Introduction: The Government of India, under the Ministry of Corporate Affairs, has taken action against Shankar Packagings Limited for failing to comply with Section 149(1) of the Companies Act, 2013. The case revolves around the company’s inability to appoint a woman director. This article delves into the details, analysis of the situation, and the conclusion of the case.
Detailed Analysis:
1. Appointment of Adjudicating Officer: The Ministry of Corporate Affairs appointed Shri B. Mishra as the Adjudicating Officer in accordance with the Companies (Adjudication of Penalties) Rules, 2014.
2. Company Details: Shankar Packagings Limited is a registered company in Mumbai, Maharashtra, under the Companies Act, 1956. It is obligated to have a woman director on its board as per Section 149 of the Companies Act, 2013.
3. Legal Requirements for Women Directors: Section 149 of the Companies Act mandates that certain classes of companies must appoint at least one woman director. This includes listed companies and public companies with significant capital or turnover.
4. Non-Compliance: The company’s financial statements revealed that it had not appointed a woman director despite meeting the criteria mentioned in the law. A Show Cause Notice was issued, and the company cited difficulties in finding a suitable candidate.
5. Company’s Response: The company informed the Nomination and Remuneration Committee to select and recommend a woman director. They requested a personal hearing to discuss the matter.
6. Penalty Provision: Section 172 of the Companies Act outlines penalties for non-compliance. In this case, the penalty imposed is based on the number of days in default.
7. Hearing and Response: Pranab Lalit Mitra, the Company Secretary & General Manager, attended the hearing and explained the delay in appointing the woman director. The company had appointed directors, including a woman independent director, but due to various issues, there was a delay in formalizing their positions.
8. Findings: The penalty period was determined from the beginning of the financial year, and a penalty of Rs. 4,85,500 was imposed on the company and its officers in default.
9. Penalty Payment and Appeal: The noticees were instructed to pay the penalty through the Ministry of Corporate Affairs portal. An appeal process is also outlined in case they wish to challenge the decision.
Conclusion: The Government of India’s Ministry of Corporate Affairs has taken a stringent stance on non-compliance with Section 149(1) of the Companies Act, 2013. Shankar Packagings Limited, despite citing difficulties, was penalized for not appointing a woman director within the prescribed time frame. This case serves as a reminder of the importance of adhering to legal requirements in corporate governance and the potential consequences of non-compliance.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES
100, “EVEREST”, MARINE DRIVE,
MUMBAI – 400002
Website : www.rnca.gov.in
e-Mail ID : roc.mumbai@mca.gov.in
Order No. ROC/MUM/Adj/2023/Section 149(1)/5003 To 5006/ RD-73 Dated: Dated: 30 OCT 2023
Order for violation of Section 149(1) of the Companies Act, 2013
IN THE MATTER OF SHANKAR PACKAGINGS LIMITED
(CIN: U25202MH1985PLC036120)
(I) Adjudicating Officer: Shri B. Mishra, ICLS, ROC, Mumbai
(II)Presenting Officer: Ms. Rujuta Bankar, ICLS, AROC, Mumbai
(III) Authorised person on behalf of the Company: – Shri Pranab Mitra, Company Secretary and General Manager
Appointment of Adjudicating Officer: –
1. Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter known as Act) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
Company: –
2. WHEREAS the company viz SHANKAR PACKAGINGS LIMITED (herein after known as ‘company’) is a registered company with this office under the provisions of the Companies Act, 1956 having its registered office as per MCA21 Registry at address 303 TURF ESTATE, DR. E. MOSES. ROAD, SHAKTI MILLS LANE, MUMBAI MH 400011 IN.
Law relating to Appointment of Women Director in company: –
3. Section 149:
(1) Every company shall have a Board of Directors consisting of individual as directors and shall have-
(a) A minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and
(b) A maximum of fifteen directors:
Provided that a company may appoint more than fifteen directors after passing a special resolution:
Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.
Rule 3 of the Companies (Appointment and qualification of Directors) Rules, 2014: The following class of companies shall appoint at least one woman director-
(i) Every listed company
(ii) Every other public company having-
(a) Paid-up share capital of one hundred crore rupees or more; or
(b) Turnover of three hundred crore rupees or more:
Provided that a company, which has been incorporated under the Act and is covered under provision of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation:
Provided further that any intermittent vacancy of a women director shall be filled-up by the Board at the earliest but no later than immediate next Board meeting or three months from the date of such vacancy whichever is later.
Explanation- For the purposes of this rule, it is hereby clarified that the paid-up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.
Facts about the Case: –
4. As per the Financial Statements filed by the company its Paid up share capital and turnover as on 31.03.2022 is as under: –
| Paid up Share Capital | Rs. 2,80,49,530.00/- |
| Turnover | Rs. 398,14,29,906.00/- |
4. The company is required to appoint a woman director based on the thresholds stated above, but it failed to do so.
5. Show Cause Notice dated 28.03. 2023 was issued to the Company arid its officers in default. Reply dated 21.04.2023 received from the Company wherein the Company replied that they were unable to find a Woman Director having appropriate skill, experience, knowledge of the business of the Company.
7. They further stated that the Board of Directors. have already informed the Nomination and Remuneration Committee to select and recommend for appointment of Woman Director.
8. The Company further requested for a personal hearing to decide upon the matter.
Penalty Provision for violation
9. Section 172:
If a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand, and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default. .
Hearing and reply of the Company: –
10. Pranab Lalit Mitra (Company Secretary & General Manager) being authorized representative of the Company attended the hearing in person on 01.06.2023.
11. Further, the authorized representative submitted that in the board meeting held on 13.05.2023, the board of directors has appointed four directors on the board out of which one is a Woman Independent Director, and another is a Woman Non-Executive Director.
12. It is further stated that the Company has been trying to induct the said Directors since past 36 months but owing to COVID-19 pandemic followed by personal issues faced by the new appointees, coupled with personal issues of the Company Secretary, there was a delay in the appointment of said Women Directors.
13. It is further stated that there was no deliberate intention for non-compliance of above-stated provisions of the Companies Act, 2013, it was kindly requested that proceedings should not be initiated for violation of Section 149 (1) of the Companies Act, 2013
FINDINGS: –
14. As per the Financial Statements filed by the Company its Paid up share Capital and Turnover as on 31.03.2022 is as under: –
15. The Company is required to appoint a women director based on the thresholds stated above, but it failed to do so.
16. The presenting officer submitted that the Company has admitted the delay in appointment of Woman Director.
17. Therefore, the grounds cited by the company are not tenable in law as they were aware of their statutory mandate to appoint a woman director.
18. The 2nd Proviso to Rule 3 states that ‘any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or 3 months from the date of such vacancy whichever is later.’
In the present case, the Company meets the criteria for appointment of a woman director based on the last date of the latest audited financial statements i.e. 31.03.2022.
19. The issue to be determined is whether the period of default begins from 01.04.2022 or the Company may be provided with a certain time frame to find a suitable candidate. The proviso to Rule 3 provides a period of six months to newly incorporated companies to appoint a woman director while the second proviso to Rule 3 states that any intermittent vacancy of a woman director shall be filled up by the Board at the earliest but no later than immediate next Board meeting or three months from the date of such vacancy, whichever is later.
The present case does not fall under either of these categories. However, in the interest of justice and through a harmonious reading of these provisions, a period of three months from the beginning of the Financial Year may be considered in order to provide time to the Company to find a suitable candidate and comply with the provisions of the law. Hence, the period of default in the present case is being considered from 1st July of the Financial Year of default.
20. Further, the Company has during the hearing and via its written submission dated 01/06/2023 that a woman director was appointed in compliance with the requirement of Section 149 of the Companies Act, 2013 stating that they are in the process of filing DIR-12.
ORDER
21. In exercise of the powers conferred on me vide Notification dated 24.03.2015 and having considered the facts and circumstances of the case besides reply of the company after taking into account the factors mentioned in the relevant Rules followed by amendments in section 454(3) of the Companies Act, 2013, I am of the opinion that penalty shall be imposed for the default related to non-compliance of section 149 of the Act.
22. Having considered the facts and circumstances of the case and after taking into accounts the above factors, I hereby impose a penalty of Rs. 4,85,500/- (Rupees Four lakh eighty-five thousand and five hundred only) on the company as per the table below for violations of provisions of section 149(1) of the Companies act, 2013.
| No. of Days -of default. | Penalty imposed on company/-director(s)/-KMPS | First default penalty in (Rs.)
(a) |
Default contin-ues Penalty- in (Rs.) (b) | Total Penalty in (Rs.) (a)+(b) | Maximum Penalty in (Rs.) | Total Penalty levied in (Rs.) |
| 271 | SHANKAR PACKAGINGS LIMITED (COMPANY) | 50,000/- | 270 x 500
=1,35,000 |
50,000 + 1,35,000 = 1,85,000/- | 3,00,000 | 1,85,000/- |
| 271 | PRANAB LALIT MITRA (Company Secretary) | 50,000/- | 270 x 500
=1,35,000 |
50,000 + 1,35,000 = 1,85,000/- | 1,00,000 | 1,00,000/- |
| 271 | VIKRAM SHANKAR PANDYA (Managing Director) | 50,000/- | 270 x 500
=1,35,000 |
50,000 + 1,35,000 = 1,85,000/- | 1,00,000 | 1,00,000/- |
| 271 | AVANEESH RAJNIKANT DUBEY DWIVEDI – CFO (KMP) | 50,000/- | 270 x 500
=1,35,000 |
50,000 + 1,35,000 = 1,85,000/- | 1,00,000 | 1,00,000/- |
| TOTAL | 7,40,000 | 6,00,000/- | 4,85,000/- | |||
TOTAL PENALTY PAYABLE – Rs. 4,85,000
(i) The period of violation of provisions under Section 149 of the Companies Act, 2013 is from 01.07.2022 till 28.03.2023 and delay is 270 days. As per signatory details available on MCA-21 portal, the above-mentioned individuals were Officers in default during the period of violation.
23. I am of the opinion that the penalty is commensurate with the aforesaid failure of the Company and its officers in default.
24. The Noticee/s shall pay the said amount of penalty through “Ministry of Corporate Affairs” portal and proof of payment be produced for verification within 90 days from receipt of this order.
25. Appeal against this order may be filed with the Regional Director (WR), Ministry of Corporate Affairs, 5TH Floor, 100 Everest Building, Marine Drive, Mumbai, Maharashtra within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website nIca.gov.in[ setting forth the grounds of appeal and shall be accompanied by a certified copy of the order. [Section 454(3) & 454(6) of the Act read with Companies (Adjudication of Penalties) Rules, 2014]. _
26. Your attention is also invited to section 454(8) of the Act in the event of noncompliance of this order.
(B. Mishra)
Adjudication Officer and Registrar of Companies,
Maharashtra, Mumbai.
