Introduction: In a noteworthy development, the Ministry of Corporate Affairs (MCA) has taken a significant step in reducing penalties related to the non-appointment of a Company Secretary (CS). This decision pertains to the case of Trane Technologies India Private Limited, where the MCA, through the Regional Director (RD), Hyderabad, slashed the penalty from an initial 15 lakhs to 2.25 lakhs. This article delves into the details of the case, the regulatory background, and the implications of the MCA’s decision.
1. Case Background and Regulatory Violation:
- Overview of the case involving M/s. Trane Technologies India Private Limited, Former Director Prasad Yeshwant Naik, and Former Director Mr. Perikal Keshava Murthy Arjun.
- The appeal under section 454(5) of the Companies Act, 2013, filed against an adjudication order related to non-compliance with Section 203.
2. Registrar of Companies’ Adjudication Order:
- Details of the Registrar of Companies’ order stating the company’s failure to appoint a whole-time company secretary.
- Suo-moto application filed by the company on 31.07.2023 regarding the non-appointment of a company secretary.
3. Penalty Imposition and Hearing:
- Imposition of a penalty of Rs.15,00,000 on the company and two directors, Mr. Prasad Yeshwant Naik and Mr. Perikal Keshava Murthy Arjun.
- Hearing held on 01.02.2024, with the authorized representative Ms. Motati Gayathri presenting the appellants’ case.
4. Appellants’ Plea and Reduction of Penalty:
- Appellants’ argument highlighting the company’s financial struggles, being a loss-making entity with no operations or revenue.
- MCA’s decision to interfere with the adjudication order, reducing the penalty to Rs.2,25,000 (15% of the original).
5. Compliance and Confirmation:
- Appellants’ compliance with the MCA’s revised penalty order.
- Payment details and confirmation of penalty reduction to Rs.2,25,000 each for the company and directors.
6. Regional Director’s Final Order:
- The Regional Director’s order, issued on 19th February 2024, officially confirming the reduced penalty.
- Directives for compliance with Section 454(8) of the Companies Act, 2013, and Companies (Adjudication of Penalties) Rules, 2014.
Conclusion: The Ministry of Corporate Affairs’ decision to reduce the penalty for the non-appointment of a Company Secretary in the case of Trane Technologies India Private Limited marks a pragmatic approach, considering the financial circumstances of the company. This step showcases regulatory flexibility while ensuring adherence to the Companies Act, 2013. Directors and companies facing similar issues can find guidance in this precedent, emphasizing the importance of a nuanced approach in penalty imposition, taking into account economic realities and operational challenges. The MCA’s move serves as a reminder of the evolving nature of corporate regulations and the need for adaptability in enforcement.
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F.No:9/36/ADJ/Sec.203 of 2013/Karnataka/RD(SER)/2023
Before the Regional Director, South East Region
Ministry of Corporate Affairs, Hyderabad
In the Matter of Companies Act, 2013/6950
In the Matter of Trane Technologies India Private Limited
1. M/s. Trane Technologies India Private Limited
2. Prasad Yeshwant Naik, Former Director
3. Mr. Perikal Keshava Murthy Arjun, Former Director
Appellants
Date of hearing : 01.02.2024
Present : Ms. Motati Gayathri, PCS
ORDER
This is an appeal filed under section 454(5) of the Companies Act, 2013 by the above appellants in e-form ADJ vide SRN F87894663 dated 15.12.2023 against the adjudication order No. ROC(B)/Adj.Ord.454-203/Thermo King/Co.No.042359/2023 dated 06.11.2023 under section 454 passed by the Registrar of Companies, Karnataka for default in compliance with the requirements of Section 203 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
2. Registrar of Companies in his order of adjudication has stated that the company has filed a suo-moto application on 31.07.2023 regarding non-appointment of whole time company secretary i.e., violation of section 203 of the Companies Act, 2013. The company has submitted that its paid-up capital crossed the required threshold of Rs.5 crores on 31.03.2017 and it was required to appoint a company secretary from this date, but has failed to appoint a company secretary from 31.03.2017 to 09.06.2019. The company has subsequently appointed a company secretary from 10.06.2019. Hearing was held before Registrar of Companies on 26.09.2023 and after hearing the authorized representative had levied a penalty of Rs.5,00,000/- each on the Company and for 2 directors i.e., Mr. Prasad Yeshwant Naik and Mr. Perikal Keshava Murthy Arjun (total aggregating to Rs.15,00,000/-).
3. An opportunity of being heard was given to the Appellants on 01.02.2024. The authorized representative Ms. Motati Gayathri, Practicing Company Secretary appeared on behalf of the appellants and reiterated the submissions made in the appeal and from the appeal it has been stated that the company is a loss-making company and has not had any operations and therefore has not generated any revenue from operations. Therefore, the penalty imposed by the Registrar of Companies, Karnataka is unaffordable to the Company. The Directors were only Non-Executive Directors and therefore have not drawn any salary from the company. Therefore, they cannot afford the penalty imposed by the Registrar of Companies,
4. Though there is a default committed, there is a ground in interfering with the impugned adjudication order of Registrar of Companies to the extent of reducing the quantum of penalty due to the reasons as stated above. Hence, taking into consideration the facts of the appeal and submissions made by the authorized I deem it would meet the end of justice if the penalty imposed by Registrar of Companies is reduced to 15% i.e., 75,000/- each for the Company and 2 directors i.e., Mr. Prasad Yeshwant Naik and Mr. Perikal Keshava Murthy Arjun (total aggregating to Rs.2,25,000/-). The appellants are directed to comply with this order and also provisions of Section 454(8) of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014.
5. Accordingly, penalty was paid by the Company and 2 directors i.e., Mr. Prasad Yeshwant Naik and Mr. Perikal Keshava Murthy Arjun amounting to Rs.75,000/- each (total aggregating to Rs.2,25,000/-) vide SRN’s X66208604, X66272220 and X66283862 dated 05.02.2024 & 06.02.2024 respectively. Accordingly, this order is issued to the Appellants with a copy to Registrar of Companies, Karnataka and Joint Secretary, E-Governance Cell, Ministry of Corporate Affairs, New Delhi for information and necessary action.
Issued under my hand and seal on this the 19th day of February 2024.
(DR. RKJ SINGH)
REGIONAL DIRECTOR (SER)
HYDERABAD
