The Ministry of Corporate Affairs (MCA) recently imposed a penalty on TDMAX Manufacturing & Services Pvt Ltd for failure to regularize an additional director, Mr. Huihui Pan, in accordance with Section 161(1) of the Companies Act, 2013. This violation has raised significant concerns regarding compliance with statutory requirements governing director appointments in Indian companies.
TDMAX, incorporated in 2018, appointed Mr. Huihui Pan as an additional director effective from December 30, 2019. Despite holding this position beyond the stipulated tenure without formal regularization at a general meeting, the company failed to adhere to legal mandates outlined in Section 161(1). The MCA’s inquiry, initiated in response to this non-compliance, underscored the necessity for adherence to procedural norms governing directorial appointments.
According to Section 161(1) of the Companies Act, 2013, an additional director’s tenure extends until the next annual general meeting or the conclusion of the scheduled AGM’s due date, whichever occurs first. Failure to regularize such appointments through a general meeting violates these provisions, prompting regulatory intervention to ensure adherence to corporate governance standards.
The penal action, initiated under Section 161(1) read with Section 172 of the Companies Act, 2013, necessitated a detailed review of the company’s procedural lapses. The MCA’s adjudicating officer, Ms. Seema Rath, Registrar of Companies, Uttar Pradesh, Kanpur, issued show cause notices to TDMAX and its directors, demanding justification for the prolonged non-compliance.
In conclusion, the penalty of ₹3 lakh imposed by the MCA serves as a cautionary measure against deviations from statutory requirements governing directorial appointments.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF
COMPANIES,
UTTAR PRADESH,
37/17, Westcott Building, The Mall,
Kanpur — 208001 (U.P.)
Phone : 0512 — 2310323/2310443
Order NO.07/01/ADJ-161(1)/ TDMAX DATED 04/07/2024
ORDER FOR VIOLATION OF SECTION 161 (1) OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 & COMPANIES (AMENDMENT ACT 2020)
IN THE MATTER OF M/s. TDMAX MANUFACTURING & SERVICES PRIVATE LIMITED
Appointment of Adjudicating Officer: –
1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-AD 11 dated 24.03.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules,2014 under the provisions of this Act.
2. Whereas the Company TDMAX MANUFACTURING & SERVICES PRIVATE LIMITED (U29309UP2018PTC109027) which was incorporated on 08.10.2018 with RoC, Kanpur and having r/o at 402, BLOCK-G ANTRIKSH KANBALL 3G,SEC- 77 NOIDA, NOIDA, Gautam Buddha Nagar, Uttar Pradesh,201301. The authorized capital of the company is Rs. 1,00,000/-
3. The Ministry vide letter no. F. No. CL-II-08/74/2022-DGCoA-MCA dated 09.09.2022 directed to conduct the inquiry u/s. 206(4) of the Companies Act, 2013, against the said company. During the course of inquiry, it is observed that Mr. Huihui Pan was appointed as additional director of the company w.e.f. 30.12.2019. However, he has not been regularized and he is holding the same designation since that date to present. As per Section 161(1) of the Companies Act, 2013, an additional director shall hold office up to the next annual general meeting. Hence the Inquiry Officer (I0) sought information and documents from the Company under Section 206(1) of the Companies Act, 2013. The reply furnished by the company in this regard was not appropriate as it has furnished copy of board resolution pertaining to regularization of Mr. Thupten Namgyal, however as per section 152(2) of the Companies Act, 2013, every director shall be appointed by the Company in general meeting. Hence, the appointment of Mr. Huihui Pan as a director of the Company has to be done in a general meeting of the Company. Hence, it is non-compliance of Section 161(1) of the Companies Act, 2013. The report in this regard furnished to the Regional Director, Northern Region wherein non-compliance of section 152(2). The Directorate vide its letter No. Inquiry/206(4)/ TDMAX /RD(NR)/2022/902 dated 04.05.2023 has accorded the penal action under section 161(1) read with 172 of the Companies Act, 2013. Thus, it is evident that the company and its Directors have failed to comply with the provisions of section 161(1) of the Companies Act, 2013. And are thus liable for penal provisions.
Section 161(1) of the Companies Act, 2013 provides that: –
“The articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.”
Section 161(1) read with 172 of the Companies Act, 2013 provides that —
“The company and every officer of the company who is in default shall be liable to be a penalty of fifty thousand rupees, and in case of continuing failure, with a further penalty off 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.”
4. Accordingly, a Show Cause Notice No.. 07/01/Adj-161(1)/ TDMAX /6856 to 6859 dated 17.01.2024 to the Directors of the company and No.. 07/01/Adj-161(1)/ INCHOI TECHNOLOGY/5507 dated 15.11.2023 to the company were issued to the company and its officers in default under section under Section 16 I (1) of the Companies Act, 2013. read with Companies (Adjudication of Penalties) Rules, 2014 by this office. This office has not received the said letter undelivered also.
5. The company and its officers in default have not furnished any reply to the said Show Cause Notice which was not found satisfactory as no compliance was made for the default till date, hence no hearing was fixed for this matter.
6. Further, neither any representative of the company nor its directors have either furnished proper reply or have appeared before the undersigned which has further strengthened the apprehension that the company and its Directors have failed to comply with the provisions of section 161(1) of the Companies Act, 2013, in regularizing the additional director (appointed on 30.12.2019) Mr. Huihui Pan as director in the board meeting of the company as on 30.09.2020.
7. The date of default in the matter has been taken as 30.09.2020 upto which the additional director (appointed on 30.12.2019) Mr. Huihui Pan shall be regularized as Director of the company. The default has been continuing since then.
8. As per provisions of section 446B of the Companies Act, 2013 provides that “Notwithstanding anything contained in this act, if penalty is payable for non-compliance of any of the provisions of this act by a One Person Company, Small Company, start-up company or producer company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other persons, as the case maybe be, shall be liable to a penalty which shall not be more than one half of the penalty specified in such provisions subject to a maximum of two lakh rupees I case of a company one lakh rupees in case of an officer who is in default or any other person, as the case may be”.
Order:
Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose a penalty as prescribed under section 161 (1) of the Act. The default of the penalty imposed on the company (Being Small Company as per section 2(85) of the Act) and officers in default are shown in the table below:
Nature of default Section |
Relevant section under the Co.Act.2 013 (penalty provision) |
Name of persons on whom penalty imposed |
Initial Penalty as per Section 161(1) (Rs) |
No. of days of default |
Per day penalty for default (Rs.) |
Total default amount (Rs.) |
Maximum Penalty (Rs.) |
Final Penalty Impose d as per Sec.446 B (Rs.) |
Mr. Huihui Pan was appointed as additional director of the company w.e.f 30.12. 2019 |
161 (3) |
Company |
50000 |
1336 |
500 |
668000 +50000 =71800 0 |
300000 |
150000 |
Jivrani Ramesh Parth |
50000 |
1336 |
500 |
668000+50000=718000 |
100000 |
50000 |
||
Thakkar Natvarlal Ravi Kumar |
50000 |
1336 |
500 |
668000 +50000 =71800 0 |
100000 |
50000 |
||
Huihui pan |
50000 |
1336 |
500 |
668000 +50000 =71800 0 |
100000 |
50000 |
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the notice(s).
9. The Noticee shall pay the amount of penalty by way of Demand Draft in favour of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days receipt of this order. The Demand Draft shall be forwarded to this office Address.
10. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, 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(5) & 454(6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014].
11. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of non-compliance of this order. In Case appeal is made 0/o Registrar of Companies, U.P. maybe informed alongwith the penalty imposed & the payments made.
(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur
No.07/01/Adjudication-,92/ TDMAX /2108 to 2112
Dated. 4/7/2024.
