Introduction: The Ministry of Corporate Affairs in India has recently imposed a significant penalty on Dorin India Private Limited for a substantial delay in appointing a Company Secretary. This article delves into the details of this case, examining the legal framework, facts surrounding the delay, factors considered for the penalty, and the final order.
Background and Legal Framework
The Ministry of Corporate Affairs (MCA) in India operates under the Companies Act, 2013, and related rules. Section 203 of the Act focuses on the appointment of Key Managerial Personnel, including the Company Secretary. Rule 8A of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, stipulates specific requirements for appointing a Company Secretary based on the company’s paid-up capital.
Facts about the Case: Dorin India Private Limited, hereafter referred to as ‘the company,’ was incorporated in March 2014 and had its registered office in Gurgaon, Haryana. Despite having a substantial paid-up capital, the company appointed a whole-time Company Secretary only on January 4, 2021, which was a significant delay.
The case involves a 794-day delay in compliance with Section 203 of the Companies Act, 2013, from November 2, 2018, to January 4, 2021. The MCA issued a Show Cause Notice (SCN) on May 30, 2023, and received a reply from the company on June 15, 2023.
During a hearing held on September 12, 2023, the company’s authorized representatives and a director, Mr. Keiichi lizuka, presented their case. They argued that Mr. lizuka was responsible for compliance with Indian laws, including the Companies Act, 2013, and requested leniency due to the company’s past financial losses.
Factors Considered for Adjudication of Penalties
The analysis of the case considered several factors:
1. The company admitted its default and applied for adjudication voluntarily.
2. Records showed both directors, Mr. Tetsuji Akase and Mr. Keiichi lizuka, as non-executive directors at the time of filing Form-32.
3. The absence of Form GNL-3 filings placed the onus of compliance on both directors.
4. The law prescribes fixed penalties on the company and its officers for such defaults.
Adjudication of Penalty
As a result of the analysis, the adjudicating officer imposed penalties as follows:
- Dorin India Private Limited (Company): 5,00,000 INR for 794 days of default.
- Mr. Keiichi lizuka (Director): 5,00,000 INR for 794 days of default, subject to a maximum of 5,00,000 INR.
- Mr. Tetsuji Akase (Director): 5,00,000 INR for 794 days of default, subject to a maximum of 5,00,000 INR.
Conclusion
In conclusion, the Ministry of Corporate Affairs has taken a firm stance on compliance with the appointment of Company Secretaries under Section 203 of the Companies Act, 2013. Dorin India Private Limited’s significant delay resulted in substantial penalties, reinforcing the importance of timely adherence to regulatory requirements in the corporate sector.
In this article, we’ve discussed the case of Dorin India Private Limited, which faced a 794-day delay in appointing a Company Secretary, leading to a 15 lakh penalty imposed by the Ministry of Corporate Affairs. The article provided an overview of the legal framework, detailed the facts of the case, examined the factors considered for penalty adjudication, and concluded with the significance of compliance in the corporate sector.
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Government of India
Ministry of Corporate Affairs
Office of Registrar of Companies,
NCT of Delhi & Haryana
4th Floor, IFCI Tower, 61, Nehru Place,
New Delhi – 110019
Order of Penalty Pursuant to Section 203 of the Companies Act, 2013, r/w Rule 8(a) (Appointment & Remuneration of Managerial Personnel) Rules, 2014
In the Matter of Dorin India Private Limited (U74140HR2014FTC096233)
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 Registrar of Companies, NCT of Delhi & Haryana 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.
2. Company: –
Whereas the company viz. DORIN INDIA PRIVATE LIMITED (herein after known as ‘company’) has been incorporated on 21.03.2014 and having its registered office as per MCA21 Register address at C-356 ANSAL PIONEER PARK, BILASPUR-TAURU ROAD, BILASPUR, GURGAON, HARYANA, 122413, INDIA. The financial & other details of the subject company for immediately preceding F.Y 2022-23. as available on MCA-21 portal is stated as under:
| S. No. |
Particulars | Details |
| 1. | Paid up capital (in Thousands of INR) | 3,90,000 |
| 2. | a. Revenue from operation (in Thousands of INR) | 0 |
| b. Other Income (in Thousands of INR) | 2679.7 | |
| c. Profit for the Period (in Thousands of INR) | – 37,310.54 | |
| 3. | Holding Company | YES |
| 4. | Subsidiary Company | NO |
| 5. | Whether company registered under Section 8 of the Act? | NO |
| 6. | Whether company registered under any other special Act? | NO |
3. Facts about the Case: –
i. This office is in receipt of application on 31.03.2023 (GNL-1 F59976472 dated 28.03.2023) from the company and one director namely Mr. Keiichi lizuka regarding adjudication of penalties for default u/s 203 of the Act as company had appointed a whole time company secretary Mr. Anuprash Gupta only on 04.01.2021, despite the mandatory requirement.
(ii) It is observed that company (as on 02.11.2018) had a paid up capital of Rs. 39 crores and was required to appoint a whole time company secretary u/s 203 of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendments therewith.
(iii) That pursuant to Companies (Amendment) Act, 2019 (w.e.f. 02.11.2018) default u/s 203 has been decriminalized. Therefore, Adjudicating officer is considering for adjudication for the period 02.11.2018 to 04.01.2021 i.e 794 days.
(iv) In view of above, SCN was issued on 30.05.2023 in response to which company submitted a reply on 15.06.2023.
(v) In view of submissions made in reply, a hearing in the matter was scheduled for oral submissions on 12.09.2023, Sh. Luv Malhotra (PCS) & Sh. Anil Kumar Sah (PCS) Authorised representatives (AR) of the Company and Mr. Keiichi lizuka, Director of the company appeared for hearing and submitted as under:
a. A board resolution dated 20.06.2014 was passed (copy of the same was placed on record) which provided that the Board had authorized Mr. Keiichi lizuka as the Director responsible for compliances of various Indian laws including the Companies Act, 2013. Therefore, it was submitted that whatever penalties to be levied it must be levied upon Mr. Keiichi lizuka only.
b. Considering that the company had suffered losses in the past, it was prayed that a lenient view may be taken at the time of levying the penalties
4. Factors considered for adjudication of penalties: –
i. The company has applied for adjudication on its own, after admitting its default. From the records of the RoC office, it is noted that at the time of filing of Form-32, both the directors namely Mr. Tetsuji Akase and Mr. Keiichi lizuka were shown as Non-executive Directors. The records of the RoC office do not suggest that company has filed any form GNL-3 in accordance of Section 2(60)(iii) of the Companies Act, 2013 so as to cast a specific obligation Mr. Keiichi lizuka for compliances under the Companies Act, 2013.
ii. As regard the submission of the AR regarding remission in the penalty amount, it is submitted that the law provides for a fix penalty on the company and its officers in default.
iii. Thus, it is clear that section 203 of the Act and rules made thereunder casts an onus on both the directors of the company.
6. The relevant provision of the Act and Rules therewith:
> Section 203 (Appointment of Key Managerial Personnel)
(4) 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.
(5) “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”
> Rule 8A of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 (applicable in respect of financial years commencing prior to 01-04-2020)
Appointment of Company Secretaries in Companies Not Covered Under Rule 8.
“A company other than a company covered under rule 8 which has a paid-up capital of 5 Crore Rupees of more shall have a whole time Company Secretary”.
Rule 8A of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 – (applicable in respect of financial years commencing on or after 01-04-2020)
Appointment of Company Secretaries in Companies Not Covered Under Rule 8 “Every private company which has a paid up share capital of ten crore rupees or more shall have a whole-time company secretary.”
> Section 2(51) of the Companies Act, 2013
(51) —key managerial personnel, in relation to a company, means—
(i) the Chief Executive Officer or the managing director or the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed;
6. Adjudication of penalty : –
i. The default with regard to non-appointment of company secretary has already been admitted. As far as issue of officer in default is concerned, in the absence of non filing of e form GNL-3 and in view of the fact that both the directors have been shown as “Non-executive” in the filings made in Form-32, the liability of Mr. Tetsuji Akase would be at par with Mr. Keiichi lizuka. Accordingly, both the directors are officer in default. The subject company does not get covered under the purview of small company as defined u/s 2(85) of the Act. Hence, the benefit of section 446B would not be applicable on the company.
ii. Now in exercise of the powers conferred on me vide Notification dated 24th March, 2015 and having considered the reply submitted by the noticee (s) in response to the notice issued on 30.05.2023 and reply submitted on 15.06.2023 hearing held in the matter on 12.09.2023, I do hereby impose the penalty on the company and its Directors for violation of section 203 of the Act:
| Violation section |
Penalty imposed on company/ director(s) |
No of days default |
Calculation for penalty amount as per Section 203 (in Rs.) |
Penalty imposed (in Rs.) |
| A | B | C | D | E |
| u/s 203 of the Companies Act, 2013 | Dorin India Private Limited (Company) | 794 | 5,00,000 | 5,00,000 |
| Keiichi lizuka (director) | 794 | 50000+(1000X794) = 8,44,000 subject to maximum 5,00,000 | 5,00,000 | |
| Tetsuji Akase (director) | 794 | 50000+(1000X794) = 8,44,000 subject to maximum 5,00,000 | 5,00,000 |
7. Order:
a. Names of parties as mentioned in the table above are hereby directed to pay the penalty amount as per column no. ‘E’
b. The said amount of penalty shall be paid through online by using the website mca.gov.in (Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, within 90 days of receipt of this order, and intimate this office with proof of penalty paid.
c. Appeal against this order may be filed with the Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi-110003 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(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].
d. Your attention is also invited to section 454(8) of the Act in the event of noncompliance of this order.
(Pranay Chaturvedi, ICLS)
(Adjudicating Officer)
Registrar of Companies
NCT of Delhi & Haryana
Date: 04/10/2023
No. ROC/D/Adj/Order/203/Dorin/3747-3750
To,
1. Dorin India Private Limited
C-356 Ansal Pioneer Park, Bilaspur-Tauru Road, Bilaspur,
Gurgaon„Haryana,122413,India.
2. Tetsuji Akase
C/O C-356 Ansal Pioneer Park,
Bilaspur-Tauru Road, Bilaspur,
Gurgaon„Haryana,122413,India.
3. Keiichi lizuka
Flat No 4c, Tower 15, Central Park Resorts,
Sector 48gurgaon,122018, Haryana,
Copy to:
Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi-110003.
