The Ministry of Corporate Affairs (MCA) has recently issued an adjudication order imposing penalties on Madhyam Agrivet Industries Limited for non-compliance with Section 173 of the Companies Act, 2013. The order specifically addresses the company’s failure to provide required documents to its independent directors. This article provides an analysis of the case and the penalty levied by the MCA.
Analysis: The adjudication order states that during an inquiry conducted by the MCA, it was observed that the independent directors of Madhyam Agrivet Industries Limited expressed dissatisfaction with the company’s failure to provide them with relevant documents in advance. The directors strongly emphasized their need for the documents to make informed recommendations to the shareholders. The MCA found that the company violated Section 173 of the Companies Act, 2013, read with Section 118(10) and Clause 1.3 of the Secretarial Standard (SS-1).
Based on the provisions of Section 173(4) of the Companies Act, 2013, the order mentions that every officer of the company responsible for giving notice under this section and failing to do so is liable for a penalty of twenty-five thousand rupees. The matter was discussed with the company during the inquiry, but the company did not accept the default and provided an unsatisfactory reason for its actions. Consequently, the director(s) or Key Managerial Personnel (KMP) responsible for the violation are liable for action under Section 173(4) of the Companies Act, 2013.
The adjudication officer issued an adjudication notice to the company and its officers in default, under Section 454(4) read with 173(4) of the Companies Act, 2013 and Rule 3(2) of Companies (Adjudication of Penalties) Rules, 2014. The order imposed a penalty on the company and its officer(s) for the violation of Section 173 of the Act.
Conclusion: The adjudication order by the Ministry of Corporate Affairs reflects the penalties imposed on Madhyam Agrivet Industries Limited for its failure to provide required documents to independent directors. The order emphasizes the significance of complying with Section 173 of the Companies Act, 2013, and the consequences of non-compliance. The penalty imposed serves as a reminder to companies to fulfill their obligations and ensure effective communication with independent directors.
MINISTRY OF THE
REGISTARAR OF COMPANIES
MAHARASHTRA, PUNE
Adjudication Order No. RoCP/ADJ/order/173/Madhyam/821,822 Date: 30th June, 2023
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Adjudication Order of penalties in the matter MADHYAM AGRIVET INDUSTRIES LIMITED (CIN: L01100PN1998PLC013068) under Section 454(3) of the Companies Act, 2013
Please Read:
- Companies (Adjudication Of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019 (G.S.R.131(E) ).
- Provisions of Subsection (4) of Section 173 of the Companies Act, 2013.
- Gazette Notification of Ministry of Corporate Affairs vide No. A42011/ 112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015)
In respect of:
MADHYAM AGRIVET INDUSTRIES LIMITED CIN: L01100PN1998PLC013068 having its registered office as per MCA21 Registry at address Gat No. 122, at Ranjankhol, Post Tilaknagar, Taluka Rahata, Ahmednagar, Shrirampur, Ahmednagar, Maharashtra – 413720.
1. Appointment of Adjudicating Officer:
Ministry of Corporate Affairs vide its Gazette Notification No. A42011/ 112/2014-Ad.II, dated 24.03.2015 (see SO 831(E), dated 24.03.2015) appointed 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 Rule 3(1) of Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Company:
MADHYAM AGRIVET INDUSTRIES LIMITED having CIN: L01100PN1998PLC013068 is a company governed by the provisions Act, and registered with this office having its office at Gat No. 122, at Ranjankhol, Post Tilaknagar, Taluka Rahata, Ahmednagar, Shrirampur, Ahmednagar, Maharashtra – 413720.
3. Facts about the Case:
a) Whereas an Inquiry of the company under section 206 of the Companies Act, 2013 was conducted by this office, wherein it is observed that the independent directors of the Company have expressed the displeasure regarding the relevant documents not being provided in advance and strongly reiterated their requirement of the various documents/information to be received for them to recommend the proposal finally to the shareholders, it is clear that the prior notice of the 251st board meeting of the Company was not as per Section 173 of the Companies Act, 2013 r/w section 118(10) of the Companies Act, 2013 r/w the Clause 1.3 of the Secretarial standard (SS1) hence, the Company has violated the Section 173 of the Companies Act, 2013 r/w section 118(10) of the Companies Act, 2013 r/w the Clause 1.3 of the Secretarial standard (SS-1), director/ KMP of the Company responsible for same is/are liable for action under Section 173(4) of the Companies Act, 2013.
b) As per section 173(4) of the companies act,2013-Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.
c) The matter was also taken up with the company during the course of the said inquiry for which the Company in its reply has not accepted the default and the reason furnished for it by the company is not satisfactory. Hence the director/KMP of the Company responsible for same is /are liable for action under Section 173(4) of the Companies Act,2013.
d) Further, as per the directions of the competent authority, the action against the officer in default (Company Secretary).
- Accordingly, the adjudication officer has issued adjudication notice vide ROCP/ADJ/FS/23-24/481 dated 31.05.2023 (herein after referred as Adjudication Notice) under Section 454(4) read with 173(4) of the Companies Act, 2013 read with Rule 3(2) Of Companies (Adjudication of Penalties), 2014 to the company and its officers in default for the violation of the provisions of the act as mentioned in para “a, b 8v c” above;
4. Relevant provisions of the Companies Act, 2013:
Meetings of the board- (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.]
(2) The participation of Directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the Directors and of recording and storing the proceedings of such meetings along with date and time:
Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means.
5[Provided further that where there is quorum in a meeting through physical presence of Directors, any other director may participate through video conferencing or other audio visual means in such meeting on any matter specified under the first proviso.]
(3) A meeting of the Board shall be called by giving not less than seven days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means:
Provided that a meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting:
Provided further that in case of absence of independent Directors from such a meeting of the Board, decisions taken at such a meeting shall be circulated to all the Directors and shall be final only on ratification thereof by at least one independent director, if any.
(4) Every officer of the company whose duty 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[(5) A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:
Provided that nothing contained in this sub-section and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors.
5. ORDER:
a. The company and its officers, who have defaulted on the provisions of section 173(4) of the Act it was observed independent directors of the Company have expressed the displeasure regarding the relevant documents not being provided in advance and strongly reiterated their requirement of the various documents/information to be received for them to recommend the proposal finally to the shareholders, hence Section 173 of the Companies Act, 2013 r/w section 118(10) of the Companies Act, 2013 r/w the Clause 1.3 of the Secretarial standard (SS-1.), hence, director/KMP of the Company responsible for same is/are liable for action.
b. In exercise of the powers conferred on the undersigned vide Notification dated 24th March, 2015 and having considered the facts and circumstances of the case mentioned herein above, I do hereby impose the penalty on the company and its officers in default pursuant to Rule 3(12) of Companies (Adjudication Of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication Of Penalties) Rules, 2014 r/w General Circular No. 1/2020 dated 02.03.2020; as per table below for violation of section 118 of the Act:-
|
Penalty imposed on company/ director(s) |
Total / maximum penalty (In Rs) |
| DIFYTI TODKAR | 25000/- |
c. I am of the opinion that penalty so imposed is commensurate with the aforesaid failure committed by the notice(s).
d. The Noticee(s)/applicant(s) shall pay the penalty so imposed through Ministry of Corporate Affairs portal only as per rule 3(14) of Companies (Adjudication of Penalties) Rules, 2014.
e. Appeal against this order may be filed under section 454(5) of the Act, in writing with the Regional Director (Western Region), Ministry of Corporate Affairs100, Everest, 5th Floor, Netaji Subhash Road, Marine Drive, Mumbai-400002, within a period of sixty days from the date of receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454 of the Act read with Companies (Adjudication of Penalties) Rules, 2014 as emended by Companies (Adjudication of Penalties) Amendment Rules, 2019.
f. Your attention is also invited to section 454(8)(ii) of the Act regarding consequences of non-payment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order in terms of the provisions of section 454(8)(i) of the Act.
g. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to MADHYAM AGRIVET INDUSTRIES LIMITED and all directors/officers in default mentioned herein above and also to Office of the Regional Director (Western Region) and Ministry of Corporate Affairs at New Delhi.
(Mangesh &adhav, ICLS)
Adjudicating Officer
Registrar of Companies
Maharashtra, Pune
