Avanti Leathers Limited found itself in legal scrutiny due to non-compliance with Section 203 of the Companies Act, 2013, concerning the appointment of a Whole Time Company Secretary. The company faced penalties for its failure to appoint a Company Secretary after the departure of the previous appointee.
Case Details: The Registrar of Companies, Andhra Pradesh, passed an adjudication order penalizing Avanti Leathers Limited and its officers for the default. The penalty amounted to a significant sum, reflecting the severity of the non-compliance.
Company’s Appeal: Avanti Leathers Limited, represented by Mr. Vikas J Thakker, appealed against the penalties imposed. The company argued that despite efforts, they were unable to appoint a Whole Time Company Secretary due to the challenges posed by the COVID-19 pandemic. They emphasized that the appointment was finally made after the specified period, and they requested a waiver of the penalties.
Decision of the Regional Director: The Regional Director, after considering the appeal and the circumstances presented, decided to intervene in the matter. Acknowledging the impact of the pandemic on business operations, the Director opted to reduce the penalties imposed by the Registrar of Companies.
Reduction of Penalties: The Regional Director’s decision led to a significant reduction in penalties for Avanti Leathers Limited and its officers. The penalties were reduced to Rs.1,06,000 for the company, Rs.56,000 for Mr. Vasudeva Rao Dhanekula (Managing Director), and Rs.46,000 for Mr. Sivaji Narla (CFO). The penalties imposed on other directors were waived off, considering the presence of a Managing Director and CFO in the company.
Conclusion: This decision by the Regional Director reflects a balanced approach to enforcement, considering both the regulatory requirements and the exceptional circumstances faced by the company. It underscores the importance of flexibility in compliance enforcement, especially during challenging times like the COVID-19 pandemic. Overall, this case serves as an example of regulatory adaptability while maintaining accountability in corporate governance
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F.No:9/70/ADJ/SEC.203/2013/ANDHRA PRADESH /RD(SER)/2022/ 6518
BEFORE THE REGIONAL DIRECTOR, SOUTH EAST REGION
MINISTRY OF CORPORATE AFFAIRS, HYDERABAD
IN THE MATTER OF COMPANIES ACT, 2013
IN THE MATTER OF AVANTI LEATHERS LIMITED
1. M/s. Avanti Leathers Limited
2. Vasudeva Rao Dhanekula, Managing Director
3. Sivaji Narla, CFO
4. Opender Kumar Kaul, Director
5. Sadhu Sundar Mallela, Director
6. Sreenivasa Reddy Maddala, Director
Dhanekula Nanda Kishore, Director
Ashok Kumar Aluri, Director
Appellants
Date of hearing: 29.12.2022
Present : Mr. Vikas J Thakker, PCS
ORDER
This is an appeal filed under section 454(5) of the Companies Act, 2013 by the above appellants in e-form ADJ vide SRN F28628261 dated 11.10.2022 against the adjudication order No. ROC (V)/ADJ (454)/SEC203 (5)/AVL/2022/1480 dated 17.08.2022 under section 454 passed by the Registrar of Companies, Andhra Pradesh for default in compliance with the requirements of Section 203 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
2. Registrar of Companies in his order of adjudication has stated that the company has failed to appoint Whole Time Company Secretary as specified in section 203(1) of the Companies Act, 2013 after cessation of the previous Company Secretary on 31.07.2020 to 31.07.2022. Hearing in the matter was scheduled before Registrar of Companies on 17.08.2022 but none appeared for hearing, accordingly Registrar of Companies had levied a penalty of Rs.5.00 Lakhs on the Company and for 4 officers i.e., Vasudeva Rao Dhanekula, Sivaji Narla, Sadhu Sundhar Mallela and Sreenivasa Reddy Maddala and Rs.2,94,000/- for 3 officers i.e., Opender Kumar Kaul, Dhanekula Nanda Kishore and Ashok Kumar Aluri (total aggregating to Rs.33.82 Lakhs).
3. An opportunity of being heard was given to the Appellants on 29.12.2022. The authorized representative Mr. Vikas J Thakker, Practicing Company Secretary appeared on behalf of the appellants and reiterated the submissions made in the appeal before the then Regional Director and also submitted that Company was having Whole Time Company Secretary upto 31.07.2020 and later he resigned due to Covid-19 pandemic and it could not be possible to appoint another in his place till 31.07.2022. From 01.08.2022 the Company has appointed a Whole Time Company Secretary i.e. Neetu Sharma and requested to waive off the penalty as levied by the Registrar of Companies.
4. Though there is a default committed, there is a ground in interfering with the impugned adjudication order of Registrar of Companies to the extent of reducing the quantum of penalty due to the following reasons:
(a) due to Covid-19 pandemic, Company was unable to appoint Whole Time Company Secretary as none shown interest despite company’s effort during that period.
(b) company has taken all reasonable steps during the Covid Pandemic and regularized the compliance of Section 203 of the Companies Act, 2013.
Hence, taking into consideration the report of Registrar of Companies, appeal and submissions made by the authorized representative penalty as imposed by Registrar of Company has been reduced by the then Regional Director and directed to pay Rs.1,06,000/- for the Company, Rs.56,000/- for Mr. Vasudeva Rao Dhanekula, Managing Director and Rs.46,000/- for Mr. Sivaji Narla, CFO (total aggregating to Rs.2,08,000/-) and the penalty as levied by Registrar of Companies with respect to Opender Kumar Kaul, Sadhu Sundar Mallela, Sreenivasa Reddy Maddala Dhanekula Nanda Kishore, Ashok Kumar Aluri, Directors has been waved off as the Company is having a Managing Director and CFO. The appellants are directed to comply with this order and also provisions of Section 454(8) of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014.
5. Accordingly, penalty was paid by the Company amounting to Rs.1,06,000/-, Vasudeva Rao Dhanekula, Managing Director for Rs.56,000/- and for Opendra Kumar Kaul, Director for Rs.46,000/- (instead of Mr. Shivaji Narla, CFO) and matter was taken up with the company requesting to furnish the details regarding payment of penalty of Mr. Shivaji Narla, CFO, accordingly e-mail dated 27.01.2023 received from the company stating that Mr. Shivaji Narla was expired on 20.12.2021 (total aggregating to Rs.2,08,000/-) vide SRN’s X34743583 dated 03.02.2023, X34172791 dated 28.01.2023 and X35005297 dated 07.02.2023 respectively. Accordingly, this order is issued to the Appellants with a copy to Registrar of Companies, Andhra Pradesh and Joint Secretary, E-Governance Cell, Ministry of Corporate Affairs, New Delhi for information and necessary action.
Issued under my hand and seal on this the 01St day of February 2024 2023.
(DR. RAJ SINGH)
REGIONAL DIRECTOR (SER)
HYDERABAD
