Penalty imposed on company for not conducting minimum 4 Board Meetings in a year
Registrar of Companies, has imposed penalties on a company, CFS Netralaya Private Limited, for not complying with Section 173 of the Companies Act, 2013. The Act mandates that a company must hold a minimum of four Board of Directors meetings each year, with no more than 120 days between consecutive meetings. CFS Netralaya Private Limited has been found in violation of this stipulation for the years 2021 and 2022, thus resulting in a penalty.
Section 173 of the Companies Act, 2013 plays a crucial role in ensuring corporate governance by stipulating the minimum number of Board meetings. In this case, CFS Netralaya Private Limited has held only two meetings in 2021 and three meetings in 2022, failing to meet the minimum requirement due to ongoing disputes among its shareholders/directors. The company was thereby found in violation of the Act’s provisions and was subjected to penalties amounting to INR 25,000 for each director for the respective years.
It’s notable that the directors admitted to the non-compliance via an application, stating the ongoing disputes as the primary reason for the failure. Despite the reasons provided, the MCA upheld the strict application of the Act and levied the penalty.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES
100, “EVEREST”, MARINE DRIVE,
MUM BAI – 400 002
Website : envw.mca.gov.in
Email ID : email@example.com
No. ROC(M)/Section 173/ADJ-ORDER/RD-30/167 to 172 Date: 07 JUN 2023
Order for penalty under Section 454 for violation of section 173 of the companies Act, 2013.
IN THE MATTER OF CFS NETRALAYA PRIVATE LIMITED
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.
2. Whereas, the Company CFS NETRALAYA PRIVATE LIMITED [herein after known as Company] is registered with this office under the provisions of Companies Act, 1956 having its registered address at First Floor, Flat No. 101, B Wing, Dhruv, CHSL, Gulmohar Main Road, Juhu, Ville Pale Mumbai MH 400049, as per the MCA portal.
Facts about the Case:-
3. Pursuant to Sect on 173(1) of the Act, the Company is required to hold minimum four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board.
4. The company had convened Board meetings on 20.04.2021 and 06.09.2021 for F.Y.2021 and 01.09.2022, 27.09 2022 and 28.12.2022 for Financial Year 2022.
5. There is a violation of the provisions of Section 173 of the Companies Act, 2013 as the company was not able to meet the minimum Board Meeting requirement of conducting 4 Board Meetings in the year 2021 and 2022 due to a pending dispute between Shareholders/Directors of the company before the Hon’ble Arbitrator appointed by the Delhi High Court vide its order dated 12.10.2021.
6. That joint applications u/s 441 of companies Act,2013 has been filed by Dr. Mahipal Singh Sachdev, Alka Sachdev, Dr. Ritika Sachdev Gupta, Dr. Roop & Dr. Sangita for composition of offences which has been treated as an application for adjudication of offences as consented on behalf the applicant vide letter dated 01.06.2023 addressesed to ROC Mumbai. Applicant in their application have inter alia stated that due to ongoing disputes, the shareholders/Directors were not on good terns so the Board failed to meet the requirements of Section 173 i.e. only 2 meetings were held in the year 2021 and 3 meetings in the year 2022. Moreover, in the two meetings held in 2021 and 2022 there was gap of 360 days.
Section 173(1) and 173(4) is reproduced as under:-
7. Section 173 :
(1) – Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board: Provided that the Central Government may, by notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.
(4) Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.
8. Application viz. Dr. Mahipal Singh Sachdev, Dr. Alka Sachdev, Dr. Ritika Sachdev Gupta, Dr. Roop & Dr. Sangite in their application filed through GNL-1 vide SRN F60637618 dated 21.04.2023 have admitted non compliance of provision of section 173(1) of Companies Act 2013 for the year 2021 and 2022 by the conducting minimum number of four meetings of Board of Director every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of boards.
1. Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby mpose a penalty of Rs.25,000/- (Rupees Twenty Five Thousand only) on each Director of the company for violation of provisions of Section 173 of the Companies Act, 2013 for the year 2021 & 2022 as per table given below.
For the year 2021
|Penalty imposed on Director(s)||First default
|Total Penalty in
|NA||1. Dr. Mahipal Singh Sachdev||25,000||25,000||25,000|
|2 Dr. Alka Sachdev||25,000||25,000||25,000|
|9. Dr. Ritika Sachdev Gupta||25,000||25,000||25,000|
|10. Dr. Roop||25,000||25,000||25,000|
|11. Dr. Sangita||25,000||25,000||25,000|
For the year 2022
|Penalty imposed on Director(s)||First default Penalty in
|Total Penalty in
|NA||2. Dr. Mahipal Singh Sachdev||25,000||25,000||25,000|
|2 Dr. Alka Sachdev||25,000||25,000||25,000|
|12. Dr. Ritika Sachdev Gupta||25,000||25,000||25,000|
|13. Dr. Roop||25,000||25,000||25,000|
|14. Dr. Sangita||25,000||25,000||25,000|
I am of this opinion that, the penalty is commensurate with the aforesaid failure committed by every officer of the Company.
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.
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.
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 costs without any further notice.
Registrar of Companies and Adjudicating Officer,
1. CFS NETRALAYA PRIVATE LIMITED
First Floor, Flat No. 101, B Wing, Dhruv,
CHSL, Gulmohar Main Road, Juhu,
Ville Parle Mumbai MH 400049.
2. MAHIPAL SINGH SACHDEV
3. ALKA SACHDEV
4. RITIKA SACHDEV GUPTA
HOUSE NO. 1-4, MAHARANI BAGH,
SRINIVASPURI, S.O. SOUTH DELHI,
NEW DELHI/11C 065,Delhi,India.
5. Dr. ROOP
334 SHIVAJI ROAD,
OPPOSITE NAS COLLEGE
E.K ROAD MEERUT,
MEERUT,250001 Uttar Pradesh, India.
6. Dr. SANGEETA
HOUSE NO.-331, SHIVAJI
ROADOPPOSITE NAS COLLEGE,
E K ROADMEERUT,250001,Uttar Pradesh, India.
7. Copy to:-
The Regional Director (WR), } For information.
Ministry of Corporate Affairs, }