Case Law Details
Suman Kumar Vs Union of India & Ors. (Supreme Court of India)
Introduction: In a recent verdict, the Supreme Court of India dismissed a writ petition challenging the amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The petitioner, Suman Kumar, contested the rule, which mandates private companies with a paid-up share capital of Rs.10 crores or more to have a full-time company secretary. This article delves into the details of the case, the court’s reasoning, and the broader implications of the judgment.
Background: The challenge revolved around the amendment to Rule 8A, where the threshold for the mandatory appointment of a full-time company secretary was increased from Rs. 5 crores to Rs. 10 crores in paid-up share capital, via a notification dated 03.01.2020. The petitioner argued against this amendment, contending that it was arbitrary and lacked a rational basis. The court, however, rejected this contention, emphasizing that economic policy matters should be left to expert bodies.
Analysis of Rule 8A Amendment: The court noted that the increase in the paid-up share capital threshold was not arbitrary or irrational but was made to counter the effects of inflation. The judgment stressed that courts should exercise caution and judicial restraint in matters requiring technical, commercial, and expert knowledge. The enhancement aimed to improve the ease of doing business and reduce compliance expenditure, which falls under the domain of economic policy.
Constitutionality and Article 14: The court highlighted that unless it can be demonstrated that the increase in paid-up share capital for appointing full-time company secretaries is ex facie arbitrary, capricious, or whimsical, and lacks a nexus with the intended purpose, it cannot be deemed unconstitutional or a violation of Article 14 of the Constitution of India.
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