Zyden Gentec Limited recently incurred a substantial penalty of ₹8 Lakh imposed by the MCA for its failure to comply with the provisions of Section 204(1) of the Companies Act, 2013. This violation pertained to the company’s omission to attach the Secretarial audit report (in form MR-3) for the financial years 2015-16 and 2016-17, as mandated by Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. This article provides a comprehensive analysis of the violation, the adjudication process, and the penalties imposed by the Registrar of Companies, Rajasthan, Jaipur.
The case revolves around the discovery that Zyden Gentec Limited had not complied with the provisions of Section 204(1) of the Companies Act, 2013, with regard to attaching the Secretarial audit report (in form MR-3) for the financial years 2015-16 and 2016-17. This failure was attributable to the company’s applicability as per Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
Section 204(1) of the Companies Act, 2013, in conjunction with the aforementioned Rules, mandates that every listed company, or every public company having a paid-up share capital of fifty crore rupees or more, or every public company having a turnover of 250 crore rupees or more, must annex a secretarial audit report to its Board’s report, prepared in accordance with subsection (3) of Section 134 of the Companies Act, 2013. This report must be provided by a company secretary in practice and must be in form MR-3, as prescribed under the relevant Rule.
The office of the Registrar of Companies issued a show-cause notice to the company and its directors on April 25, 2022. However, the company did not provide any response to this notice, indicating non-compliance with the provisions of Section 204(1) of the Companies Act, 2013.
Subsequently, a violation of Section 204(1) was taken up with the company and its officers in default through an adjudication notice dated June 30, 2022. This notice offered them an opportunity to be heard on July 15, 2022, at the office of the Registrar of Companies in Jaipur. Due to the non-appearance of representatives on this date, another opportunity was provided for a hearing on September 16, 2022.
However, on both hearing dates, no one appeared on behalf of the company or its directors, and the default was not rectified. Consequently, it was concluded that the directors/KMPs of the company were in default. After a careful examination of the facts, the Registrar of Companies concluded that Zyden Gentec Limited and its directors had indeed failed to comply with the provisions of Section 204(1) of the Companies Act, 2013.
In response to this violation, the Registrar of Companies issued an adjudication order imposing penalties as follows:
- Zyden Gentec Limited: ₹4,00,000/-
- Each KMP (1 KMP in default): ₹4,00,000/-
The total penalty amounted to ₹8,00,000/-. It was specified that the company should pay ₹4,00,000/-, and the single KMP in default should pay ₹4,00,000/-. These penalties were imposed for the default in attaching the Secretarial audit report (in form MR-3) for the financial years 2015-16 and 2016-17.
The matter was subsequently disposed of with this order, signed on October 11, 2022.
Conclusion: The case of Zyden Gentec Limited underscores the critical importance of adhering to statutory requirements, such as attaching the Secretarial audit report (in form MR-3) as mandated by the Companies Act, 2013. Failure to comply with such requirements can result in substantial financial penalties, as evident in this case. It serves as a reminder to companies to ensure strict compliance with all regulatory obligations to avoid significant legal consequences.
*****
Registrar of Companies, Rajasthan, Jaipur
In the matter of Companies Act 2013
And
In the matter of adjudication proceeding under section 454 (3) of
Companies Act, 2013
And
In the matter of adjudication proceeding for the violation of section
204 of the Companies Act, 2013.
And
In the matter of
1) M/s Zyden Gentec Limited
2) Smt. ANITA KUMARI (CFO)
Date of hearing- 16/09/2022
Present
1. Shri C. M. Karl Marx, Registrar of Companies, Rajasthan, Jaipur, Adjudicating Officer
Adjudication Order
Fact of the Case
1. That it is has been noticed that the company has not complied with the provisions of Section 204(1) of the Companies Act, 2013 for attaching Secretarial audit report (in form MR-3) in respect to the financial year 2015-16 and 2016-17 by virtue of applicability as per Rule 9 of the Companies (Appointment and remuneration of Managerial Personnel) Rule 2014.
2. That the provisions of the section 204 of the Companies Act, 2013 read with (Appointment and remuneration of Managerial Personnel) Rules 2014 requires that every listed company or every public company having paid up share capital of fifty cores rupees or more or every public company having turnover of 250 cores rupees or more shall annex with its Boards report made in terms of sub-section (3) of section 134 of the Companies Act, 2013 a secretarial audit report, given by a company secretary in practice in form MR-3 prescribed under the said Rule.
3. That this office has issued show cause notice to the Company and its directors on 25.04.2022. The Company has not furnished any reply to the said notice. Hence, the company has not complied with the provisions of Section 204(1) of the Companies Act, 2013 for attaching Secretarial audit report (in form MR-3) by the company by virtue of applicability as per Rule 9 of the Companies (Appointment and remuneration of Managerial Personnel) Rule 2014.
4. That violation of Section 204(1) of the Companies Act, 2013 was taken up with the company and its officers in default vide adjudication Notice dated 30.06.2022 for violation of section 204 of the companies Act, 2013 giving an opportunity of being heard on 15th July, 2022 at the committee room of the 0/o Register of the Companies Corporate Bhawan, G – 6 86 7, Residency Area, Civil Lines, Jaipur-302001. Further, due to non-appearance on 15.07.2022 again given an opportunity of being heard on 16th September, 2022
5. That no one appeared on behalf of Company and other directors. Further, the default is not rectified as on date. Hence, it is concluded that director/KMP of the Company is defaulted. On carefully examination and considering the fact of the case, I am on conclusion that the provision of section 204 (1) of the Companies Act, 2013 have not been complied with by the Company and its directors.
ORDER
“That keeping in mind all the relevant facts penalty of Rs. 4,00,000/- (Rs. Four Lacs only) is hereby imposed on Company and Rs. 4,00,000/- (Rs. Four Lacs only) is hereby imposed on KMPs for 1 KMPs in default totaling to Rs. 8,00,000/- for the default in Secretarial audit report (in form MR-3) in respect to the financial year 2015-16 and 2016-17.”
Calculation table for Penalty
The matter has been stands disposed of with this order. Signed this on 11th day of October 2022.
Order No. 2633 To 2636
12.10.2022
C. M. Karl Marx
Registrar of companies, Rajasthan
Jaipur (Rajasthan)
