MCA Imposes Penalty for Board Meeting Gap Exceeding 120 Days

Introduction: Recently, INTO Education India Private Limited faced regulatory scrutiny from the Ministry of Corporate Affairs (MCA) for failing to adhere to the mandated timeline between board meetings, as per the Companies Act, 2013. This violation has led to the imposition of penalties on the company and its officers.

Detailed Analysis:

1. Background and Appointment: The MCA appointed the Registrar of Companies, NCT of Delhi & Haryana as the Adjudicating Officer under section 454(1) of the Companies Act, 2013. This appointment empowers the officer to adjudicate penalties for violations related to company board meetings.

2. Company Details: INTO Education India Private Limited, a subsidiary of INTO University Partnerships Limited, was scrutinized for its compliance with the Companies Act, 2013. The company’s financial details and operational compliance were reviewed, revealing a significant gap between board meetings in the calendar year 2022.

3. Violation of Companies Act: The company held its second and third board meetings with a gap of 180 days, far exceeding the permissible limit of 120 days between consecutive meetings as stipulated in clause 2.1 of Secretarial Standard-1 issued by the ICSI r/w section 118(10) of the Act.

4. Penalty Imposition: Following the violation, INTO Education India Private Limited, along with its directors and additional director, faced penalties under section 118(11) of the Companies Act, 2013. The penalties were imposed as follows:

• INTO Education India Private Limited: ₹25,000
• Mr. Diwakar Chandhok (Director): ₹5,000
• Mr. John Buchanan Sykes (Director): ₹5,000
• Mr. Steven George Smale (Director): ₹5,000
• Mr. Viren Gupta (Additional Director): ₹5,000

5. Order and Compliance: The company and its directors were directed to pay the penalties within 90 days of the order receipt. Failure to comply with the order could lead to further consequences as per section 454(8) of the Act.

Conclusion: The penalty imposed on INTO Education India Private Limited underscores the importance of adhering to statutory timelines and regulations set forth in the Companies Act, 2013. Companies must ensure timely conduct of board meetings to avoid regulatory scrutiny and financial penalties. This case serves as a reminder for all entities to maintain compliance with legal standards governing corporate governance in India.

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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS,
OFFICE OF REGISTRAR OF
COMPANIES,
NCT OF DELHI & HARYANA
4TH FLOOR, IFCI TOWER, 61, NEHRU
PLACE, NEW DELHI -110019

ORDER FOR PENALTY FOR VIOLATION OF SECTION 118 OF THE COMPANIES ACT, IN THE MATTER OF INTO EDUCATION INDIA PRIVATE LIMITED (U80902DL2021FTC376991) ADJUDICATION IN RESPECT OF VIOLATION OF COMPANIES ACT, 2013.

1. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 (See SO 831(E), dated 24.03.2015) appointed Registrar of Companies, NCT of Delhi & Haryana as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (herein after known as Act) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company:

Whereas the company viz. INTO EDUCATION INDIA PRIVATE LIMITED (CIN-U80902DL2021FTC376991) (herein after known as ‘company’) incorporated under the Companies Act, 2013 having its registered office as per MCA21 Registry at address Plot No. 18-20, Kasturba Gandhi Marg, Mezzanine Floor, Hindustan Times House, Connaught Place, Central Delhi, New Delhi, Delhi, India, 110001. The financial & other details of the subject company for F.Y. 2022-23 as available on MCA-21 portal is stated as under:

3. Facts about the Case: –

1. Whereas the subject company has filed suo-moto applications for adjudication vide SRN F64498991, F64502446, F64783954 and F88560271 dated 16.09.2023, 21.09.2023 and 23.12.2023 u/s 454 of the Act, with regard to the violation of section 173(1) rlw 118 of the Act

a. The company in its application has stated that it conducted its first Board Meeting for FY 2022-23 on 23^rd June 2022 and the second Board Meeting of the company was held on 20th December 2022 i.e., with a gap of more than 120 days between the two consecutive meetings.

b. Whereas as per records available and submission made by the company it is observed that company had conducted its Board Meeting for the calendar year 2022 as following manner: –

c. Thus, in view of the above facts, it is hereby observed that the subject company made a default by conducting its 3^rd board meeting with the gap of 180 days i.e., whereas as per clause 2.1 of secretarial standard-1, the gap between two board meetings should not have exceeded 120 days. Further it is also observed that the company could not hold its fourth Board Meeting for the Calendar Year 2022. Hence, there are two instances wherein clause 2.1 of secretarial standard-1 issued by the ICSI r/w section 118(10) of the Act has not been complied with.

I. In terms of the provisions of section 118(10) r/w 454 of the Companies Act, 2013, this office had issued Show Cause Notices (SCN) vide ROC/D/Adj/2024/Section118/INT0/1838-1839 dated 24.04.2024 to the Company and officers in default.

II. In response to the SCN, the subject company submitted its reply through e-mail dated 08.05.2024 and has inter alia stated that-

“1. The Company and its directors, the applicants have filed 4 separate applications suo-moto u/s 454 of the Companies Act, 2013, without any prior Show cause notice issued by your office.

2. The default committed under Section 173 of the Companies Act, 2013 was neither intentional nor deliberate.

3. The applicants pray that since the application for making good the default was made suo-moto and in good faith and the delay in holding the board meeting was a procedural default without any malafide intent, therefore, the least/ minimum cost be imposed on the defaulting applicants.

In view of the above, the applicants submit that the Adjudicating officer may adjudicate the penalty without holding a hearing for the default and oblige.”

4. Factors considered for adjudication of penalties: –

i. It is observed that in the calendar year 2022, the subject company held its 2n^d & 3rd board meetings on 23.06.2022 and 20.12.2022 respectively, wherein the gap between the said two board meetings was 180 days, i.e., with a gap of more than 120 days between the two consecutive meetings. Accordingly, the third board meeting was delayed by 60 days. Further it is also noted that the company failed to hold the minimum numbers i.e. 4 (four) board meetings in a calendar year.

ii. In view of the above, the company failed to comply with the provisions of clause 2.1 of Secretarial Standard-1 specified by the ICSI r/w section 118(10) of the Act.

5. The relevant provision of the Act are as under:

The relevant provision of Section 118:

(10) “Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved as such by the Central Government.”

(11) “If any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of twenty- five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.”

The relevant provision of secretarial standard -1 issued by ICSI as on date of default are as under:

(2.1) “The company shall hold at least four meetings of its Board in each Calendar Year with a maximum interval of one hundred and twenty days between any two consecutive Meeting.”

6. Adjudication of penalty: –

a. The subject company is a wholly owned subsidiary of a foreign company, namely INTO University Partnerships Limited. Therefore, the subject company does not get covered under the purview of Small Company as defined u/s 2(85) of the Companies Act, 2013. Hence, the benefit of section 446B of Companies Act, 2013 would not be applicable on the company.

b. Now in exercise of the powers conferred on the undersigned vide Notification dated 24th March 2015 and having considered the reply submitted by the noticee(s), I hereby impose penalty on the company and its officers in default for violation of clause 2.1 of Secretarial Standard-1 specified by the ICSI r/w section 118(10) of the Companies Act, 2013 which are as follows: –

7. Order:

a. Names of party as mentioned in the table above are hereby directed to pay the penalty amount as per column no. ‘C’ therein. In case of parties other than company, such amount is required to be paid out of their own funds.

b. The said amount of penalty shall be paid through online by using the website mca.gov.in (Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

c. Appeal against this order may be filed with the Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi-110003 within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website mca.gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of the order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudication of Penalties) Rules, 2014].

d. Your attention is also invited to section 454(8) of the Act in the event of non compliance of this order.

Place: New Delhi.

(Pranay Chaturvedi, ICL
(Adjudicating Office
Registrar of Companies
NCT of Delhi & Haryana

No. ROC/D/Adj/2024/Section 118/INTOQ/2485-2490

Date: 18-06-2024