MCA Penalizes company for Non-Inclusion of Sexual Harassment Compliance in Board Report

The Ministry of Corporate Affairs (MCA) has imposed penalties on Ceeta Industries Limited for violating Section 134(3)(q) of the Companies Act, 2013. The violation pertains to the failure to include in its board reports for the financial years 2019 and 2020 that the company has complied with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. This case underscores the importance of compliance with legal provisions related to workplace safety and gender-specific regulations.

Appointment and Authority: The MCA appointed the Adjudicating Officer under Section 454 of the Companies Act, 2013, for adjudging penalties for violations of the Act. The case concerns Ceeta Industries Limited, a company incorporated on 31st October 1984 under the jurisdiction of the Registrar of Companies in Karnataka. The company’s registered office is currently located in Tumkur, Karnataka.

Legal Requirement: Section 134(3)(q) of the Companies Act, 2013 mandates that the board’s report to the general meeting must include a statement indicating the company’s compliance with the provisions relating to the constitution of an Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. Rule 8(5)(x) of the Companies (Accounts) Rules, 2014 specifies this requirement.

Violation Detected: During an inquiry conducted under Section 206(4) of the Act, it was noted that Ceeta Industries Limited’s board reports for the financial years ending on 31st March 2019 and 31st March 2020 did not disclose compliance with the Sexual Harassment of Women at Workplace Act. This failure to make the required disclosure constituted a violation of Section 134(3) of the Companies Act.

Penalties for Non-Compliance: Section 134(8) of the Companies Act, 2013, prescribes penalties for non-compliance. In case a company fails to comply with the provisions of this section, it is liable to a penalty of three lakh rupees, and every officer of the company who is in default is liable to a penalty of fifty thousand rupees.

Notices and Submissions: The violation was brought to the company’s attention through a Preliminary Findings Letter issued on 28th July 2021 by the Inspecting Officer. Subsequently, a show cause notice was issued on 20th April 2023. The company responded by submitting an adjudication application on 29th May 2023. Following this, a notice of hearing was issued on 27th July 2023, and a physical hearing was held on 10th August 2023. Mr. Mahaveer Jain, a practicing company secretary, represented the company and its directors and made submissions. It was argued that as the company had fewer than ten employees in each of its establishments, it was not required to constitute an Internal Complaints Committee under the Sexual Harassment of Women at Workplace Act, 2013. The company stated that no complaints from women workers had been received, and the non-disclosure of the statement in the board reports was unintentional.

Non-Applicability of Lesser Penalty: As Ceeta Industries Limited is a public company, it does not qualify as a small company as per the provisions of Section 2(85) of the Companies Act, 2013. Therefore, the provisions of imposing a lesser penalty as per Section 446B of the Act do not apply in this case.

Penalty Imposition: Considering the facts and circumstances of the case and the submissions made by the company and its officers through their authorized representative, a penalty has been imposed on the company and its officers in default for each year of the violation:

• Company: Rs. 3,00,000 for each financial year (2019 and 2020)
• Mr. Krishna Murari Poddar, Managing Director: Rs. 50,000 for each financial year
• Mr. Anubhav Poddar, CFO (KMP): Rs. 50,000 for each financial year
• Ms. Sneha Binani, Company Secretary: Rs. 50,000 for each financial year

Payment and Appeal: The company and its directors/key managerial personnel are directed to pay the respective penalty amounts separately within 90 days from the date of receiving the Order. Form INC-28 must be filed, attaching a copy of the Order and payment challans. Directors are required to pay the penalty from their own funds. Payment should be made online through the specified website. An appeal can be filed within 60 days from the receipt of the Order.

Conclusion: The imposition of penalties on Ceeta Industries Limited serves as a reminder of the significance of compliance with legal provisions, especially those related to workplace safety and gender-specific regulations. Companies are responsible for ensuring that they fulfill their obligations, as specified by the law, and make appropriate disclosures in their board reports. Failure to do so can result in financial penalties and potential legal actions.

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Registrar of Companies, Karnataka
Kendriya Sadan, 2nd Floor, ‘E’ Wing,
Koramangala. Bengaluru -560 034
Phone: 080 25537449/25633105
E-mail ID: roc. bangalore@ mca.gov.in

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. 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALITES) 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-42011/112/2014-Ad.II dated 24.03.2015 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 31.03.2020 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 lath 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 non­disclosure 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:

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 AD) 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)0) 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