In a significant legal development, the Office of the Registrar of Companies, under the Ministry of Corporate Affairs, Government of India, issued a penalty order on October 16, 2023. This order relates to the violation of Section 203 of the Companies Act, 2013, by First Data (India) Private Limited. This article provides a comprehensive analysis of this order, including its context, key details, legal provisions, and implications.
Detailed Analysis:
1. Appointment of the Adjudicating Officer: The order commences by detailing the appointment of Benudhar Mishra as the Adjudicating Officer, vested with the authority to impose penalties as per Section 454 of the Companies Act, 2013.
2. About the Company: It introduces First Data (India) Private Limited and highlights its registered address. The company operates under the regulations of the Companies Act, 1956, and is based in Mumbai, Maharashtra, India.
3. Case Background: The article outlines that First Data (India) Private Limited submitted a suo-moto application for adjudication regarding its violation of Section 203 of the Companies Act, 2013. This breach was related to the appointment of a Company Secretary on May 4, 2020, resulting from difficulties in finding a suitable candidate. The delay amounted to 66 months and 10 days.
4. Provisions of Section 203 of the Companies Act, 2013: The order includes a reproduction of Section 203 of the Companies Act, 2013. This section mandates the appointment of key managerial personnel, including managing directors, company secretaries, and chief financial officers.
5. Factors Considered in Penalty Determination: The Adjudicating Officer is guided by specific factors while assessing the penalty under Section 203(5) of the Act. These factors include identifying disproportionate gain or unfair advantage, as well as quantifying losses sustained by investors due to the default.
6. The Hearing Process: The article delves into the hearing process, where the Company and the officers in default were provided an opportunity to present their case and provide submissions. Denzil Rodrigues, representing the Company, appeared during this stage. The Company explained that they were required to appoint a whole-time Company Secretary from October 24, 2014, but managed to do so only on May 4, 2020. The delay is attributed to the challenge of finding a suitable candidate. The Company asserted that this delay was unintentional, with no malicious intent, and did not harm the interests of members, creditors, or stakeholders.
On the contrary, the presenting officer referred to the Companies (Amendment) Ordinance, 2019, which came into effect on November 2, 2018. According to this, the period of default from October 24, 2014, to November 1, 2018, was compoundable in nature and should not be considered in the adjudication process. The presenting officer recommended that the period from November 2, 2018, to May 3, 2020, for non-compliance with Section 203 of the Companies Act, 2013, should be the focus of adjudication.
7. Nature of Default: The article categorizes the default into two parts:
a) The period of default from October 24, 2014, to November 1, 2018, is considered compoundable and is not addressed in the adjudication.
b) The period from November 2, 2018, to May 3, 2020, is taken up for adjudication under the provisions of Section 203 read with Section 454 of the Companies Act, 2013.
8. The Penalty Order: The order reveals the penalties imposed on the Company, its directors, and key managerial personnel for the 548-day delay in compliance with Section 203. The penalty amounts are determined based on the duration of the default period and are deemed commensurate with the nature of the failure.
9. Compliance and Consequences: The Company and individuals in default are instructed to file an appeal within 60 days of receiving the order. Failure to pay the penalty within 90 days may lead to penalties and potential imprisonment, in accordance with the provisions of Section 454 of the Companies Act, 2013.
Conclusion:
This penalty order sheds light on the stringent enforcement of corporate regulations, underscoring the importance of adhering to statutory provisions, particularly those related to key managerial personnel such as the Company Secretary. By dissecting this case, businesses can gain valuable insights into the repercussions of non-compliance and the significance of prompt corrective actions. The order also underscores the government’s unwavering commitment to corporate compliance and safeguarding the interests of investors and stakeholders.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES
100, “EVEREST”, MARINE DRIVE,
MUMBAI – 400 002
Website : www.mca.gov.in
e-Mail ID : [email protected]
No.ROC(M)/ADJ-ORDER/162543/4611-4613
Date: 16 OCT 2023
Order of Adjudication of Penalty under Section 454 for violation of Section 203 of the Companies Act, 2013
IN THE MATTER OF FIRST DATA (INDIA) PRIVATE LIMITED
(CIN: U64203MH2006PTC162543).
Adjudicating Officer: – Benudhar Mishra, ICLS, ROC, Mumbai, Maharashtra.
Presenting Officer: – Sai Sankar Landa, ICLS Dy. ROC, Mumbai, Maharashtra.
Authorized person on behalf of Company: – Denzil Rodrigues
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 the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 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.
2. Company: –
Whereas the Company FIRST DATA (INDIA) PRIVATE LIMITED [herein after known as Company] is registered with this office under the provisions of Companies Act, 1956 having its registered address at 74, Kalpataru Square, Off Andheri Kurla Road, Kondivita Lane, Andheri (East), Mumbai City, Mumbai, Maharashtra, 400 059, India as per the MCA portal.
3. Facts about the Case: –
The Company has filed suo-moto application for adjudication of violation of the provisions of Section 203 of the Companies Act, 2013 read with Rule 8A of Companies (Appointment Company Secretary on 04.05.2020, due to the difficulty in finding a suitable candidate which led to delay of 66 months and 10 days.
4. Sections 203(1), 203(4) and 203(5) of the Companies Act, 2013 are reproduced as under: –
Section 203 — Appointment of Key Managerial Personnel
Section 203 (1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel, -(i) managing director, or chief executive o wer or manager and in their absence, a whole-time director; (ii) company secretary; and(iii) Chief Financial Officer.
Section 203 (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 sorting of the Board within a period of six months from the date of such vacancy.
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 continuing one with further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.
5. Factors to be taken into account by the Adjudicating Officer: –
While adjudging quantum of penalty under Section 203(5) of the Act, the Adjudicating Officer shall have due regard to the following factors, namely:
a. The amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of default.
b. The amount of loss caused to an investor or group of investors as a result of the quantify the unfair advantage made by the Noticee or the loss caused to the investors in a default of this nature.
6. Hearing: –
The undersigned in exercise of power conferred under sub-Section 3 of Section 454 of the Companies Act, 2013 had issued hearing notice dated 10.05.2023 to the Company and Officers in default for giving an opportunity to be heard and for submissions in the matter, if any. In response to the hearing notice, representative of the Company, Denzil Rodrigues appeared and gave consent to adjudicate and pass necessary orders for adjudicating the penalty as per the provisions of the Companies Act, 2013.
The representatives of the Company stated that the company was required to appoint Whole time Company Secretary w.e.f. 24.10.2014. However, the Company appointed the Whole-time Company Secretary on 04.05.2020 only. Hence, there is a violation of provisions of Section 383A of Companies Act, 1956 and Section 203 of the Companies Act, 2013.
Delay in filing up the casual vacancy in the office of whole time key managerial personnel was caused due to the difficulty in finding a suitable candidate. Further, the authorized representative submitted that there was no mens rea and default was committed due to unavoidable circumstances, having no mala fide intention and the default is not of such a nature as to prejudice the interest of members or creditors or others dealing with the Applicant Company. It was committed due to unavoidable circumstances. Application is being filed suo moto by the Applicant Company and its officers in default to rectify the non-compliances pertaining to Section 203 of the Companies Act, 2013.
However, the presenting officer referring to the Companies (Amendment) Ordinance, 2019 dated 12.01.2019 which came into effect from 02.11.2018 stated that the period of default from 24.10.2014 to 01.11.2018 is compoundable in nature, henceforth such period shall not be made part of adjudication and the same need to be compounded accordingly with the appropriate authority u/s 441 of the Companies Act, 2013.
Thus, the presenting officer is of the opinion that the period from 2.11.2018 to 03.05.2020 for non-compliance of provisions of section 203 of the Companies Act, 2013 shall be taken up
7. Nature of default: –
a) The period of default for non-compliance of provision of section 203 of the Companies Act, 2013 from 24.10.2014 to 1.11.2018 is compoundable and accordingly it is not taken up for adjudication.
b) The period from 2.11.2018 to 03.05.2020 for non-compliance of provisions of section 203 of the Companies Act, 2013 is taken up for adjudication in terms of provisions of section 203 read with section 454 of the Companies Act, 2013.
8. Order: –
a. Having considered the facts and circumstances of the including representations made by the company, officers in default and the presenting officer, I hereby impose penalty on the company and every director and key managerial personnel of the company who is in default as per the table below for violation of provisions of Section 203 of the Companies Act, 2013 for delay of 548 days. I am of this opinion that, the penalty is commensurate with the aforesaid failure committed by the Noticee.
| Sr. No | Penalty imposed on the Company/ Director(s) | Period of default | No of days of default |
First Default Penalty (in Rs) | Continuing Default Penalty (In Rs) | Total Penalty (In Rs) |
Maximum Penalty (In Rs) |
| 1. | FIRST DATA (INDIA) PRIVATE LIMITED | 02.11.2018 to 03.05.2020 | 548 | 5,00,000 | 548 X 1000 | 10,48,000 | 10,00,000 |
| 2. | RAJAN VERMA, Director | 02.11.2018 to 03.05.2020 | 548 | 50,000 | 548 X 1000 | 5,98,000 | 5,50,000 |
| 3. | SUMIT CHOPRA, Director | 02.11.2018 to 03.05.2020 | 548 | 50,000 | 548 X 1000 | 5,98,000 | 5,50,000 |
| TOTAL PENALTY | 21,00,000 | ||||||
b. As per the signatory details available on MCA 21 Portal, the above-mentioned individual(s) were officer in default during the period of violation Region) within a period of 60 days from the date of receipt of this order in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order.
e. Your attention is also invited to Section 454(8)(ii) of the Companies Act, 2013, where an officer of a company who is in default does not pay the penalty within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both. Regarding consequences of non-payment of penalty within the prescribed time limit of ninety days from the date of receipt of this order in terms of the provisions of Section 454(8)(i) of the Companies Act, 2013, where Company does not pay the penalty imposed by the adjudicating officer or the Regional Director within a period of ninety days from the date of the receipt of the copy or the order, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees.
f. Therefore, in case of default in payment of penalty, prosecution will be filed under Section 454(8)(i) and (ii) of the Companies Act, 2013 at your own costs without any further notice.
(Benudhar Mishra)
Registrar of Companies and Adjudicating
Officer, Maharashtra, Mumbai.
