The Ministry of Corporate Affairs (MCA) in India has recently imposed penalties on a company and its directors for failing to appoint a company secretary, as required by the Companies Act, 2013. In this article, we will delve into the details of this case, exploring the implications and legal framework behind the penalties.
1. Appointment of Adjudicating Officer
The MCA appointed the Registrar of Companies, NCT of Delhi & Haryana, as the Adjudicating Officer to assess penalties under the Companies Act, 2013, and the Companies (Adjudication of Penalties) Rules, 2014. This appointment was made through a Gazette Notification.
2. About the Company
The company in question, known as SMITHS DETECTION SYSTEMS PRIVATE LIMITED, was incorporated in 2010. It was obligated to appoint a full-time company secretary, as stipulated by the Companies Act.
3. Facts about the Case
The case centers on the non-appointment of a company secretary from 04.02.2011 to 12.12.2019. The company had a paid-up capital of 1,29,44,79,420 and was legally required to have a company secretary during this period.
4. Factors Considered for Adjudication
The company admitted its default and rectified it by appointing a company secretary on 13.12.2019. However, the company sought to have the penalty imposed from 04.02.2011. The Adjudicating Officer considered this request, considering the historical legal context.
5. Relevant Provisions of the Act and Rules
The penalties were imposed under Section 203 of the Companies Act, 2013, and Rule 8A of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014.
6. Adjudication of Penalty
The Adjudicating Officer imposed penalties on the company and its directors based on the period of default. Penalties were calculated according to the provisions of Section 203, taking into account the number of days in violation.
7. Conclusion
In conclusion, the Ministry of Corporate Affairs has imposed penalties on SMITHS DETECTION SYSTEMS PRIVATE LIMITED and its directors for failing to appoint a company secretary as required by the Companies Act, 2013. This case highlights the legal obligations on companies regarding the appointment of key managerial personnel and the consequences of non-compliance. Companies are encouraged to adhere to these regulations to avoid penalties and legal implications.
For more information and to understand the legal framework in detail, parties involved have the option to file an appeal within 60 days from the date of the order.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS,
OFFICE OF REGISTRAR OF COMPANIES,
NCT OF DELHI & HARYANA
4TH FLOOR, IFCI TOWER, 61, NEHRU PLACE,
NEW DELHI -110019
PURSUANT TO SECTION 203 OF THE COMPANIES ACT, 2013 R/W RULE 8(A) (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 IN THE MATTER OF SMITHS DETECTION SYSTEMS PRIVATE LIMITED (U74900DL2010PTC203881)
1. Appointment of Adjudicating Officer : –
Ministry of Corporate Affairs vide its Gazette Notification No. A42011/112/2014-Ad.II, dated 24.03.2015 appointed Registrar of Companies, NCT of Delhi & Haryana 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.
2. Company: –
Whereas the company viz. SMITHS DETECTION SYSTEMS PRIVATE LIMITED (herein after known as ‘company’) has been incorporated on 09.06.2010 and having its registered office as per MCA21 Register address at UNIT NO.300 3rd FLOOR VARDHMAN CROWN MALL, SECTOR-19, DWARKA NA,NEW DELHI, West Delhi,Delhi,110075,India. The financial & other details of the subject company for immediately preceding F.Y 2021-22. as available on MCA-21 portal is stated as under:
| S. No. | Particulars | Details |
| 1. | Paid up capital (in Rs.) | 129,449,942 |
| 2. | a. Revenue from operation (Rs. in lakhs) | 29,548 |
| b. Other Income (Rs. in lakhs) | 265 | |
| c. Profit for the Period (Rs. in lakhs) | 29,813 | |
| 3. | Holding Company | YES |
| 4. | Subsidiary Company | NO |
| 5. | Whether company registered under Section 8 of the Act? | NO |
| 6. | Whether company registered under any other special Act? | NO |
3. Facts about the Case: –
i. This office is in receipt of application vide GNL-1 F06574628 dated 06.2022 for non-appointment of Company Secretary from 04.02.2011 to 12.12.2019.
ii. It is observed that company (as on 02.11.2018) had a paid up capital of 1,29,44,79,420 and was required to appoint a whole time company secretary u/s 203 of the Companies Act, 2013 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendments therewith.
iii. That pursuant to Companies (Amendment) Act, 2019 (w.e.f. 02.11.2018) default u/s 203 has been decriminalized. Therefore, Adjudicating officer is considering for adjudication for the period 02.11.2018 to 12.12.2019.
iv. In view of above, SCN was issued on 16.06.2023 in response to which company submitted a reply on 28.06.2023 & 04.07.2023.
v. In view of submissions made in reply, a hearing in the matter was scheduled for oral submissions on 18.08.2023, Ms. Charu Tiwari Authorised representatives (AR) of the Company and Sh. Sandeep Bhatia, Wholetime Director of the company appeared for hearing and submitted as under:
That the director and AR reiterated their submissions that since the default in this matter arose on 04.02.2011 which could only be made good on 13.12.2019, the entire period of default may be subjected to the Adjudication. In this regard reliance were placed on various orders passed by different RoCs across the country which showed that adjudication order was passed even in case of default preceded 02.11.2018 i.e the date on which section 203 of the Act got decriminalized.
4. Factors considered for adjudication of penalties: –
i. The company has applied for adjudication on its own, after admitting its default. Company has made default good on 13.12.2019 by appointing Company Secretary. Thus, it is clear that section 203 of the Act and rules made thereunder casts an onus on the directors of the company for the relevant period.
ii. The submission of the company to adjudicate the penalty from 04.02.2011 is not maintainable as on that date the Companies Act, 1956 was in force where all the defaults gave rise to criminal consequences. In absence of any express provisions in law, the amendments made to Section 203 can only be given prospective effect.
5. The relevant provision of the Act and Rules therewith:
> Section 203 (Appointment of Key Managerial Personnel)
(4) if the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.
(5) “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”
> Rule 8A of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 (applicable in respect of financial years commencing prior to 01-04-2020)
Appointment of Company Secretaries in Companies Not Covered Under Rule 8.
“A company other than a company covered under rule 8 which has a paid-up capital of 5 Crore Rupees of more shall have a whole time Company Secretary”.
> Rule 8A of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 – (applicable in respect of financial years commencing on or after 01-04-2020)
Appointment of Company Secretaries in Companies Not Covered Under Rule 8 “Every private company which has a paid up share capital of ten crore rupees or more shall have a whole-time company secretary.”
> Section 2(51) of the Companies Act, 2013
(51) —key managerial personnel, in relation to a company, means‑
(i) the Chief Executive Officer or the managing director or the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed;
6. Adjudication of penalty : –
i. The default with regard to non-appointment of company secretary has already been admitted. The subject company does not get covered under the purview of small company as defined u/s 2(85) of the Act. Hence, the benefit of section 446B would not be applicable on the company.
ii. Under Section 203(4), the onus of appointing a whole time KMP is on the entire Thus the directors during the relevant time are being considered as officers in default for the purpose of levying penalties.
iii. Now in exercise of the powers conferred on me vide Notification dated 24th March, 2015 and having considered the reply submitted by the noticee (s) in response to the notice issued on 16.06.2023 and reply submitted on 28.06.2023 & 04.07.2023 hearing held in the matter on 18.08.2023, I do hereby impose the penalty on the company and its Directors for violation of section 203 of the Act:
|
Violation section |
Penalty imposed on company/ director(s) | Days of default | Calculation for penalty amount as per Section 203 (in Rs.) |
Penalty imposed (in Rs.) |
|
A |
B | C | D |
E |
| u/s 203 of the Companies Act, 2013 | SMITHS DETECTION SYSTEMS PRIVATE LIMITED (Company) | 406
(from 02.11.2018 to 12.12.2019) |
5,00,000 | 5,00,000 |
| Mr. STUART PAYNE JEFFREY (director) | 406
(from 02.11.2018 to 12.12.2019) |
50000+(1000X406) = 4,56,000
subject to maximum 5,00,000 |
4,56,000 | |
| Mr. SANDEEP BHATIA (WTD) | 406
(from 02.11.2018 to 12.12.2019) |
50000+(1000X406) = 4,56,000
subject to maximum 5,00,000 |
4,56,000 | |
| Mr.VIKRANT SUBHASH TRILOKEKAR (director from 08.02.2019 to 12.12.2019) | 307
(from 08.02.2019 to 12.12.2019) |
50000+(1000X307) = 3,57,000
subject to maximum 5,00,000 |
3,57,000 | |
| Mr. SWEE CHOON GEORGE TAY (director from 02.11.2018 to 14.12.2018) | 43
(from 02.11.2018 to 14.12.2018) |
50000+(1000X43) = 93,000
subject to maximum 5,00,000 |
93,000 |
7. Order:
a. Names of parties as mentioned in the table above are hereby directed to pay the penalty amount as per column no. ‘E’ therein.
b. The said amount of penalty shall be paid through online by using the website mca.gov.in (Misc. head) in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, within 90 days of receipt of this order, and intimate this office with proof of penalty paid.
c. Appeal against this order may be filed with the Regional Director (NR), Ministry of Corporate Affairs, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi-110003 within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website mca.gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of the order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].
d. Your attention is also invited to section 454(8) of the Act in the event of non‑compliance of this order.
(Pranay Chaturvedi, ‘us)
(Adjudicating Officer)
Registrar of Companies
NCT of Delhi & Haryana
No. ROC/D/Adj/Order/203/Smiths Detection/3935-3940 Date: 17/10/2023
