Introduction: In a landmark order, the Ministry of Corporate Affairs, Government of India, has imposed a penalty of Rs. 25 Lakh on M/s. MIV Therapeutics (India) Private Limited for failing to appoint a Company Secretary. This non-appointment was found to be in contravention of Section 203(1) of the Companies Act, 2013.
Analysis: The order by the Registrar of Companies, Gujarat, Dadra & Nagar Haveli, underscores the importance of adherence to the statutory provisions of the Companies Act, 2013. The provision in question, Section 203(1), mandates the appointment of a Company Secretary for every class or classes of companies prescribed under Rule 8A of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014.
The company in question, M/s. MIV Therapeutics (India) Private Limited, had not appointed a Company Secretary timely, thereby failing to comply with the requirements of the aforementioned provision. Despite subsequent rectification of the non-compliance, the violation had occurred, resulting in the penalty imposed by the Adjudicating Authority.
The company argued for leniency, citing a judgment by the Hon’ble High Court of Madras that allows for in-house adjudication of “technical” violations and only mandates punishment for failure to comply with the adjudication order or non-payment of penalty. However, the Adjudicating Authority, after considering all factors and submissions, imposed the maximum penalty permissible under the Companies (Amendment) Act, 2019.
Conclusion: This order serves as a stern reminder of the need for strict adherence to corporate governance norms in India. The Companies Act, 2013, and the rules and regulations formed thereunder, exist to ensure transparency, accountability, and fairness in corporate dealings. The Rs. 25 Lakh penalty is a significant deterrent for other companies, highlighting the severe repercussions of non-compliance with the statutory provisions of the Act. It also sends out a strong message that even technical violations are treated seriously and attract stringent penalties.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES,
GUJARAT, DADRA & NAGAR HAVELI
ROC Bhavan, Opp. Rupal Park,
Nr. Ankur Bus Stand, Nwanpura, Ahmedabad (Gujarat) – 380013.
Tel. No.: 079-27438531, Fax : 079-27438371
Website : www.mca.gov in : email@example.com
BEFORE THE ADJUDICATING OFFICER
REGISTRAR OF COMPANIES, GUJARAT, DADRA & NAGAR HAVELI
Order No. ROC-GJ/ADJ. ORDER/Sec. 454 / MIV / Sec.203/ 2022-231/1572 to 77
Dated: 28 JUN 2023
ORDER FOR PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICTION OF PENALTIES) RULES, 2014 and COMPANIES (ADJUDICATION OF PENALTIES) AMENDMENT RULES, 2019 FOR DEFAULT OF SECTION 203(1) OF THE COMPANIES ACT, 2013 READ WITH RULE 8A OF THE COMPANIES (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014
IN THE MATTER OF M/s. MIV THERAPEUTICS (INDIA) PRIVATE LIMITED
Date of Hearing: 19.06.2023
1. Shri R. C. Mishra (ROC), Adjudicating Officer
2. Mr. Indrajit Vania (Dy. ROC), Presenting Officer
Company/ Officers/Directors/KMP/Authorized Representative:
Mr. Yogesh D. Dabholkar, Practicing Company Secretary -Authorized Representative present before Adjudicating Authority on behalf of the company and its directors.
Appointment of Adjudication Authority:-
1. The 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 under section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 (Notification No. GSR 254(E) dated 31.03.2014) for adjudging penalties under the provisions of Act.
2. M/s. MIV THERAPEUTICS (INDIA) PRIVATE LIMITED is a company having its registered office at “Plot No. 136-B, Surat Special Economic Zone, Road No. 4, G.I.D.C, Sachin, Surat, Gujarat-394230, India.” registered under the provisions of the Companies Act, 2013 in the State of Gujarat. The CIN of the Company is
Fact about of the case:
3. This office has received suo-moto application filed by the company through e-form GNL-1 vide SRN:F58630484 dated 10.02.2023 under the MCA21 portal for Adjudication along with physical copy of the same submitted in this office u/s 454 of the Companies Act, 2013 for default under section 203(1) of the Companies Act, 2013 regarding non-appointment of Company Secretary as per the requirement of the aforesaid provisions of the Companies Act, 2013.
4. Thereafter, before imposing penalty in the aforesaid matter, the onus of Adjudicating Officer is to give a reasonable opportunity of being heard in the interest of natural justice to the Company and its Officer(s) in default pursuant to Section 454(4) of the Companies Act, 2013 read with Rules made thereunder.
5. Therefore, Adjudicating Officer has issued a written communication vide letter no. ROC-GJ/Sec. 454(4)/MIV THERAPAEUTICS/JTA(S)/2022-23/1366-1370 dated 16.06.2023 to the company and its Officer(s) in default pursuant to sub-Section 4 of Section 454 of the Companies Act, 2013 and a hearing was fixed on 19.06.2023 at 03.00 pm before the Adjudicating Authority.
Reply/submission of the Company/Director/ Authorized Representatives of the Company and physical hearing.
6. In respect of Adjudication Notice, the Authorized Representative of the Company/Directors was present before the Adjudicating Authority on 19/06/2023 at 03.00 pm for hearing as per the schedule.
7. The Authorized Representative of the company has submitted that they relying on the written affidavit dated 12/01/2023 along with prayers made thereon with details of grounds to adjudicate penalty against all the applicants which is taken on record.
8. They further submitted that the company has not appointed the Company Secretary timely in compliance of the provision of section 203 of the Companies Act, 2013.
However, the company has already appointed Company Secretary as per the provision of section 203 of the Companies Act, 2013 w.e.f. 02/07/2018.
9. It is further submitted by the Authorized Representative of the company that they rely on the Order of the Hon’ble High Court Madras, passed in Cr1.0.P.No. 2735 of 2017 and Crl. M.P. No.s 1933 and 1934 of 2017, dated 12/12/2022, in the matter of B. Kannan Vs Dy. Registrar of Companies, 0/0 the Registrar of Companies, Tamilnadu, wherein Hon’ble Court observed that the intension of legislature to treat the violation which are only technical to be adjudicated by in-house process. Further, section 454 of the Companies Act, 2013 makes it clear that where after adjudication the person either does not pay penalty or fails to comply with the order of Adjudication, he is liable for punishment either fine or imprisonment. Therefore, the object is to give an opportunity to the person to comply with the provisions and only after order of the Adjudicating officer directing the compliance or his payment of penalty is violated, it would be common offence.
10. The Hon’ble High Court of Tamilnadu, while passing the above order has relied on the Hon’ble Apex Court order in (2018)17 SCC 448 and stated following principles;
“If the amendment reduced the punishment for an offence, the accused shall have benefit of such reduced punishment notwithstanding the fact that he had committed the offence prior to the amendment.
Further, in order to apply this principle, the offence described under the old act and the new act must be one and the same. If the ingredients are different, then the principle of awarding reduced punishment after the amendment, would not be applicable.”
11. Authorized Representative of the company further submitted that after the Companies (Amendment) Ordinance,2018, dated 02.11.2018 which become act the Companies (Amendment) Act,2019 dated 31.07.2019, above provision has been substituted as under;
“If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.”
12. In view of the above, the Authorized Representative of the company further requested to take a lenient view and impose the minimum penalty as per provision of law.
Submission of the Presenting Officer
13. The Presenting officer of the company submitted that before the Companies (Amendment) Ordinance,2018 dated 02.11.2018, the penal provision u/s 203(5) of the Companies Act, 2013 was as under;
“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.”
14. In pursuant to section 203(1) of the Companies Act, 2013 [the Companies (Appointment and Remuneration of Managerial Remuneration) Amendment Rules, 2020, dated 03.01.2020-applicable prior to 01.04.2020), every company belonging to such class or classes of Companies as may be prescribed under Rule 8A of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 shall appoint a whole time Company Secretory.
Rule, 8A- Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014:- A company other than a company covered under rule 8 which has a paid up share capital of five crore rupees or more shall have a whole-time company secretary
Section 203(5) of the Act provides that If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.
15. The Presenting Officer submitted that it is observed from the records of the company, since the paid-up capital of the company on 01/04/2014 was Rs. 6,80,00,00/-which is exceeded Rs. 5,00,00,000/-from the prescribed paid-up Capital of the company as per the provision of the Companies Act, 2013 i.e. Rs. 5 Crore (prior to applicable of the Companies (Amendment) Ordinance,2018 dated 02.11.2018). Hence, the applicant company made default by non-appointment of Company secretary as per the provision of the Companies Act, 2013 at the relevant point of time. The applicant has appointed Ms. Madhavi Kishor Jawale w.e.f from 02.07.2018 till date and made good the default.
16. The Presenting officer further submitted that as per the aforesaid amendment in the act and in line of the aforesaid order of the Hon’ble High Court of Madras, as the there are no change in act, hence, the benefit of Adjudication may be granted to the applicant company and maximum penalty as per the Companies (Amendment) Ordinance,2018 dated 02.11.2018, may be imposed.
17. While adjudicating quantum of penalty u/s 203 of the Companies Act, 2013, the Adjudicating officer shall have due regard to the following factors, namely;
a. The amount of disproportionate gain or unfair advantage, whenever quantifiable, made as a result of default.
b. The amount of loss caused to an investor or group of investors as a result of the default.
c. The repetitive nature of default.
18. With regard to the above factors to be considered while determining the quantum of penalty, it is noted that the disproportionate gain or unfair advantage made by the noticee or loss caused to the investor as a result of the delay on the part of the noticee to redress the investor grievance are not available on the record. Further, it may also be added that it is difficult to quantify the unfair advantage made by the noticee or the loss caused to the investors in a default of this nature.
19. The undersigned considered the submission made by the authorized representative of the Company and its directors & Presenting Officer. Having considered the facts and circumstances of the case and after taking into account the factors above, the undersigned has reasonable cause to believe that the company and its officer(s) in default(s) have violated the provision of section 203(1) of the Companies Act, 2013 read with Rule 8A of Companies (Appointment & Remuneration Of Managerial Personnel) Rules, 2014. I hereby imposing penalty on Company and its Officer(s) in default as per the table given below and I am of the opinion that penalty is commensurate with the aforesaid default committed by the Noticees and punishable as per the Companies (Amendment)Act, 2019.
|Name Of Company / Director||Penalty
|Penalty Continuing Failure||Maximum Penalty
|MIV Therapeutics (India) Private Limited||5,00,000/-||1552 Days *1000
= 1,552,000 /-
|Murlidhar Baliram Bendale||5,00,000/-||1552 Days *1000
= 1,552,000 /-
|Rajesh Hiralal Shrivas||5,00,000/-||1552 Days *1000
= 1,552,000 /-
|Brian Savio Lancelot||5,00,000/-||1552 Days *1000
= 1,552,000 /-
|Mathew Thundiyl Thomas||5,00,000/-||1552 Days *1000
= 1,552,000 /-
20. The noticee shall pay the amount of penalty individually for the company and its officers from their personal sources/income by way of e-payment available on Ministry website mca.gov.in under “Pay miscellaneous fees” category in MCA fee and payment Services under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 within 60 days from the date of receipt of this order and copy of this adjudication order and Challan/SRN generated after payment of penalty through online mode shall be filed in INC-28 under the MCA portal without further reference.
21. Appeal against this order may be filed in writing with the Regional Director, North Western Region, Ministry of Corporate Affairs, ROC BHAVAN, OPP. RUPAL PARK, NR. ANKUR BUS STAND, NARANAPURA, AHMEDABAD (GUJARAT)-380013 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 the certified copy of this order. [Section 454(5) & 454(6) of the Companies Act, 2013 read with the Companies (Adjudicating of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019].
22. Your attention is also invited to Section 454(8)(i) and 454(8) (ii) of the Companies Act, 2013, which state that in case of non-payment of penalty amount, the company shall be punishable with fine which shall not less than Twenty Five Thousand Rupees but which may extend to Five Lakhs Rupees and officer in default shall be punishable with Imprisonment which may extend to Six months or with fine which shall not be less than Twenty Five Thousand Rupees by which may extend to one Lakhs Rupees or with both.
The adjudication notice stands disposed of with this order.
R. C. Mishra, ICLS
Registrar of Companies & Adjudicating Officer
Ministry of Corporate Affairs,
Gujarat, Dadra & Nagar Haveli