Introduction: The Ministry of Corporate Affairs (MCA) has wielded its adjudication powers, imposing a penalty of Rs. 17.25 lakhs on KHED DEVELOPERS LIMITED for delays in the appointment of a Whole-Time Company Secretary. The adjudication order, RoCP/ADJ/203/23-14/KHED/B/6/ 2291 to 2297, dated December 19, 2023, underscores the significance of timely compliance with the Companies Act, 2013.

Detailed Analysis:

Background and Adjudication Order: KHED DEVELOPERS LIMITED, registered under CIN U70102PN2008PLC131478, found itself in the regulatory spotlight as the Registrar of Companies, Maharashtra, Pune, issued an adjudication order under Section 454(3) read with Section 203 of the Companies Act, 2013. The penalty, amounting to Rs. 17.25 lakhs, is rooted in the company’s non-compliance with the appointment of a Whole-Time Company Secretary, as mandated by Section 203(1).

Chronology of Events and Violations: a. Section 203(1) of the Companies Act, 2013, mandates every private company with a paid-up share capital of ten crore rupees or more to have a Whole-Time Company Secretary. b. Section 203(4) stipulates that if the office of any Whole-Time Key Managerial Personnel is vacated, the Board must fill the resulting vacancy within six months. c. The company, KHED DEVELOPERS LIMITED, faced a violation as it failed to appoint a Company Secretary from February 3, 2020, to August 16, 2020, following the resignation of the last Company Secretary on August 3, 2019.

Adjudication Process and Company’s Response: The Adjudicating Officer, appointed as per Gazette Notification dated March 24, 2015, issued an Adjudication Notice on July 27, 2023, under Section 454(4) read with Section 203 of the Companies Act, 2013. The company, in its response on August 10, 2023, highlighted efforts to find a suitable candidate amid challenges posed by COVID-19 restrictions.

Imposition of Penalty: The penalty, imposed through the adjudication order, is in line with Section 203(5) of the Companies Act, 2013. The provisions state that non-compliance with Section 203 may result in a penalty of five lakh rupees for the company and fifty thousand rupees for every director and key managerial personnel in default. In cases of continuing default, a further penalty of one thousand rupees for each day may be levied, not exceeding five lakh rupees.

Payment Process and Right to Appeal: The company and the officers in default have been directed to pay the imposed penalty through the Ministry of Corporate Affairs portal. Furthermore, the order provides a right to appeal within sixty days from the receipt of the order, as per Section 454(5) of the Act, in the specified format.

Conclusion: The adjudication order against KHED DEVELOPERS LIMITED highlights the regulatory vigilance on timely compliance with statutory provisions. The penalty underscores the significance of adhering to the appointment timelines outlined in the Companies Act, 2013. As the company weighs its options for appeal, this case serves as a cautionary tale for entities to prioritize governance and compliance to avoid regulatory consequences.

OFFICE OF THE
REGISTRAR OF COMPANIES
MAHARASHTRA, PUNE
MINISTRY OF CORPORATE AFFAIRS
GOVERNMENT OF INDIA

RoCP/ADJ/203/23-14/KHED/B/6/ 2291 to 2297 Date:19 DEC 2023

ADJUDICATION ORDER

*****

Adjudication Order of penalties in the matter of KHED DEVELOPERS LIMITED having CIN U70102PN2008PLC 131478 under Section 454(3) read with section 203 of the Companies Act, 2013 read with Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Please Read:

respect of:

KHED DEVELPERS LIMITED having CIN U76102PN2008PLC131478 is a company governed by the provisions Act and registered with this office having its office C‑303 Maharana Heights, Chavhanmala, Holewadi, Pune Maharashtra 410505 India.

1 Appointment of Adjudicating Officer:

Ministry of Corporate A fairs vide its Gazette Notification A-42011/112/2014-Ad.II dated 24.03.2015 (see So 831(E), dated 24.03.2015) appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (herein after known as Act) read with Companies (Adjudication of penalties), Rules, 2014 for adjudging penalties under the provisions of this Act. The undersigned vide Companies (Amendment) Act, 2019 is entrusted to adjudicate penalties under section 203 of the Act with effect from 02.11.2018.

2. Company:

KHED DEVELOPERS LIMITED having CIN U70102PN2008pLC131478 is a company governed by the provisions Act and registered with this office having its office C- 303 Maharana Heights, Chavhanmala, Holewadi, Pune Maharashtra 410505 India.

3. Facts about Case:

a. In terms provisions of section 203 (1) Companies Act, 2013 r/w Rule 8A of 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 a whole-time company secretary”;

b. In terms of the provisions of section 203(4) of the Act, if the office of any Whole-Time Key Managerial Personnel is vacated, the resulting vacancy shall be filled-up by the Board within a period of six months from the date of such vacancy ; in the instant case the company has not appointed the Company secretary since 03.02.2020 to 16.08.2020 despite the last appointed Company Secretary vacating the office on 03.08.2019.;

c. In terms of the provisions of Section 203 (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 file lakh rupees ;

d) Accordingly, the adjudication officer has issued adjudication notice vide ROCP/ADJ/203/23-24/ 127 to 1135 dated 27.07.2023 (herein after referred as Adjudication Notice) under Section 454(4) read with 203 Of the Companies Act, 2013 read with Rule 3(2) Of Companies (Adjudication of Penalties), 2014 as amended in Amendment Rules, 2019, to the company and its officers in default for the violation of the provisions of the act as mentioned i para “a & b” above;

e) A reply to the Adjudication notice has been received on 10.08.2023 from the company stating that Mr. Swanand Eknath Shede (PAN: CFAPS8215Q) resigned as the Whole Time Company Secretary of the Company by tendering his resignation w.e.f. August 03, 2019. Immediately after his cessation as the Company Secretary, the Company initiated search for a suitable candidate for the position of Company Secretary by approaching practicing professionals to help the Company to find a suitable candidate for the
vacancy caused. The Company had evaluated candidature of various qualified Company Secretaries for filling the vacant position. However, the Company could not complete the process of appointment of suitable candidate, L1ithin the permitted timelines. Also, prevailing COVID restrictions from March 2020 viz., restrictions on movement and social distancing norms for an extended period, constrained the Company in finding a suitable candidate. However, keeping in view the social distancing norms, the Company continued searching for the suitable candidate. As soon, as there was ease of COVID restrictions, the Company interviewed and appointed the current Com first any Secretary in the Board Meeting held on August 17, 2020 i.e. first Board Meeting upon ease of COVID restrictions after initial massive wave of Covid-19 Virus.

f) Furthermore under section 454(4) of the Act read with Rule 3(2) of the Companies; Adjudication Of Penalties) Rule 2014, Noticee(s) were given an opportunity to submit a reply by issuing an Adjudication Notice vide ROCP/ADJ 203/23-24/1127-1135 dated 27.07.2023 herein after referred as Adjudication Notice) to why the penalty should not be imposed under the provisions of 203(5) of the Act against the Company and its officers in default for the above stated violations.

4. Relevant provisions of the Companies Act, 2013:

Section 2013(1) of the Act provides that every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,

1. managing director, or Chief Executive Officer or manager

2. and in their absence, a whole-time director;

3. compony secretary;

4. an Chief Financial Officer:

Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing director for or Chief Executive Officer of he company at the same time after the date of commencement of this Act unless-

(a) the articles of such a company provide otherwise; or
(b) the company does not carry multiple businesses:

Provided further that nothing contained in the first proviso s all apply to such class of companies engaged in multiple businesses, and which has appointed one or more Chief Executive officers for each such business a may be notified by the Central Government.

Section 203(4) of the Act provides that if the office of an, 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 month from the date of such vacancy.

Section 203(5) of the Act provides inter alia that if any company makes any default in complying with the provisions of section 203, 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.

5. ORDER:

a. The applicant company and its officers, who have defaulted the provisions of section 203(1) r/w 203(4) of the Act for non-appointment of hole- Time Company Secretary are liable for penalties under section 203(5) of the Act w.e.f. 03rd February 2020 to 16th August 2020, as the last CS has vacated the off the on 03rd August 2019.

b. In exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and after taking into account the factors mentioned herein above, I do hereby impose the penalty on the company and its officers in default pursuant to Rule 3(12) of Companies (Adjudication Of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication Of Penalties) Rules, 2014 r/w General Circular No. 1/2020 dated. 02.03.2020; as per table below for violation of section 203(1) of the Act:-

Adjudication of Penalties

c. I am the opinion that penalty so imposed is commensurate with the aforesaid failure committed by the notice(s). The delay in issuance of orders on account of other admin work.

d. The Notice(s)/applicant(s) shall pay the penalty so imposed through Ministry of Corporate Affairs portal only as per rule 3(14) of  Companies (Adjudication of Penalties) Rules, 2014.

e. Appeal against this order may be filed under section 454(5) of the Act, in writing with the Regional Director (Western Region), Ministry of Corporate Affairs 100, Everest, 5th Floor, Netaji Subhash Road, Marin Drive, Mumbai-400002, within a period of sixty days from the date f receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454 of the Act read with Companies (Adjudication of Penalties) Rules, 2014 as emended by Companies (Adjudication of Penalties Amendment Rules, 2019.

f. Your attention is also invited to section 454(8)(ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order in terms of the provisions of section 454(8)(i) of the Act.

g. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to KHED DEVELOPERS LIMITED and all directors/officers in default mentioned herein above and also to Office of the Regional Director (Western Region) and Ministry of Corporate Affairs at New Delhi.

(Mangesh Jadhav, ICLS)
Adjudicating Officer
Registrar of Companies
Maharashtra, Pune

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