Fruitful Buildcon Private Limited faced significant penalties for failing to appoint a Company Secretary as required under Section 203(1) of the Companies Act, 2013. This provision mandates the appointment of key managerial personnel, including a Company Secretary, in companies with a paid-up share capital of ₹10 crore or more.
Legal Provisions
According to Section 203(1) of the Companies Act, 2013, every company of the prescribed class must appoint certain key managerial personnel, including a Company Secretary. Additionally, Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 stipulates that private companies with a paid-up share capital of ₹10 crore or more must have a whole-time Company Secretary.
The Act also requires that if the office of a whole-time key managerial personnel becomes vacant, it must be filled within six months. Failing to comply with these provisions attracts a penalty of ₹5 lakh on the company, and ₹50,000 plus ₹1,000 per day of default on the directors and key managerial personnel.
Case Summary
Fruitful Buildcon Private Limited did not have a Company Secretary from February 29, 2020, to November 27, 2023, a period of 1,186 days. Despite being legally obligated to fill the vacancy by August 28, 2020, the company failed to do so until November 28, 2023. The Registrar of Companies (ROC) issued multiple notices to the company and its directors, seeking an explanation for the delay. However, the responses provided were deemed insufficient, and the ROC concluded that the company had deliberately violated the law.
Penalties Imposed
After a detailed examination, the Registrar of Companies imposed penalties totaling ₹48.52 lakh on the company and its directors. The breakdown of the penalties is as follows:
- Fruitful Buildcon Private Ltd.: Rs. 20,00,000
- Shri Jugal Kishore Garg: Rs. 11,57,000
- Ms. Rajkumari Agarwal: Rs. 11,57,000
- Shri Ritesh Agarwal: Rs. 11,57,000
- Ms. Rashi Agarwal: Rs. 8,81,000
These penalties reflect the severity of the violation and serve as a reminder of the importance of complying with corporate governance requirements.
Conclusion
The case highlights the stringent regulatory framework governing corporate compliance in India. Companies must ensure that key managerial positions are filled promptly to avoid legal repercussions. The substantial penalty imposed on Fruitful Buildcon Private Limited underscores the financial risks of non-compliance with the Companies Act, 2013.
Government of India
Ministry of Corporate Affairs
Office of Registrar of Companies cum Official Liquidator,
attached to Rajasthan High Court, Jaipur Bench at Jaipur
Corporate Bhawan, G/6-7, Residency Area, Civil Lines, Jaipur-302001
Order for Penalty under Section 454 of the Companies Act, 2013 read with the Companies (Adjudication of Penalties) Rules, 2014 and the Companies (Adjudication of Penalties) Amendment Rules, 2015 for the Violation of Section 203(1) of the Companies Act, 2013 read with Rule 8(A) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: –
01. Fruitful Buildcon Private Limited, Company
“Govind House” Plot No. 8-A, Kanota Bagh, Behind RBI, Takteshai Road, .ILN Marg, Rajasthan- 302004.
02. Shri Jugal Kishore Garg, Director
03. Rajkumari Agarwal, Director
04. Shri Ritesh Agarwal, Director
05. Rashi Agarwal, Director
…….. Respondents
Date of hearing 03.06,2024
Present: –
01. Shri Ruvit Kumar, ROC-Cum-OL, Rajasthan, Jaipur
02. Shri Raunak Agrawal, AROC-cum-AOL, Rajasthan, Jaipur
ADJUDICATION ORDER
1. Appointment of Adjudicating Officer: –
WHERAS the Ministry of Corporate Affairs vide its Gazette Notification No. SO 831 (E) dated 24.03.2015 appointed the Registrar of Companies/undersigned as Adjudicating
Officer in exercise of the Power conferred by Section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules, 2014. The Registrar of
Companies vide the Companies (Amendment) Act, 2019 is entrusted with power to adjudicate penalty as provided under Section 203(5) of the Companies Act, 2013.
2. Respondent Company:
WHEREAS Fruitful Buildcon Private Limited (ON U70100RJ2001PTC016927) is registered with this office under the provisions of Companies Act, 1956 and having registered office at “Govindi House” Plot No. 8-A, Kanota Bagh, Behind RBI, Takteshai Road, JLN Marg, Rajasthan- 302004.
3. Relevant provisions of the Companies Act, 2013: –
WHEREAS as per the provision of section 203 (1) of the Companies Act, 2013 “every company belonging to such class or classes of companies as may be prescribed shall have following whole-time key managerial personnel: –
I. Managing Director, or Chief Executive Officer or Manager and in their absence, a Whole-Time Director
II. Company Secretary; and
III. Chief Financial Officer”
WHEREAS as per the provision of Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 “every private company which has a paid-up share capital of ten crore rupees or more shall have whole-time company secretary.”
WHEREAS as per the provision of section 203(4) of the 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.”
WHEREAS as per provision of section 203 (5) of the Companies Act, 2013 “If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.”
4. Facts of the Case:
> That it has been observed that the post of Company Secretary in the Respondent Company was vacated from 29.02.2020 to 27.11.2023. The same was required to fill up by the Respondent Company on or before 28.08.2020 pursuant to section 203(4) of the Companies Act, 2013. However, the Respondent Company filled up the same on 28.11.2023. Hence, this office is in view that the Respondent Company has violated the provision of section 203(1) of the Companies Act, 2013 read with Rule 8A of the Companies for the period from 29.08.2020 to 27.11.2023.
> Therefore, this office has issued Show Cause Notice dated 14.12.2023 to the Respondent Company and its officer’s in default for the violation of section 203(1) of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 for the period of 29.08.2020 to 27.11.2023.
In this regard, the Respondent Company has furnished its reply vide letter dated 28.12.2023 stating that after the resignation of the Company Secretary, the company took many interviews but due to other external factors and market conditions, the company couldn’t find the suitable candidate.
The reply furnished by the Respondent Company has been examined by this office and observed that the Respondent Company has furnished its reply without any cogent reasons and no documentary evidence in lieu of their submission was furnished. Hence, this office issued an Adjudication Notice dated 17.01.2024 to the Respondent Company and its officer’s in default and fixed a date of hearing in the matter on 06.02.2024.
> Further, at the time of hearing, Ms. Khushboo Jain, Practicing Company Secretary and authorized representative of the Respondents appeared in the matter. Ms. Jain has also furnished its submission vide letter dated 05.02.2024 stating that due to COVID-19 pandemic, the Respondent Company was not able to appoint Company Secretary.
> However, during the course of examination of reply furnished by Ms. Jain, it was observed that the Respondent Company has made default in complying with the provision of section 203(1) of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 during the previous years also, which is summarized as under:-
| Date of vacation of the post of Company Secretary | Date by which the post of the Company Secretary was required to fill up | Date on which the post of the Company Secretary was filled up | Defaulting period (In days) |
| 29.02.2016 | 28.08.2016 | 30.08.2017 | 366 |
| 31.10.2017 | 30.04.2018 | 01.08.2018 | 92 |
| 30.09.2018 | 30.03.2019 | 20.05.2019 | 49 |
| 28.02.2020 | 28.08.2020 | 28.11.2023 | 1186 |
> In view of the above, this office again issued a Show Cause Notice dated 19.02.2024 to the Respondent Company and its officer’s in default. In this regard, the Respondent Company has furnished its reply vide letter dated 01.03.2024 stating that the above default was caused without any malicious or malafide intention. The Respondent Company has further submitted that after the resignation of the Company Secretary, the Respondent Company tried multiple times to appoint a Company Secretary, but the Respondent Company could not find a suitable candidate on time.
> The Reply furnished by the Respondent Company has been examined and observed that no cogent reasons were given for non-compliance of the provision of section 203(1) of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Hence, it appears that the Respondent Company has deliberately flouted the provisions of the law.
Therefore, this office has issued an Adjudication Notice 15.03.2024 followed vide e-mail dated 01.04.2024 to the Respondent Company and its officer’s in default and fixed a date of hearing in the matter on 09.04.2024.
> Further, the Respondent Company vide e-mail dated 09.04.2023 requested the Competent Authority to adjourn the aforesaid matter for 10-15 days as the directors of the Respondent Company were out from the town. The Request of the Respondent Company was accepted by the Competent Authority and the hearing was postponed on 24.04.2024 vide this office’s e-mail dated 12.04.2024.
> Further, the Respondent Company again vide e-mail dated 24.04.2024 requested Competent Authority to adjourn the matter as the promoters of the Respondent Company were occupied in some assignments. The above request of the Respondent Company was again accepted by the Competent Authority and the matter was adjourned for a hearing on 06.05.2024.
> Further, the Respondent Company again vide e-mail dated 06.05.2024 requested Competent Authority to adjourn the matter as the directors of the Respondent Company were out of Jaipur till 15.05.2024. The above request of the Respondent Company was again considered by the Competent Authority and the matter was adjourned to last and final hearing on 03.06.2024.
However, at the time of hearing, none appeared on behalf of the Respondent Company and its officer’s in default nor this office has received any communication from them.
5. In view of the above facts, the undersigned has reasonable cause to believe that the provision of section 203 (1) of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has not been complied with by the Respondents and therefore liable for penal action under section 203 (5) of the Companies Act, 2013. Accordingly, in exercise of the power of 454 (3) of the Companies Act, 2013, I am inclined to impose a penalty on the Respondents, as under-.
| Nature of default | Violation of the Companies Act, 2013 and Rules made there under | Name of company/ persons on whom penalty imposed | No. of days of default |
Penalty as per section 203(5) of the Companies Act, 2013 (In Rs.) | Maximum Penalty (In Rs.) | Final Penalty Imposed (In Rs.) |
| Non-appoint-ment of Company Secretary
|
Section 203(1) of the Companies Act, 2013 read with Rule 8A of the Companies (Appoint-ment and Remu-neration of Managerial Personnel) Rules, 2014
|
Fruitful Buildcon Private Limited | 366 | 5,00,000 | 5,00,000 | 5,00,000 |
| Shri Jugal Kishore Garg | 366 | 50,000 +1,000* 366= 4,16,000 | 5,00,000 | 4,16,000 | ||
| Ms. Rajkumari Agarwal | 366 | 50,000/- +1,000* 366= 4,16,000 | 5,00,000- | 4,16,000 | ||
| Shri Ritesh Agarwal | 366 | 50,000/- +1,000* 366= 4,16,000 | 5,00,000 | 4,16,000 | ||
| Ms. Rashi Agarwal | 90 | 50,000/- +1,000* 90= 1,40,000 | 5,00,000 | 1,40,000 | ||
| Fruitful Buildcon Private Limited | 92 | 5,00,000 | 5,00,000- | 5,00,000 | ||
| Shri Jugal Kishore Garg | 92 | 50,000 +1000* 92= 1,42,000 | 5,00,000 | 1,42,000 | ||
| Ms. Rajkumari Agarwal | 92 | 50,000 +1000* 92= 1,42,000 | 5,00,000 | 1,42,000 | ||
| Shri Ritesh Agarwal | 92 | 50,000/- +1000* 92= 1,42,000 | 5,00,000 | 1,42,000 | ||
| Ms. Rashi Agarwal | 92 | 50,000/- +1000* 92= 1,42,000 | 5,00,000 | 1,42,000 | ||
| Fruitful Buildcon Private Limited | 49 | 5,00,000 | 5,00,000 | 5,00,000 | ||
| Shri Jugal Kishore Garg | 49 | 50,000/- +1,000* 49= 99,000 | 5,00,000 | 99,000 | ||
| Ms. Rajkumari Agarwal | 49 | 50,000/- +1,000* 49= 99,000 | 5,00,000 | 99,000 | ||
| Shri Ritesh Agarwal | 49 | 50,000/- +1,000* 49= 99,000 | 5,00,000 | 99,000 | ||
| Ms. Rashi Agarwal | 49 | 50,000/- +1,000* 49= 99,000/- | 5,00,000 | 99,000 | ||
| Fruitful Buildcon Private Limited | 1186 | 5,00,000 | 5,00,000 | 5,00,000 | ||
| Shri Jugal Kishore Garg | 1186 | 50,000+ 1,000 *1186= 12,36,000 | 5,00,000 | 5,00,000 | ||
| Ms. Rajkumari Agarwal | 1186 | 50,000+ 1,000 * 1186 = 12,36,000 | 5,00,000 | 5,00,000 | ||
| Shri Ritesh Agarwal | 1186 | 50,000+ 1,000 * 1186= 12,36,000 | 5,00,000 | 5,00,000 | ||
| Ms. Rashi Agarwal | 1186 | 50,000+ 1,000 *1186= 12,36,000 | 5,00,000 | 5,00,000 |
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the Respondents and penalty so imposed upon the notice shall be paid from their personal sources/ income. It is further directed that penalty imposed shall be paid through the Ministry of Corporate Affairs portal only as mentioned under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 under intimation to this office.
6. Appeal against this order may be filed in writing with the Regional Director (NWR), Ministry of Corporate Affairs, Ahmedabad within a period of sixty days from the date of receipt of this order, in e-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 Companies Act, 2013 read with Companies (Adjudicating of Penalties) Rules, 2014).
7. 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.
8. In terms of the provisions of sub-Rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, copy of the order is being sent to the following: –
(I) Fruitful Buildcon Private Limited at “Govindi House” Plot No. 8-A, Kanota Bagh, Behind RBI, Takteshai Road, JLN Marg, Rajasthan- 302004.
(II) Shri Jugal Kishore Garg at ________________________.
(III) Rajkumari Agarwal at ________________________.
(IV) Shri Ritesh Agarwal at ________________________.
(V) Rashi Agarwal at ________________________.
(VI) Regional Director, NWR, Ministry of Corporate Affairs, Ahmedabad at ROC Bhavan, Opp. Rupal Park Society, Behind Ankur Bus Stop, Naranpura, Ahmedabad, Gujarat-380 013.
The Adjudication Notice(s) are disposed off with this order.
(RUVIT KUMAR)
ROC-cum-OL & Adjudicating officer,
Rajasthan, Jaipur
Signed on this 24th day of June 2024.
Place: Jaipur, Rajasthan.
File No. ROCJP/SCN/Sec 203/2023-24/1220
Date: – 25/06/2024
