In a significant development, the Ministry of Corporate Affairs (MCA), Government of India, has imposed a hefty penalty of 20 lakh on Himalayan Rolling Steel Industries Private Limited and its directors for not complying with Section 203(4) of the Companies Act, 2013. This act mandates the appointment of a Company Secretary (CS) in certain companies. This decision, passed under Order NO: ROC/JK/JMU/AN454/2022-23/2796/45 dated 14/06/2023, is bound to set a precedent in corporate governance in India.
As per the Ministry of Corporate Affairs’ notification, Himalayan Rolling Steel Industries, registered in Jammu and Kashmir, had failed to appoint a whole-time Company Secretary since 01.07.2014. The action is in violation of Section 203(4) of the Companies Act, 2013, which mandates the appointment of a CS within six months from the date of a vacancy.
The MCA issued several notices and reminders to the company, yet no response or corrective action came forth. Therefore, the MCA imposed a maximum penalty of 5 lakh rupees on the company and 5 lakh each on the directors – Mr. Kamili Shahid Ahmed, Ms. Masuda Kausa, and Mr. Shafat Ahmed Kamili, thereby amounting to a total of 20 lakh rupees.
The non-compliance continued for a total of 1683 days from 02.11.2018 to 12.06.2023, excluding a cooling period of six months, as detailed in the MCA’s notification.
Conclusion:
This order underscores the importance of adherence to the Companies Act, 2013, specifically the need for the appointment of a full-time Company Secretary in certain firms. The hefty penalty serves as a deterrent for companies and their directors, emphasizing the need for strict adherence to corporate governance norms. The MCA’s stern action could be a wake-up call for other companies that take these norms lightly. It’s also a clear signal of the government’s commitment to enforcing compliance with corporate governance norms, thus ensuring a more robust and transparent corporate sector.
Government of India
Ministry of Corporate Affairs
0/0 Registrar of Companies
U.T of Jammu & Kashmir and U.T of Ladakh
-cum-Official Liquidator, Attached to the Hon’ble High Court of
Jammu & Kashmir and Ladakh
Hall Nos. 405-408, South Block, Rail Head Complex, Jammu
SDA Office Complex, Ground Floor, Bemina Bvepass, Srinaaar
Order NO: ROC/JK/JMU/AN454/2022-23/2796/45 Dated: 14/06/2023
ORDER FOR PENALTY FOR VIOLATION OF SECTION 203(4) OF THE COMPANIES ACT, 2013
IN THE MATTER OF M/S HIMALAYAN ROLLING STEEL INDUSTRIES PRIVATE LIMITED
(CIN: U27106JK2007PTC002796)
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) followed by SO 3956(E) dated 30.10.2019 appointed the undersigned 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:
M/S Himalayan Rolling Steel Industries Private Limited (herein after known as ‘Company’) is registered company with this office under the provision of Section 7 of the Companies Act, 1956 (erstwhile Companies Act, 2013) incorporated on 29.06.2007 and presently having its registered office situated at J&K SIDCO Industrial Estate Rangreth, Srinagar, JK-190005 as per the records of MCA 21. The details of the Company are as under:
| S. No. | Particulars | Remarks |
| 1. | Paid up Capital – (Equity & Preference Shares) | 18,00,00,000/- |
| 2. | Turn Over — (Revenue from Operation) | 1,97,78,799.19 |
| 3. | Holding Company | – |
| 4. | Subsidiary Company | – |
| 5. | Whether Company registered under Section 8 of the Act? | – |
| 6. | Whether Company registered under any other Special Act? | – |
3. FACTS ABOUT THE CASE:
Whereas it is observed from the records of the company available on MCA Portal that the paid-up capital of the company has been increased from 1 Crore to 10 Crore w.e.f 30.04.2013 vide SRN S21041306 and the paid up capital of the company as on date is 18,00,00,000/- and the undersigned on the examination of the signatory details of the captioned company has found that the company has not appointed whole time Company Secretary w.e.f 01.07.2014 after the vacancy created from the date of cession of the previous whole time Company Secretary on 30.06.2014 within the stipulated time period of six months from the date of such vacancy as provided u/s 203(4) of the Companies Act, 2013. Therefore, the provisions of section 203 of the Companies Act, 2013 is attractive on the Company w.e.f 01.01.2015 excluding cooling period of 6 months to 12.06.2023 till the date of Adjudication Order.
In terms of the provisions of Section 203(4) r/w 454 of the Companies Act, 2013, this office had issued Adjudication Notices (AN) vide No. ROC/JK/JMU/AN454/2022-23/2796/1619-1623 dated 16.02.2023, first reminder vide No. ROC/JK/JMU/AN454/2022-23/2796/24-28 dated 19.05.2023 and second reminder vide No. ROC/JK/JMU/AN454/2022-23/2796/36-39 dated 05.06.2023 to the company and its officers in default giving an opportunity of being heard on 17.03.2023, 01.06.2023 & 12.06.2023 respectively at the O/o Registrar of Companies, UT of J&K and UT of Ladakh, Hall No. 405 — 408, South Block, A-2, Bahu Plaza, Rail Head Complex, Jammu — 180012 but, neither the company nor any director of the company or any authorized person of the company attended hearing in the office fixed on the above date and no document/ response was produced by the company to the adjudication notices issued by this office.
And whereas the violation of Section 203 of the Act falls under the purview of Adjudication u/s 454 of the Act vide Companies (Amendment) Act, 2019 dated 31.07.2019 w.e.f 02.11.2018. Since the default of non-appointment of Whole Time Company Secretary u/s 203 of the Act has continued default w.e.f 01.01.2015 to 12.06.2023, therefore, the company is liable to be adjudicated u/s 454 of the Act for the defaulting period w.e.f 02.11.2018 to 12.06.2023.
And whereas in view of the above facts, the undersigned has reasonable cause to believe that the company and its directors have not complied with the provisions of Section 203(1) & (4) of the Companies Act, 2013
And whereas, the company and all its officers in default/directors have rendered themselves liable for penal action as provided under sub-Section (5) of Section 203 of the Act.
4. THE RELEVANT PROVISION OF THE SECTIONS 203 R/W 8A (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) AMENDMENT RULES 2014 AND 2020 ARE AS UNDER:
SECTION 203 (APPOINTMENT OF KEY MANAGERIAKL PERSONNEL)
(4) If the office of any whole-time key managerial personnel is vacated or if the company becomes liable for appointment of whole-time company secretary by virtue of Section 203 read with Rule 8A of the (Appointment & Remuneration of Managerial Personnel Amendment Rules, 2014 and 2020, the company is liable to fill the vacancy after approving it in the meeting of the Board within a period of six months from the date of such vacancy.
(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 manga4eraial 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 a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees”.
RULE 8A (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) AMMENDMENT RULES, 2020-NOTIFIED ON 03RD JANUARY 2020 (APPLICABLE IN RESPECT OF FINANCIAL YEAR COMMENCING ON OR AFTER 01.04.2020)
Appointment of Company Secretaries in Companies Not Covered Under Rule 8A” Every Private Company which has a paid up share capital of ten crore rupees or more shall have a whole-time company secretary.”
5. ADJUDICATION OF PENALTY: –
The applicant company and its officers, wo have defaulted the provisions of Section 203(1) r/w 203(1) r/w 203(4) of the Act for non-appointment of Whole-Time Company Secretary are liable for penalties under Section 203(5) of the Act w.e.f. 02.11.2018 to 12.06.2023 (1683 days) after excluding cooling period of 6 months.
In exercise of the powers conferred on the undersigned vide Notification dated 24th March 2015 with a power to adjudicate penalty under Section 203 of the Act entrusted to the undersigned vide company’s (Amendment) Act, 2019 w.e.f 02.11.2018 and having considered the facts and circumstances of the case besides no response by the Directors of the Company and after taking into account the factors mentioned herein above, I do hereby impose the penalty on the company and its officers in default as per the table below for violation of section 203 of the Act r/w Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
| Penal provision
for violation of section 203 (1) & (4) of the Companies Act, 2013 |
Penalty
imposed on company/ directors(s) |
No. of days of default | Calculation of penalty amount | Maximum penalty that can be imposed | Penalty imposed by adjudicating officer u/s
454 of the Companies Act, 2013 |
| A | B | *C | D | E | F |
| 203(5) of the Act | On company | – | Rs. 5,00,000/- | Rs. 5,00,000/- | Rs. 5,00,000/‑ |
| Mr. Kamili Shahid Ahmed Director | 1682 | ₹ 50,000
+ 1682 x 1000 =16,82,000 = ₹ 17,32,000/‑ |
₹ 5,00,000/- | ₹ 5,00,000/‑ | |
| Ms. Masuda Kausa, Director | 1682 | ₹ 50,000
+ 1682 x 1000 =16,82,000 = ₹ 17,32,000/‑ |
₹ 5,00,000/- | ₹ 5,00,000/- | |
| Mr. Shafat Ahmed Kamili, Director | 1682 | ₹ 50,000
+ 1682 x 1000 =16,82,000 = ₹ 17,32,000/‑ |
₹ 5,00,000/- | ₹ 5,00,000/‑ |
*No. of days have been calculated from 02.11.2018 to 12.06.2023 (till the date of issue of Adjudication Order).
a. The Company and its directors are hereby directed to pay the penalty amount as per Coloumn No. ‘F’ of above Table. In case of directors such amount is required to be paid out of their own funds.
b. The company and its directors are hereby directed to rectify the default immediately from the date of receipt of copy of this order.
c. The notices shall pay the said amount of penalty through online by using the website mca.gov.in (Misc. Head) in favour 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 with the filing of e-form INC-28.
d. 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 onMinistry website www.mca.gov.in) setting forth the gounds of appeal and shall be accompanied by a certified copy of the order. (Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014).
e. Your attention is also invited to Section 454(8) of the Act in the event of non-compliance of this order.
You are also requested to serve a copy of this ORDER on the undermentioned Director/MD/WTD/Officers under Section 20 of the Companies Act, 2013 for compliance.
(SUDHIR PHAYE)
(ADJUDICATING OFFICER)
REGISTRAR OF COMPANIES
UT OF J&K AND UT OF LADAKH
JAMMU
(SUDHIR PHAYE)
(ADJUDICATING OFFICER)
REGISTRAR OF COMPANIES
UT OF J&K AND UT OF LADAKH
JAMMU
from when got power to levy penalty