Introduction: The Government of India, Ministry of Corporate Affairs, through the Office of the Registrar of Companies in Mumbai, has issued a penalty order under Section 454 of the Companies Act, 2013. This order pertains to the violation of Section 149(1) by MSRDC Sea Link Limited.
Detailed Analysis: The company, a wholly owned subsidiary of the Maharashtra State Road Development Corporation Ltd., failed to appoint a woman director as required by the Companies Act. The violation, confirmed through financial statements, led to the issuance of a show cause notice and subsequent hearings.
In response, the company explained the delay, attributing it to government processes and changes, including the impact of the COVID-19 pandemic. The Board eventually appointed Vijaya Shenoy as the Woman Director to rectify the non-compliance.
The adjudicating officer, B. Mishra, considered the company’s submissions and analyzed the timeline of events. The order specifies a penalty of INR 1,85,000 for the 270-day default, emphasizing the commensurability of the penalty with the failure.
Conclusion: This penalty order highlights the significance of timely compliance with regulatory requirements, even for government-owned entities. The case serves as a reminder of the legal obligations imposed by the Companies Act, 2013, and the consequences of non-compliance. Companies, irrespective of ownership, must adhere to corporate governance norms to avoid penalties and legal repercussions.
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
No .ROC(M)/ S.149(1) MSRDC /ADI-ORDER/4104/RD-80
Date: 12/09/2023
Order for Penalty under Section 454 for violation of
Section 149(1) of the Companies Act, 2013.
IN THE MATTER OF MSRDC SEA LINK LIMITED
(CIN: U45200MH2018SGC315536)
1. Adjudicating Officer: B. Mishra, ICLS, ROC, Mumbai
2. Presenting Officer: Rujuta Bankar, ICLS, AROC, Mumbai
APPOINTMENT OF ADJUDICATING 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 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 MSRDC SEA LINK LIMITED (hereinafter known as the `Company’) is a registered company with this office under the provisions of the Companies Act, 2013 having its registered office as per MCA21 Registry at address Near Lilavati Hospital, Opp. Bandra Reclamation Bus Depot, K C Marg Bandra (West) Mumbai Mumbai City MH 400050 IN.
FACTS ABOUT THE CASE:
3. As per the Financial Statements filed by the Company, its Paid up share capital and turnover as on 31.03.2022 is as under:-
| Paid up share capital | Rs. 4,22,70,00,000.00/- |
| Turnover | Rs. 69,95,80,256.00/- |
4. The company is required to appoint a woman director based on the thresholds stated above, but it failed to do so. Therefore, the company has violated the provision of section 149(1) of the Companies Act, 2013 read with Rule 3 of Companies
(Appointment and Qualification of Directors) Rules, 2014. Hence, the Company and every officer will be liable for penal action u/s 172 of the Companies Act, 2013.
5. Whereas, this office had issued show cause notice under section 454 for violation of section 149(1) of the Companies Act, 2013 dated 27.03.2023 to the Company and its
6. The company vide its letter dated 13.04.2023 has submitted its reply stating, inter alba, that
a. MSRDC Sea Link Limited (“MSLL”) is a wholly owned subsidiary of Maharashtra State Road Development Corporation Limited, a Government of Maharashtra
b. Being a Government Company, the Government of Maharashtra nominates Directors on the Board of the Company.
c. Earlier, Government of Maharashtra has not appointed women Directors on the Board of MSLL.
d. In view of show cause notice received from Ministry of Corporate Affairs, MSLL Board appointed Vijaya Shenoy (DIN: 10111666) as Woman Director on the Board of MSLL, vide Board Resolution dated 12.04.2023.
e. DIR-12 regarding appointment of Woman Director was filed with the office of Ministry of Corporate Affairs on 12.04.2023 vide SRN Number AM 894144.
f. MSLL is a fully owned undertaking of Government of Maharashtra. Board of Directors consists of eminent LA.S Officers nominated by Government of
SECTION 149 IS REPRODUCED AS UNDER:
7. 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 oilier 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.
PENALTY PROVISION FOR VIOLATION
Section 172:
8. 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 father 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. Shri jatin Desai, Company Secretary (Additional Charge, MSLL), Shri Prasad Sawant, Company Secretary and Ms. Dhurti Satiya, Company Secretary being authorized representatives of the Company attended the hearing in person on 27.04.2023.
10. Further, the company vide its letter dated 17.05.2023 has made written submissions, the relevant paragraphs of which are reproduced as under:
a) Government of Maharashtra (GoM) vide its Government Resolution (GR) dated 9 July, 1996 had decided to incorporate Company in the name of Maharashtra State Road Development Corporation (100% Holding Company) for the development of infrastructure in the State of Maharashtra.
b) GoM further vide its GR dated 9 February, 2000 had specified the composition of the Board of Directors of MSRDC. The composition of Board of Directors of MSRDC is as follows:
a. Hon’ble Minister for Public Works (Public Undertaking) as Chairman
b. Hon’ble Minister of State for Public Works (Public Undertaking) as a Co- Chairman
c. Secretary (Road), Public Works Department, GoM
d. Secretary (Works) Public Works Department, GoM were to act as Board of Directors.
c) Accordingly, GoM from time-to-time issues orders for appointment/ changes in the composition of Board Members.
d) As per GoM direction, MSRDC in its Board meeting held on 4 August, 2018 approved formation of Special Purpose Vehicle (Wholly Owned Subsidiary Company) i.e. MSRDC Sea Link Limited (“MSLL”) as a operator for operating, maintaining and tolling the Rajiv Gandhi Sea Link Bridge connecting Bandra and Worli area of Mumbai for the period starting from February 2, 2020 till March 31, 2039. In the said resolution, Board nominated following directors of MSRDC as first Directors of MSLL:
a. Shri. Radheshyam Mopalwar (IAS)
b. Anil Kumar Gaikwad (Secretary, GoM)
c. Chandrakant Pulkundwar (IAS)
d. Vijay Waghmare (IAS)
e) All the aforesaid Directors of Subsidiary Company were also Directors in Holding Company.
f) Composition of Board of Directors of MSLL consists of IAS Officers and Chief Engineer who is deputed by Public Works Department, GoM, in MSRDC.
g) Company vide its letter dated 11 April, 2022 and 16 November, 2022 requested Government of Maharashtra for the appointment of Woman Directors on the Board. However, Government of Maharashtra has failed to appoint Woman Director.
h) The Company further submitted that due to COVID Epidemic and change in Government in State of Maharashtra, there was delay in decision making regarding appointment/change of Directors including Woman Director in Government Organizations.
11. In view of show cause notice received from Ministry of Corporate Affairs, MSRDC Sea Link Limited at its Board meeting held on 12 April, 2023 appointed Vijaya Shenoy as Woman Director. She is LLM and having experience in Legal, Toll & Commercial department for more than 17 years.
12. In view of above submission, there was sequential delay in compliance with the requirement of section 149 of the Companies Act, 2013 regarding appointment of Woman Director.
FINDING AND OBSERVATIONS
13. As per the Financial Statements filed by the company its Paid up share capital and turnover as on 31.03.2022 is as under:-
| Paid up share capital | Rs. 4,22,70,00,000.00/- |
| Turnover | Rs. 69,95,80,256.00/- |
14. The company is required to appoint a woman 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. However, the Company is a wholly owned subsidiary of Maharashtra State Road Development Corporation Ltd., a Government of Maharashtra Undertaking. Accordingly, the Directors are nominated by the Government of Maharashtra or hold position in an ex- officio Thus, in the present case, the officers of the Company are not in a position to take remedial action to rectify the default. Therefore, it may not be appropriate to regard them as Officers in Default. Also, any direction issued to them under section 454(3)(b) would not be fruitful as such Officers are on their own not in a position to rectify the default. However, the default in respect of the Company would lie.
16. Further, in order to calculate the period of default, 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 info 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.
17. The issue to be determined is whether the period of default begins from 01.04.2023 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.
18. The presenting officer has submitted that the Company itself admitted the default vide its letter dated 13.04.2023 wherein it informed this office that a Woman Director was appointed in compliance with the requirement of section 149 of the Companies Act, 2013 after the receipt of the show cause notice dated 27.03.2023.
19. MSLL Board appointed Vijaya Shenoy (DIN: 10111666) as Woman Director on the Board of MSLL and DIR-12 regarding appointment of women Director filed with this office on 12.04.2023 vide SRN AA1894144.
ORDER
20. 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. The order is being passed beyond a period of 30 days from the date of hearing for administrative reasons.
21. Having considered the facts and circumstances of the case and after taking into accounts the above factors, I hereby impose a penally of 1,85,000/-(One Lakh Eighty Five Thousand Only) on the company as per the Table below for violations of provisions of section 149(1) of the Companies Act,2013.
|
No. of Days of default. |
Penalty imposed on company /directors | First default penalty in (Rs.)
(a) |
Default continues Penalty in (Rs.)
(b) |
Total Penalty in (Rs.) (a)+(b) | Maximum Penalty in (Rs.) |
| 270 | Company | 50,000 | 270 X 500 | 185000 | 1,85,000 |
| TOTAL | 185000 | 1,85,000 |
(♦) The period of violation of provisions under Section 149 of the Companies Act, 2013 is from 01-Jul-2022 till 27-March-2023 and delay is 270 days.
I am of this opinion that, the penalty is commensurate with the aforesaid failure.
22. The Notices shall pay the said amount of penalty through “Ministry of Corporate Affairs” portal and proof of payment be produced for verification within 60 days of receipt of this order.
23. 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.
24. 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.
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.
(B MISHRA)
Adjudication officer and Registrar of Companies,0
Maharashtra, Mumbai.
