Introduction: The Ministry of Corporate Affairs (MCA) has made a significant decision to reduce penalties related to non-reporting under the Prevention of Sexual Harassment (POSH) guidelines. The case involves Ceeta Industries Limited and its key officers, challenging penalties imposed for non-disclosure in the Board’s report regarding the constitution of the Internal Complaints Committee.
Detailed Analysis:
1. Background of the Case: The appeal was filed under section 454(5) of the Companies Act, 2013, challenging the adjudication order passed by the Registrar of Companies, Karnataka. The appellants, including Ceeta Industries Limited and its officers, were penalized for non-compliance with Section 134(3) of the Companies Act, 2013, regarding the disclosure of the Internal Complaints Committee under the POSH guidelines.
2. Registrar of Companies’ Findings: The Registrar of Companies observed that the Board’s reports for the years ending 31.03.2019 and 31.03.2020 did not disclose compliance with the Internal Complaints Committee provisions. Penalties were imposed on the company and its officers, totaling Rs. 9,00,000.
3. Appellants’ Response: The authorized representative, Mr. Mahaveer Jain, argued on behalf of the appellants. The key points of contention included the company’s claim of creating a safe workplace, the misunderstanding of the requirement due to less than 10 employees, and the unintentional nature of the non-disclosure.
4. Arguments Presented:
- The company asserted its commitment to a harassment-free workplace, citing an exemption due to having less than 10 employees in each establishment.
- Non-disclosure in the Board’s report was claimed to be unintentional, given the misconception about the applicability of the Internal Complaints Committee requirement.
- The company argued compliance with the POSH guidelines and emphasized the absence of women employees during the default year.
5. Order and Penalty Reduction: The Regional Director, Dr. Raj Singh, reduced the penalties imposed by the Registrar of Companies. The new penalties, totaling Rs. 1,80,000, were considered reasonable, considering the company’s unintentional default and the arguments presented.
6. Penalty Payment Confirmation: The company and its officers paid the reduced penalties, totaling Rs. 1,80,000, as per the specified schedule, demonstrating their commitment to complying with the order.
Conclusion: The MCA’s decision to reduce penalties in the Ceeta Industries Limited case reflects a balanced approach, considering the company’s unintentional default and commitment to compliance. The arguments presented regarding the exemption due to the company’s size and the absence of women employees during the default year were crucial in influencing the penalty reduction. This case emphasizes the importance of clarity in reporting requirements and the need for a nuanced approach in adjudicating penalties. Companies should remain vigilant in understanding and adhering to statutory provisions, and authorities should consider the circumstances before imposing penalties. For more details on this case, refer to the official order issued by the Regional Director, Hyderabad.
F.No:9/32/ADJ/SEC.134 OF 2013/KARNATAKA/RD(SER)/2023/5821
BEFORE THE REGIONAL DIRECTOR, SOUTH EAST REGION
MINISTRY OF CORPORATE AFFAIRS, HYDERABAD
IN THE MATTER OF COMPANIES ACT, 2013
IN THE MATTER OF CEETA INDUSTRIES LIMITED
1. M/s. Ceeta Industries Limited
2. Krishna Murari Poddar, Managing Director
3. Anubhav Poddar, CFO (KMP)
4. Sneha Binani, Company Secretary
Appellants
Date of hearing : 21.11.2023
Present : Mr. Mahaveer Jain, 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 F78719556 dated 07.11.2023 against the adjudication order No. ROC(B)/ADJ.ORDER/454-134(3)/CEETA/Co.No.21494/2023 dated 12.09.2023 under section 454 passed by the Registrar of Companies, Karnataka for default in compliance with the requirements of Section 134(3) of the Companies Act, 2013.
2. Registrar of Companies in his order of adjudication has stated that during the course of inquiry under section 206(4) of the Act, it was noticed that the Board’s report attached to the financial statement as on 31.03.2019 and 31.03.2020 did not disclose that the company has complied with provisions relating to constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, Redressal) Act, 2013. Hence the Company has violated the provisions of section 134(3) of the Act and the Company and officers in default of the company are liable for action under section 134(8) of the Act. Hearing was held before Registrar of Companies on 10.08.2023 and after hearing the authorized representative had levied a penalty as below:
| S.No | Particulars | Penalty for the Board Report ending 31.03.2019 |
Penalty for the Board Report ending 30.03.2020 |
Total (Amt. in Rs) |
| 1 | Company | 3,00,000 | 3,00,000 | 6,00,000 |
| 2 | Mr. Krishna Murari Poddar, Managing Director |
50,000 | 50,000 | 1,00,000 |
| 3 | Mr. Anubhav Poddar, CFO (KMP) | 50,000 | 50,000 | 1,00,000 |
| 4 | Ms. Sneha Binani, Company Secretary |
50,000 | 50,000 | 1,00,000 |
| Total | 9,00,000 | |||
3. An opportunity of being heard was given to the Appellants on 21.11.2023. The authorized representative Mr. Mahaveer Jain, Practicing Company Secretary appeared on behalf of the appellants and reiterated the submissions made in the appeal and also submitted the following:
1. the company has always created a safe and harassment free workplace for every individual working in premises including sexual harassment. Since the company has less than 10 employees in each of the establishment it is not required to constitute an Internal Complaints Committee as per the section 6 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
2. The non-disclosure of the statement in the Board’s Report as on 31.03.2019 and 31.03.2020 relating to constitution of Internal Complaint Committee was not a deliberate act. Since, the Company is not required to constitute Internal Complaint Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the disclosure with respect to the constitution of the Committee as required under the law is not applicable and is not made in the Board’s However, the same is mentioned in the Board’s report in the succeeding years.
3. The Company has complied with the provisions relating to constitution of Internal Compliant Committee, under the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013. Also during the year of default there were no women employees in the Company, hence the guideline as specified in M/s. Vishaka v/s State of Rajasthan mentions only with regard to constitution of Internal Compliant Committee, the company has duly complied with the guideline as specified by the Honorable Supreme Court.
4. The company would like to comply with the law in letter and spirit. In the light of the foregoing, the Company requests to take a merciful view of the said matter and to permit appeal of the offence (which was committed unintentionally) and to levy a reasonable monetary penalty with respect to the same. The said default was inadvertent and not malafide in nature and there was no intention to commit the aforesaid defaults or to cause any harm, injury or prejudice to the rights and interest of the public, shareholders or creditors.
5. 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 at para (3) above and taking into consideration the facts of the appeal and submissions made by the authorized representative. 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 and I deem it would meet the end of justice if the penalty imposed by Registrar of Companies is hereby reduced to 20% of the penalty as imposed by Registrar of Companies in his adjudication order dated 12.09.2023 for the Company and officers as stated below:
| S.No | Particulars | Penalty imposed for the year 2019 | Penalty imposed for the year 2020 | Total (Amt. in Rs.) |
| 1 | Company | 60,000 | 60,000 | 1,20,000 |
| 2 | Mr. Krishna Murari Poddar, Managing Director | 10,000 | 10,000 | 20,000 |
| 3 | Mr. Anubhav Poddar, CFO (KMP) |
10,000 | 10,000 | 20,000 |
| 4 | Ms. Sneha Binani, Company Secretary |
10,000 | 10,000 | 20,000 |
| Total | 1,80,000 | |||
6. Accordingly, penalty was paid by the Company and officers as stated below:
| S.No | Particulars | Penalty paid for the year 2019 | SRN and Date of Payment |
Penalty paid for the year 2020 | SRN and Date of Payment |
| 1 | Company | 60,000 | X59254219 dated 24.11.2023 | 60,000 | X59253898 dated 24.11.2023 |
| 2 | Mr. Krishna Murari Poddar, Managing Director | 10,000 | X59252585 dated 24.11.2023 | 10,000 | X59254250 dated 24.11.2023 |
| 3 | Mr. Anubhav Poddar, CFO (KMP) | 10,000 | X59253344 dated 24.11.2023 | 10,000 | X59254284 dated 24.11.2023 |
| 4 | Ms. Sneha Binani, Company Secretary | 10,000 | X59253542 dated 24.11.2023 | 10,000 | X59254151 dated 24.11.2023 |
| Total aggregating to Rs.1,80,000/- | |||||
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 13th day of December 2023.
(DR. RAJ SINGH)
REGIONAL DIRECTOR (SER)
HYDERABAD
