Delay in Remuneration & Nomination Committee Constitution: MCA Imposes Rs. 12 Lakh Penalty

The Registrar of Companies (RoC), Karnataka, has imposed a significant penalty on Mukka Proteins Limited for the delayed constitution of the Nomination and Remuneration Committee, a violation of Section 178(1) of the Companies Act, 2013. This adjudication, executed under Section 454 of the Companies Act, underlines the importance of timely adherence to statutory requirements concerning corporate governance structures.

Background: Mukka Proteins Limited, CIN U0500KA2010PLC055771, incorporated on 04.11.2010, filed an adjudication application on 07.08.2023, admitting to the violation of Section 178(1) of the Companies Act, 2013. The company converted from a private limited company to a public limited company on 02.12.2019, triggering the applicability of Section 149(4) regarding the appointment of independent directors. However, the company appointed independent directors only on 15.01.2022, and the Nomination and Remuneration Committee was constituted belatedly, effective from 17.01.2022.

Violation and Penalty Imposition: As per Section 178(1) of the Act, every listed public company and certain other classes of companies must constitute a Nomination and Remuneration Committee consisting of three or more non-executive directors, with at least one-half being independent directors. The violation of this section attracts penalties under Section 178(8), with the company liable for a penalty of five lakh rupees and every officer in default facing a penalty of one lakh rupees.

Adjudication Process: After receiving the adjudication application from the company, a notice of hearing was issued on 18.09.2023. A physical hearing took place on 26.09.2023, attended by Mr. Chethan Nayak K, a practicing company secretary, representing the company, and making submissions as detailed in the application.

Penalty Calculation: Considering the public limited status of the company, it does not fall under the definition of a small company, rendering the provisions of imposing a lesser penalty as per Section 446B inapplicable. The penalty was imposed as follows:

1. Company: Rs. 5,00,000
2. Kalandan Abdul Ratak, Director: Rs. 1,00,000
3. Kalandan Mohammed Haris, Director: Rs. 1,00,000
4. Kalandan Mohammed Arif, Director: Rs. 1,00,000
5. Umaiyya Banu, Director: Rs. 1,00,000
6. Kalandan Mohammed Althaf, Director: Rs. 1,00,000
7. Jessica Juliana Mendonca, Company Secretary: Rs. 1,00,000
8. Mehaboobsab Mahmadgous Chalyal, Company Secretary: Rs. 1,03,000

Payment and Appeal: The company and its directors/key managerial personnel are directed to pay the penalty within 90 days from the receipt of this order. Payment should be made online using the MCA website, and a copy of the order and payment challans must be attached while filing Form INC-28. Directors should pay the penalty amount from their own funds. The option to file an appeal with the Regional Director (South East Region), Hyderabad, is available within 60 days from the date of receiving the order.

Consequences of Non-Compliance: Non-compliance with this order may lead to penal action under Section 454(8)(i) and (ii) of the Companies Act, 2013, against the company and its directors/key managerial personnel without further notice.

Conclusion: This adjudication emphasizes the necessity of promptly establishing corporate governance structures in accordance with statutory requirements. Companies are reminded of the repercussions of delayed compliance and the financial penalties imposed for violations. Adhering to these provisions contributes to robust corporate governance practices and regulatory compliance.

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Registrar of Companies, Karnataka
Kendriya Sedan, 2nd floor, ‘E’-Wing,
Koramangala. Bengaluru – 560 034
Phone :080-25537449/25633105
E-mail ID: roc.bangalore@mca.gov.in

File No. ROC(B)/Adj.Ord.454-178/Mukka Proteins/Co.No.055771/2023

Date: 23.11.2023

ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUCTION OF PENALTIES) RULES,2014 FOR VIOLATION OF PROVISIONS OF SECTION 178(1) OF THE COMPANIES ACT, 2013 BY MUKKA PROTEINS LIMITED

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Adff dated 24.032015 has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act 2013 (hereinafter referred to as Act) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of Companies Act, 2013

2. The company, Mukka Proteins Limited (hereinafter referred to as Company), having CIN UO5OOKA2010PLC055771 was incorporated on 04.11.2010 and is presently registered under the jurisdiction of Registrar of Companies, Karnataka and the registered office of the company is situated at Mukka Corporate House. Door No. 18-2-16/4, First Cross, NG Road. Attavara, Mangaluru, Dakshina Kannada. Kamataka 575001.

3. The company has filed adjudication application on 07.08.2023 for violation of section 178(1) of the Act. It is seen that the company had converted from private limited company to a public limited company with effect from 02.12.2019. As a result of such a conversion. the provisions of section 149(4) of the Act were applicable to the company as its turnover and outstanding loans. debentures and deposits exceeded the prescribed limits and it was required to appoint independent directors from 02.12.2019, but the company had appointed them only on 15.01.2022. After the company was converted from private limited company to a public limited company on 02.12.2019 and independent directors were required to be appointed the company was required to constitute a Nomination and Remuneration Committee. But the company has complied with these requirements only with effect from 17.01.2022.

4. As per section 178(1) of the Act the Board of Directors of every listed public company and such other class or classes of companies, as may be prescribed shall constitute the Nomination and Remuneration Committee consisting of three or more non-executive directors out of which not less than one half shall be independent directors.

5. As per Rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014. the Board of directors of every listed public company and a company covered under rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an ‘Audit Committee and a Nomination and Remuneration Committee of the Board.

6. As per the provisions of section 178(8) of the Act, in case of any contravention of the provisions of section 177 and this section. the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of one lath rupees,

7. Pursuant to the adjudication application filed by the company, Notice of hearing was sent on 18.09.2023 and physical hearing was held on 26.09.2023 which was attended by Mr. Chethan Nayak K, practising company secretary who made his submissions on the above lines as stated in the application.

8. It is seen that the company is a public-limited company, the company does not fall under the definition of a small company as per the provisions of section 2(85) of the Companies Act 2013. Therefore, the provisions of imposing lesser penalty as per the section 4468 of the Act shall not be applicable in this case.

9. Therefore, having considered the facts and circumstances of the case and the submissions made by the company / director key managerial personnel through their authorised representative. in view of the above said violation, in exercise of the powers vested under Section 454(3) of the Companies Act 2013. I do hereby impose penalty in the following manner on the company and all the officers in default

The company and its directors / key managerial personnel are hereby directed to pay the penalty amount as tabulated above within 90 days from the date of receipt of this Order and file Form INC-28 attaching a copy of the Order and payment challans. In case of directors. such penalty amount is required to be paid out of their own funds. The noticee shall pay the said amount or penalty online by using the website www.mca.gov.In (Miscellaneous head) specifying the details of this Order and the noticee who is paying the penalty.

11 Appeal, if any, against this Order may be filed with the Regional Director (South East Region), Hyderabad within a period of 60 days from the date of receipt of this Order in Form AD) setting forth the grounds of appeal and shall be accompanies by a certified copy of this Order

12. Your attention is also invited to section 454(8) of the Companies Act. 2013 in case of non-compliance of this Order wherein necessary penal action will be initiated under 454(8)(i) and (ii) of the Companies Act. 2013 against the company and directors / key managerial personnel without further notice in the matter.

13. The company is required to serve a copy of this Order on the director(s)/ officer(s)-in-default mentioned above in terms of provisions of section 20 of the Companies Act 2013.

(Sanjay Sood)

Registrar of Companies, Karnataka

and Adjudicating Officer