Introduction: In a recent development, Taskus India Private Limited found itself in hot water with the Ministry of Corporate Affairs due to a significant breach of the Companies Act, 2013. The violation, involving a 120-day gap between two board meetings, led to the imposition of penalties. In this article, we’ll delve into the details of this case, the implications, and the importance of adhering to corporate regulations.
Background of Taskus India Private Limited: Taskus India Private Limited, a registered company under the provisions of the Companies Act, 1956, has its registered address in Mumbai, Maharashtra. The company came under scrutiny for failing to comply with Section 173(1) of the Companies Act, 2013.
The Violation: Section 173(1) mandates that every company must hold its first board meeting within thirty days of its incorporation. Subsequently, it should conduct a minimum of four board meetings each year, with no more than 120 days between consecutive meetings. Taskus India Private Limited failed to meet this requirement when the second board meeting, due on or before September 30, 2021, was held on November 26, 2021, with a delay of 57 days.
Company’s Explanation: The company attributed the delay to the challenges posed by the COVID-19 pandemic, which restricted the availability of one of its directors residing outside India. As a result, the company could not convene the meeting within the prescribed time frame and held it in the third quarter of the year.
Section 173(1) and 173(4) of the Companies Act: Section 173(1) emphasizes the importance of timely board meetings to ensure effective corporate governance. Failure to comply with this provision can lead to penalties. Section 173(4) specifies that officers of the company responsible for giving notice of board meetings can be penalized.
Factors Considered for Penalty: The adjudicating officer, while determining the penalty, takes into account two key factors:
Penalty Imposed: In this case, a penalty of Rs. 25,000 was imposed on each of the directors, namely Sapna Bhambani and Balaji Sekar, for their involvement in the violation of Section 173. The total penalty amounted to Rs. 50,000. The period of violation spanned from September 30 to November 26, 2021.
Consequences of Non-Payment: As per Section 454(8)(i) of the Companies Act, 2013, if the penalty is not paid within ninety days, the company can face fines ranging from Rs. 25,000 to Rs. 5 lakh. Additionally, the officers responsible may be liable for imprisonment of up to six months, fines from Rs. 25,000 to Rs. 1 lakh, or both.
Conclusion: The case of Taskus India Private Limited serves as a stark reminder of the importance of adhering to corporate regulations. Violations can lead to financial penalties and, in some cases, even legal consequences. It is imperative for companies to understand and meet their obligations under the Companies Act, ensuring transparency and good corporate governance. This incident highlights the need for companies to plan and manage their board meetings effectively, even in challenging circumstances, to avoid regulatory penalties and potential legal actions. Compliance remains a cornerstone of corporate integrity and trustworthiness in the business world.
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-MaiI ID : roc.mumbaiPmca.Rov.in
No. ROC(M)/TASKUS /ADJ-ORDER/4326 to 4328
22 September, 2023
Order for Penalty under Section 454 for violation of
Section 173 of the Companies Act, 2013.
IN THE MATTER OF TASKUS INDIA PRIVATE LIMITED
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.
Whereas, the Company TASKUS 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 Ambassador Hotel, Churchgate, Mumbai, Maharashtra, 400020, India, as per the MCA portal.
2. Facts about the Case:-
The Company, filed application for adjudication of penalties for offence under Section 454 of the Companies Act, 2013 for violation of provisions of Section 173(1) of the Companies Act, 2013. Whereas, every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board. As per the application the First Board Meeting was held on 01st June, 2021, the next Board Meeting was required to be held on or before 30th September, 2021. However, the meeting was held on 26th November, 2021 with delay of 57 days i.e from 30th September to 26th November, 2021, which is not within the prescribed time limit as provided in the applicable provision of the Companies Act, 2013 hence, the First applicant Company has not complied with corresponding Section 173 sub section 1 of the Companies Act, 2013 for conducting Meetings of Board.
The applicant Company has state that due to Covid outbreak and non-availability of the Directors to attend the meeting, as one of the director residing outside India and he was facing travel restrictions thereby it was not possible for company to held next Board Meeting within prescribed time and same was held on 26th November, 2021 in 3rd quarter.
The board considered the same and reason mentioned above, conveyed the first Board meeting of the FY 2021-22 on 01st June, 2021 in first quarter and the next Board Meeting was held on the 26th November, 2021 in third quarter within 178 days from the 1st Board Meeting. However, later the board noticed that the default of section 173 had already been committed as benefit of the general circular was only available for first quarter April to June, 2021 and Second quarter July to September, 2021.
3. Section 173(1) and 173(4) is reproduced as under:-
Section 173 :
(1) – Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board: Provided that the Central Government may, by notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.
(4) Every officer of the company whose duly is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.
4. Factors to be taken into account by the Adjudicating Officer:-
While adjudging quantum of penalty under Section 173(4) 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 default.
Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose a penalty of Rs.25,000/- (Rupees Twenty Five Thousand only) on each on its Directors for violation of provisions of Section 173 of the Companies Act, 2013 as per table given below.
|No. of days of default (.)||Penalty imposed on Director(s)||First default
|NA||1. SAPNA BHAMBANI||25,000||25,000||25,000|
|2. BALAJI SEKAR||25,000||25,000||25,000|
(♦) The period of violation of provisions under Section 173 of the Companies Act, 2013 is from 30th September to 26th November, 2021. Delay = 57 days.
I am of this opinion that, the penalty is commensurate with the aforesaid failure committed by every officer of the Company.
The Noticee shall pay the said amount of penalty through “Ministry of Corporate Affairs” portal and proof of payment be produced for verification within 90 days of receipt of this order.
Please note that as per 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 receipt of the copy of 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.
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.
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.
Registrar of Companies and Adjudicating Officer,