Penalty Imposed for Non-Compliance with Women Director Requirement

The Ministry of Corporate Affairs (MCA) recently imposed a penalty on Godrej Tyson Foods Limited for failing to comply with Section 149(1) of the Companies Act, 2013, which mandates the appointment of at least one woman director for certain companies. As of the company’s financial year ending March 2022, its turnover exceeded the required thresholds, making it legally obligated to appoint a female director, which it had failed to do. Despite having a woman director until 2020, the company did not fill the vacancy for several years, citing challenges posed by the COVID-19 pandemic and the need for approval from joint venture partners based in India and the USA.

Following a show-cause notice, the company responded, explaining the delay in appointing a new woman director. However, after further investigation, the MCA found the company in violation of the legal requirements and decided to impose a penalty. Godrej Tyson Foods and its officers in default, including the Managing Director, CEO, Company Secretary, and CFO, were fined a total of ₹5,85,500 for the 271 days of default. The company and the officers must remit the penalty within 60 days, or face further legal consequences under Section 454 of the Companies Act. The company’s failure to promptly appoint a woman director triggered this enforcement action, reflecting the importance of adhering to corporate governance norms.

The penalty emphasizes the importance of compliance with the Companies Act, specifically Section 149(1), which is designed to ensure gender diversity on boards. Though the company has now appointed a woman director, the financial and legal repercussions of non-compliance will serve as a reminder to businesses to meet legal obligations within the set timelines. The MCA also highlighted the possibility of further legal action if the penalties are not paid within the designated period.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF
COMPANIES
100, “EVEREST”, MARINE DRIVE,
MUMBAI – 400 002
Website : www.mca.gov.in
e-Mail ID : roc.mumbai@mca.gov.in

Order No. ROC(M)/ S.149(1) / GODREJ /ADT-ORDER/3326 to 3330 Dated: 07 JAN 2025

Order for Penalty under Section 454 for violation of Section 149(1) of the Companies Act, 2013.

IN THE MATTER OF GODRET TYSON FOODS LIMITED (CIN: U15122MH2008PLC177741)

(I) Adjudicating Officer: B. Mishra, ICLS, ROC, Mumbai

(II) Presenting Officer: Rujuta Bankar, ICLS, AROC, Mumbai

APPOINTMENT OF ADTUDICATING OFFICER:

1. Ministry of Corporate Affairs vide its Gazette Notification No.A-42011/112/ 2014-Ad.II dated 24.03.2015 appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 [herein after known as Act] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

COMPANY:

2. WHEREAS the company viz GODREJ TYSON FOODS 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 Godrej One, 3rd Floor, Pirojshanagar, Eastern Express Highway, Vikhroli (East),Mumbai, Mumbai City,Maharashtra,400079,India.

SECTION 149 IS REPRODUCED AS UNDER:

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 women 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:-

5. The company is clearly required to appoint a Woman Director based on the thresholds stated above, but it failed to do so.

6. This office had issued show cause notice under section 454 for violation of section 149(1) of the Companies Act, 2013 dated 29.03.2023 to the Company and its directors.

7. Reply dated 28.04.2023 was received from the Company and relevant para of the Company reply is reproduced as under:

a. The Company is an unlisted public company. As per the provision of Section 149(1)
r/w Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 the Company shall appoint at least one-woman Director. Ms Els Raynaers (DIN: 00516837) held the office woman Director from March, 20,2015 and immediately after her resignation there was an unprecedented outbreak of COVID-19 pandamic across the globe which adversely affected the selection of a new woman director on the board.

b. The company is a Joint venture between Godrej Agrovet Ltd (Indian Company) and Tyson India Holding Ltd (USA based), therefore, selection of new director needs to meet professional criteria / norms of both JV partners, as to suitability of the candidate for the Company’s business and operations.

8. Vide further reply dated 12.07.2023 the Company informed that the company has appointed Ms Ahana Gautam as an Independent Director (Woman Director) on the Board of the Company for term of 5 consecutive years commencing from 10.07.2023 upto 09.07.2028.

PENALTY PROVISION FOR VIOLATION:

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:

9. Mr Upendra R Pathak, Company Secretary being authorized representative of the Company attended the hearing in person on 27.06.2024.

10. He submitted that there was no mens rea and default was committed due to unavoidable circumstances, however, there was no mala fide intention.

11. The presenting officer has submitted that the Company in its reply dated 28.04.2023 stated that Ms Els Raynaers (DIN: 00516837) held the office woman Director from March, 20,2015 who has resigned on 19/02/2020 (SRN: R33481714) and immediately after her resignation there was an unprecedented outbreak of COVID-19 pandamic across the globe which adversely affected the selection of a new woman director on the board.

The Company is a Joint venture between Godrej Agrovet Ltd (Indian Company) and Tyson India Holding Ltd (USA based), therefore, selection of new director needs to meet professional criteria / norms of both JV partners, as to suitability of the candidate for the Company’s business and operations.

12. The Company vide its letter dated 12.07.2023 has submitted further reply informing this office that Ms Ahana Gautam (DIN: 08385484) has been appointed as an Independent Woman Director on the Board of the Company for term of 5 consecutive years commencing from 10.07.2023 upto 09.07.2028.

FINDINGS AND OBSERVATIONS

13. As per the FS filed by the company its Paid up share Capital and Turnover as on 31.03.2022 is as under: –

14. The Company is required to appoint a Women Director based on the thresholds stated above, but it failed to do so. Therefore, the Company and its Officers in default have violated the provision of section 149(1) of the Companies Act, 2013.

15. Further, on the issue of providing, ‘reasonable time’ to comply with the provision, attention is drawn to the Explanation to Rule 3 which states that “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.” 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.

16. 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 a 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.

17. The Company appointed Ms Ahana Gautam having DIN 08385484 as Woman Director Director on the Board of the Company for term of 5 consecutive years commencing from 10.07.2023 upto 09.07.2028 as informed to this office vide letter dated 13.06.2023. As per Section 2(51) r/w Sec 2(60) of the Act, penalty is being levied on Mr. BALRAM SINGH YADAV (Managing Director), Mr. ABHAY PARNERKAR (CEO-KMP), Mr. UPENDRA KUMAR R PATHAK, (Company Secretary), Mr. SUHAS RAVINDRA ADVANT (CFO-KMP) being officers in default.

ORDER

18. In exercise of the powers conferred on me vide Notification dated 24th March 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(1) of the Act.

19. Having considered the facts and circumstances of the cases and after taking into account the factors above, I hereby impose a penalty of Rs. 1,85,000/- on the Company and Rs. 1,00,000/- on each officers in default as per table below for violation of provisions of Section 149(1) of the Companies Act, 2013.

TOTAL PENALTY PAYABLE — Rs. 5,85,50*

(•) The period of violation of provisions under Section 149 of the Companies Act, 2013 is from 01st July, 2022 till 29th March, 2023 and delay is 271 days. As per signatory details available on MCA-21 portal, the above-mentioned individuals as per their appointment dates were Officers in default during the period of violation.

20. I am of this opinion that, the penalty is commensurate with the aforesaid failure committed by every officer of the Company.

21. The Noticee shall pay the said amount of penalty through “Ministry of Corporate Affairs” portal and proof of payment be produced for verification within 30 days of receipt of this order.

22. Please note that as per Section 454(8)(i) of the Companies Act, 2013, where company does not pay the penalty imposed by the Adjudicating Officer or the Regional Director within a period of ninety days from the date of receipt of the copy of the order, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees, but which may extend to five lakh rupees.

23. Where an officer of a company who is in default does not pay the penalty within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees, but which may extend to one lakh rupees, or with both.

24. Therefore, in case of default in payment of penalty, prosecution will be filed under Section 454(8)(i) and (ii) of the Companies Act, 2013 at your own cost without any further notice.

25. Further, the company and its officers are hereby direct that the penalty amount shall be remitted from their own sources through MCA21 portal within 60 days from the date of receipt of order. The company needs to file INC-28 as per the provisions of the Act, attaching the copy of the adjudication order along with payment challans.

26. As per Section 454 of the Companies Act, 2013 read with the Companies (Adjudicating of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, appeal, if any, against this order may be filed in writing with the Regional Director, Western Regional, Ministry of Corporate Affairs, within a period of 60 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.

27. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to the Company and Noticee/s and also to Office of the Regional Director, Western Region, Ministry of Corporate Affairs.

(B MISHRA)
Adjudication officer and Registrar of Companies,
Maharashtra, Mumbai.