MCA imposes 4.5 Lakh penalty for not including statement on constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act, 2013 in Board report
Introduction
Ceeta Industries Limited, a company registered under the jurisdiction of the Registrar of Companies, Karnataka, has been penalized by the Ministry of Corporate Affairs (MCA) for violating Section 134(3)(q) of the Companies Act, 2013, by not including a required statement on the constitution of the Internal Complaints Committee (ICC) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013, in their Board report. This article discusses the details of the violation and the penalties imposed by the MCA.
Detailed Analysis
Ceeta Industries Limited, incorporated in 1984 and headquartered in Tumkur, Karnataka, is the subject of an adjudication process by the MCA. The violation pertains to Section 134(3)(q) of the Companies Act, 2013, which mandates that the Board of Directors’ report to be attached to statements presented before a company in a general meeting should include various prescribed matters. According to Rule 8(5)(x) of the Companies (Accounts) Rules, 2014, the Board’s report should also contain a statement confirming the company’s compliance with provisions related to the constitution of the Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013.
During the course of an inquiry, it was discovered that Ceeta Industries Limited had failed to disclose in its Board reports, which covered the financial years ending on March 31, 2019, and March 31, 2020, that the company had complied with the provisions related to the constitution of the Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. This non-disclosure constituted a violation of Section 134(3) of the Companies Act, 2013.
As a consequence, Section 134(8) of the Companies Act, 2013, prescribes penalties for non-compliance. If a company defaults in complying with the provisions of this section, the company is liable to a penalty of three lakh rupees. Furthermore, every officer of the company who is in default is liable to a penalty of fifty thousand rupees.
The violation was initially identified in a Preliminary Findings Letter issued on July 28, 2021, by the Inspecting Officer. Subsequently, a show cause notice was issued on April 20, 2023, in response to the violation of Section 134(3) of the Companies Act.
Ceeta Industries Limited submitted an adjudication application on May 29, 2023. Following this, a notice of hearing was sent on July 27, 2023, and a physical hearing was held on August 10, 2023, during which Mr. Mahaveer Jain, a practicing company secretary, represented the company and its directors. Mr. Jain argued that since the company has fewer than ten employees in each of its establishments, it is not required to constitute an Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. He further contended that the company had not received any complaints from women workers, and the non-disclosure of the statement in the Board’s report was unintentional.
Since Ceeta Industries Limited is a public company, it 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 for imposing a lesser penalty, as per Section 446B of the Act, do not apply in this case.
Conclusion
Ceeta Industries Limited’s penalty serves as a reminder of the importance of complying with all statutory requirements. The failure to include the required statement on the constitution of the Internal Complaints Committee in the Board report, as mandated by the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013, has resulted in financial penalties for both the company and its key officers.
This case highlights the need for companies to diligently adhere to the legal requirements set out in the Companies Act, no matter how seemingly procedural they may appear. Compliance with these provisions is critical to avoid financial penalties and potential legal actions. The penalty levied by the MCA underscores the significance of taking statutory obligations seriously.
Companies and their directors should be aware of their responsibilities and obligations under the Companies Act to ensure regulatory compliance. The prompt payment of any penalties is essential to avoid further legal consequences, as non-compliance with the MCA’s order could lead to additional actions under Section 454(8) of the Companies Act, 2013.
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Registrar of Companies, Karnataka
Kendriya Sedan, 2′ Floor, ‘E’- Wing.
Koramangala. Bengaluru – 560 034
Phone : 08045537449/2563310S
E-mail ID: [email protected]
F. No. ROC(8)/Adj.Order/454-134(3)/CEETA /Co.No.21494/2023 Date:12.09.2023
Order of Adjudication of Penalty Under Section 454 of Companies Act, 2014 read with Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014 for Violation of Provisions of Section 134(3) of the Companies Act, 2013 read with Corresponding Rules by Ceeta Industries Limited.
Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/11V2014-Ad.II 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 (hereinafter referred to as Act).
2. The company, Ceeta Industries Limited (hereinafter referred to as Company) was incorporated on 31.10.1984 under the jurisdiction of Registrar of Companies. Karnataka and the registered office of the company is presently situated at Plot No. 34-38, KIAOB Industrial Area, Sathyamangala, Tumkur — 572104.
3. As per the provisions of section 134(3)(q) of the Act. there shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include such other matters as may be prescribed. Pursuant to Rule 8(5)(x) of the Companies (Accounts) Rules, 2014. in addition to the information and details specified in sub-rule (4), the report of the Board shall also include a statement that the company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act, 2013.
4. During the course of inquiry under section 206(4) of the Act, it was noticed that the Board’s report attached to the financial statement as on 31.03.2019 and 31.032020 did not disclose that the company has complied with provisions relating to constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition. Redressal) Act, 2013. Hence the company has violated the provisions of section 134(3) of the Act and the company and officers in default of the company are liable for action under section 134(8) of the Act
5. As per the provisions of Section 134(8) of the Companies Act. 2013, if a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.
6. This violation was pointed out in the Preliminary Findings Letter issued on 28.07.2021 by the Inspecting Officer and further show cause notice was issued for the said violation of section 134(3) of the Act on 20.04.2023.
7. The company thereafter submitted an adjudication application on 29.05.2023, pursuant to which, a notice of hearing was sent on 27.07.2023 and physical hearing was held on 10.082023 which was attended by Mr. Mahaveer Jain, practising company secretary who appeared on behalf of the company and directors and made his submissions. He submitted that since the company has less than ten employees in each of its establishment. it is not required to constitute an Internal Complaints Committee as per Sexual Harassment of Women at Workplace (Prevention Prohibition, Redressal) Act 2013. Further, till date no complaint from any women worker has so far been received in the company and he submitted that the non-disclosure of the statement in the Boards report was also not intentional or deliberate. The company thereafter submitted its details of officers who are in default for the years 2019 and 2020 vide letter dated 16.08.2023.
8. As the company is a public company, it 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 of non-compliance of provisions of section 134(3) of the Act I do hereby impose penalty in the following manner on the company and all the officers in default during the period of offence committed:
| S. No. | Particulars | for Penalty the Board Report ending 31.03.2019 | Penalty for the Board Report ending 30.03.2020 |
| 1 | Company | 3,00.000 | 3,00.000 |
| 2 | Mr. Krishna Murari Poddar, Managing Director | 50.000 | 50,000 |
| 3 | Mr. Anubhav Poddar, CFO (KMP) | 50,000 | 50.000 |
| 4 | Ms. Sneha Binani, Company Secretary | 50,000 | 50,000 |
10. The company and its directors / key managerial personnel are hereby directed to pay the penalty amount separately for each default 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 notice shall pay the said amount of penalty online by using the website vevnv.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 ADJ 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 directors/ officers in default mentioned herein under the provisions of section 20 of the Act.
(Sanjay Sood)
Registrar of Companies, Karnataka and
Adjudicating Officer
