03.2023 to 27.03.2023.
c. For violation of Section 173 of the Companies Act, 2013:
| No of Days of Default * |
Penalty imposed on Company/Director |
First Default (in Rs) | Default Continues (in Rs) |
Total (in Rs) |
| 32* days | On Company | Rs.10,000/- | Rs.1000 x 32 = Rs.32,000/- | Rs.42,000/- |
| Mr. Simon Christopher Day | Rs.10,000/- | Rs.1000 x 32 = Rs.32,000/- | Rs.42,000/- | |
| Mr. Padmakar Degwekar, CS |
Rs.10,000/- | Rs.1000 x 32 = Rs.32,000/- | Rs.42,000/- | |
| Total | Rs.1,26,000/- | |||
*: 152 days – 120 days = 32 days
7. The Penalty imposed hereinabove shall be paid through the Ministry of Corporate Affairs portal only within 90 days of receipt of this order and intimate this office with proof of penalty paid.
8. Appeal if any against this order may be filed in writing with the Regional Director (WR), Ministry of Corporate Affairs, 100, Marine Drive, Everest Building, 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 Companies Act, 2013 read with the Companies (Adjudicating of Penalties) Rules, 2014].
9. Your attention is also invited to Section 454(8) of the Act regarding consequences of non-payment of penalty.
10. In terms of the provisions of sub-rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, copy of this order is being sent to the company and its directors and also to Office of Regional Director(WR), Ministry of Corporate Affairs, 100, Marine Drive, Everest Building, Mumbai-400002.
Place: – Panaji, Goa.
Date:- 12/04/2024
Registrar of Companies Goa, Daman & Diu
&
Adjudication Officer
