Case Law Details

Case Name : Re. Atyati Technologies Private Limited (National Company Law Tribunal Bangalore)
Appeal Number : C.P. No. 131/BB/2017
Date of Judgement/Order : 16/10/2017
Related Assessment Year :
Courts : NCLT (6)

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This Petition is filed under Section 203 of the Companies Act, 2013 read with Rule 8A of the companies (Appointment and Remuneration of Managerial Personals) Rules, 2014 with a prayer for compounding of the violation committed under provisions of 441 of the Companies Act, 2013.

The averments made in the Company Application are briefed here under:-

The 1st Applicant i.e., Atyati Technologies Private Limited, is the Company; Mr. Prakash Ramachandra Prabhu– is the 2nd Applicant / Chief Executive Officer & Director. This suo- moto Application is filed by the Applicants for compounding for violation of provisions of Section 203 of the Companies Act, 2013 read with Rule 8A of the companies (Appointment and Remuneration of Managerial Personals) Rules, 2014.

The 1st Applicant Company was incorporated under the Companies Act, 1956 on 29th March 2006 as a Private Limited Company under the name and style of “Atyati Technologies Private Limited” vide Registration No. CIN U72200KA2006PTCO38859. The Registered office of the company is situated at 301-323, 3rd Floor, Tower C, Diamond District PID No. 73-1-15-0/C-C-2, Airport Road, Kodihalli, Bangalore-560008.

The Authorized share capital of the 1St Applicant Company is Rs. 19,91,00,000/- divided into 1,99,10,000 of Equity Shares of Rs 10/ each. The Issued, Subscribed and paid up share capital of the Company is Rs. 8,81,06,590/- divided into 88,10,659 of Equity Shares of Rs 10/ each.

The Main objects of the 1st Applicant Company is to carry on the business of developing, packaging, distributing, importing, selling, exporting, leasing, hiring or otherwise dealing in computer hardware, software, computer peripherals, computer parts, spare parts, accessories, data publishing and processing system„ computer consumables, electronic communication system, data, other automated and CAD devices etc., Details of the objects of the Applicant Company are mentioned in the Memorandum and Articles of Association of the 1St Applicant Company.

It is averred that, the 1st Applicant Company could not appoint its full time Company Secretary as required under the provisions of Section 203 of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personals) Rules, 2014 and it is mandatory to appoint Company Secretary in case if the paid up capital of a Company crosses Five crores or more. It is further averred that, the 1st Applicant Company has a paid up capital of more than Rs. 5 Crores on the date of commencement of the Companies Act, 2013 i.e., from 1St April 2014 and thereby there was a default for non-compliance of the provisions of Section 203 of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personals) Rules, 2014. It is further averred that, the non-appointment of company secretary is mainly due to the Company has been making regular efforts to identify and appoint suitable candidate for the position, however no professional company secretary was interested in joining the Company, since being a private limited Company, the scope of work available was very minimal which did create any interest for potential Company Secretaries. However, the 1st Applicant Company during the Board Meeting held on 29th September 2016 appointed Ms. Shruti Gupta as the Company Secretary and necessary E-form No.DIR-12 and the SRN Challan bearing No. SRN: G19398825 dated 02/11/2016 were filed with the Registrar of Companies, Karnataka, Bangalore with a delay of 845 days and the period of default is from 09/06/2014 to 30/09/2016.

It is further averred that, non-appointment of the Company Secretary to the Ist  Applicant Company as required under Section 203 of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personals) Rules, 2014 was neither deliberate nor intentional and it was due to reasons which were beyond the control of the Applicants. The 1st Applicant Company and its Director suo- moto filed this application admitting violation and prayed for compounding by taking a lenient view. Thus there was violation of provisions of Section 203 of the Companies Act, 2013 which reads as follows:-

“(1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—

(i) Managing Director, or Chief Executive Officer or manager and in their absence, a whole-time director;

(ii) Company Secretary; and (iii) Chief Financial Officer:

Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless,

(a) the articles of such a company provide otherwise; or

(b) the company does not carry multiple businesses:

Provided further that nothing contained in the first proviso shall apply to such class of companies engaged in multiple businesses and which has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government.”

For violation of provisions of section 203 is punishable under section 203(5) of the Companies Act, 2013 which reads as follows:-

“If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues.”

We have heard the Counsel for Applicants. The Counsel contended that, the default occurred due to unavoidable circumstances and totally inadvertent for non-appointment of Company Secretary within the stipulated time and there was neither deliberate nor intentional on the part of Company or its Directors. The Counsel for Applicants further contend that, this is a suo- moto application filed by the Company and its Director for compounding of violation.

The Registrar of Companies, Karnataka, Bangalore vide its letter bearing No. ROCB/MMM/441/038859/2017 dated 8th September 2017 has stated in his report that, the Company has admitted the violation suo-moto and made good the offence and has offered to compound the offence and the Compounding-Application may be decided on merits.

We have seen the Memorandum and Articles of Association of the 1st Applicant Company, Certified copy of the Board Resolution dated 29th September 2016 of the 1st Applicant Company wherein the Board of Directors resolved for appointing the Company Secretary. Certified copy of the E-form No. DIR-12 and the SRN Challan bearing No. SRN: G19398825 dated 02/11/2016 filed with the Registrar of Companies, Karnataka at Bangalore. After considering the materials on record and after taking into account the submissions made by the Counsel that lenient view may be taken, We hereby levy compounding fee under section 203 of the Companies Act, 2013 for non-appointment of Company Secretary on the Applicants as shown in the table given below:-

SI No. Particulars Violation of Sec. 203 of Companies Act, 2013 Delay of 845 days Total Rs.
1 1st Applicant Company Rs. 1,50,000/- 845x 100/-= 84,500 2,34,500/-
2 2nd Applicant Chief Executive Officer & Director Rs. 20,000/- 845x 100/-= 84,500 1,04,500/-

The compounding fee levied shall be paid by the Applicants within 15 days from the date of this order and call this matter on 30th October 2017 for compliance.

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