Company failed to appoint woman director: MCA imposes Penalty of ₹3.57 Lakh

Registrar of Companies, Mumbai, issued a penalty order under Section 454(3) of the Companies Act, 2013, against Sajjan India Limited for violating Section 149(1), which mandates the appointment of a woman director for certain companies. Despite having a paid-up capital of ₹3.81 crore and a turnover exceeding ₹1,580 crore, the company failed to comply after the resignation of its previous woman director in May 2022. The law requires such vacancies to be filled within three months or by the next board meeting, whichever is earlier. Sajjan India Limited delayed the appointment for 215 days, citing challenges in finding a suitable candidate, but this explanation was deemed insufficient.

The adjudication resulted in a total penalty of ₹3,57,500, with ₹1,57,500 imposed on the company and ₹1,00,000 each on its CEO and CFO. The penalty is intended to address non-compliance over the specified period from August 26, 2022, to March 28, 2023. The company has since rectified the issue by appointing a woman director and requested compounding of the offense. However, the penalty was upheld, and payment must be made within 90 days. Appeals can be filed with the Regional Director, Ministry of Corporate Affairs, within 60 days.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF
COMPANIES
100, “EVEREST”, MARINE DRIVE,
MUMBAI – 400 002
Website : www.mca.gov.in

Order No. ROC(M)/ S.149(1)/ SAJJAN/ADJ-ORDER/030874/ 3387 to 3389 Dated: Dated: 8 JAN 2025

Order for Penalty under Section 454(3) for violation of Section 149(1) of the Companies Act, 2013.

IN THE MATTER OF SATTAN INDIA LIMITED
(CIN: U51900MH1983PLC030874)

(I) Adjudicating Officer: B. Mishra, ICLS, ROC, Mumbai

(II) Presenting Officer: Rujuta Bankar, ICLS, AROC, Mumbai

(III) Authorised representative on behalf of Company: Mr Ankit Mishra, Mr Shwetank Chaubey

Appointment of Adjudicating Officer:-

1. Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.”, dated 24.03.2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter known as Act) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

Company:-

2. WHEREAS the company viz SAJJAN INDIA LIMITED (herein after known as ‘company’) is a registered company with this office under the provisions of the Companies Act, 1956 having its registered office as per MCA21 Registry at address Urmi Estate, Tower A, 14th Floor, 95, Ganpatrao Kadam Marg, Lower Parel (W) Mumbai Mumbai City MH 400013 IN.

Law relating to Appointment of Women Director in company: ­

3, Section 149:

(1) 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 a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and

(b) A maximum of fifteen directors:

Provided that a company may appoint more than fifteen directors after passing a special resolution:

Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.

Rule 3 of the Companies (Appointment and qualification of Directors) Rules, 2014:

The following class of companies shall appoint at least one woman director-

i. Every listed company

ii. Every other public company having-

a. Paid-up share capital of one hundred crore rupees or more; or

b. Turnover of three hundred crore rupees or more:

Provided that a company, which has been incorporated under the Act and is covered under provision of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation:

Provided further that any intermittent vacancy of a women director shall be filled-up by the Board at the earliest but no later than immediate next Board meeting or three months from the date of such vacancy whichever is later.

Explanation- For the purposes of this rule, it is hereby clarified that the paid-up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.

Facts about the Case: –

4. As per the Financial Statements filed by the company its Paid up share capital and turnover as on 31.03.2022 is as under: –

5. The company is required to appoint a woman director based on the thresholds stated above, but it failed to do so.

6. Thus, this office had issued Show Cause Notice dated 28.03.2023, under section 454 for violation of section 149(1) of the companies Act, 2013 to the Company and its Officers in default.

7. The company vide its letter dated 26.04.2023 has submitted its reply and relevant para of the company’s reply is reproduced as under:

a. In compliance of Section 149 of the Act, Company had appointed a woman director
on January 20, 2020, who resigned on May 25, 2022.

b. The Company has been in the process of identifiying and selecting a suitable candidate with the requisite expertise, knowledge and experience to be appointed as

per Section 149 of the Act. However, as on the date of the instant response, the appointment of a woman director was yet to be finalized.

c. The delay in appointment was unintentional and bona fide. Thus, the Company requests that no penalty be imposed in the instant matter.

Penalty Provision for violation

8. Section 172:

If a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand, 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.

Hearing and reply of the Company

9. Adv. Ankit Mishra and Adv. Shwetank Chaubey being authorized representatives of the Company attended the hearing in person on 11.05.2023.

10. The authorized representatives submitted that there was no mens rea and that the default was committed due to unavoidable circumstances. They further stated that there was no mala fide intention.

11. Further, the Company through Anagrampartners filed compounding application u/s 441 vide SRN F71078539 in GNL-1 dated 25.10.2023 and physical copy on 10.01.2024 for compounding the default of non-compliance of woman director as per Section 149(1) of the Companies Act, 2013 in pursuance to notice received from ROC dated 28.03.2023. In the said Compounding Application the Company submitted that subsequent to the hearing held on 11.05.2023, the Company vide Board Resolution dated 29.05.2023 appointed Ms Jasmine Makkar holding DIN 10170742 as an Additional Director on the board of the Company in terms of Sec 149 of the Act w.e.f. 29.05.2023, for which DIR 12 was filed on 09.06.2023. The Company further requested to compound the matter. However, Section 149 r/w Section 172 being amenable to adjudication, the present order is being passed in the facts of the matter.

FINDINGS: –

12. As per the Financial Statements filed by the Company its Paid up share Capital and Turnover as on 31.03.2022 is as under: –

13. The Company is required to appoint a women director based on the thresholds stated above, but it failed to do so.

14. Therefore, the reply given by the company is not tenable as they were aware of their statutory mandate to appoint a woman director.

15. The company admitted the default vide its letter dated 26.04.2023. Subsequently it appointed a Woman director, but its default for the previous period is established.

16. The 2^nd Proviso to Rule 3 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 states that ‘any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or 3 months from the date of such vacancy whichever is later.’

The erstwhile woman director resigned on 25.05.2022 and the resulting intermittent vacancy should have been filled within 3 months, but the Company failed to do so. Hence, the period of default is from 26.08.2022 till 28.03.2023.

17. In view of para 11 supra since the violation of Section 149 of the Act is liable for penal action u/s 172 which is falls under Adjudication of penalties u/s 454 of the Act, therefore, the present order is passed in view of Show cause Notice dated 28.03.2023 and the said Compounding application filed vide SRN F71078539 in GNL-1 dated 25.10.2023 is thus infructuous.

ORDER

18. In exercise of the powers conferred on me vide Notification dated 24.03.2015 and having considered the facts and circumstances of the case besides reply of the company after taking into account the factors mentioned in the relevant Rules followed by amendments in section 454(3) of the Companies Act, 2013, I am of the opinion that penalty shall be imposed for the default related to non-compliance of section 149 of the Act.

19. Having considered the facts and circumstances of the case and after taking into accounts the above factors, I hereby impose a penalty of Rs. 1,57,500/- (Rupees One Lakh Fifty-Seven thousand and Five hundred) on the Company and Rs. 1,00,000/- each on its Officers in default as per the table below for violations of provisions of section 149(1) of the Companies act, 2013

TOTAL PENALTY PAYABLE – Rs3,57,500/-

(•) The period of violation of provisions under Section 149 of the Companies Act, 2013 is from 26-Aug-2022 till 28-Mar-2023 and delay is 215 days.

20. I am of the opinion that, the penalty is commensurate with the aforesaid failure of the Company and its officers in default.

21. The company and its Officers in default are hereby directed to rectify the default immediately from the date of receipt of copy of this Order.

22. The Noticee/s shall pay the said amount of penalty through “Ministry of Corporate Affairs” portal and proof of payment be produced for verification within 90 days from receipt of this order.

23. Appeal against this order may be filed with the Regional Director (WR), Ministry of Corporate Affairs, 5TH Floor, 100 Everest Building, Marine Drive, Mumbai, Maharashtra 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 the order. [Section 454(3) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].

24. Your attention is also invited to section 454(8) of the Act in the event of non­compliance of this order.

(B MISHRA)
Adjudication officer and Registrar of Companies,
Maharashtra, Mumbai.