The Disciplinary Committee of the Institute of Company Secretaries of India (ICSI) has punished a Company Secretary for committing professional misconduct for filing Compliance Certificate without due diligence.
A complaint was filed against the respondent, a Company secretary alleging that several acts of Professional and Other Misconduct was committed by him while certifying the Compliance Certificates of M/s Kaizen Wheels Pvt. Ltd. for the years 2009-10 and 2010-11. It was noted in the complaint that in the Compliance Certificate, it was wrongly stated that proper notices for Board meetings were given by the Company held during the year 2009-10. The Respondent has admitted that out of eight meetings held in the year, the Respondent has admitted that he had verified the proof of only three meetings held on 09.06.2009, 16.07.2009 and 10.12.2009. In regard to the other five meetings, the Respondent relied on the letter of the management confirming dispatch of notices.
It was alleged that the Respondent failed to disclose in his Certificate that the allotment of 72,660 equity shares of Rs. 10/- each on 31st March 2009, by the Company, was illegal and beyond the authority of the Company as its Authorised Capital was only Rs. 5,00,000 as on that date. It was further alleged that the Respondent failed to report that the 1st AGM held by the Company on 1st January 2010, was illegal and void as it was held in complete disregard of Section 166 read with Section 210 of the Companies Act, 1956.
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The Director (Discipline) recorded a prima facie opinion that there was laxity on the part of the Respondent as he failed to verify the proofs of dispatch of notices of all the eight meetings of the Board of Directors of M/s Kaizen Wheels Pvt. Ltd. Also, he mentioned the date as 26.5.2010 instead of 31.03.2009. Also, the Board of Directors of the Company in its meeting held on 10.12.2009 had authorized any Director to sign Form 23AC, Form 23ACA, and Form 20B. However, while preparing e-form 20B, the date was inadvertently mentioned as 20.12.2009 instead of 10.12.2009. Further, the Respondent has failed to notice the variation in the paid-up capital and authorized capital wherein the Authorised Capital was Lesser than the Paid-up Capital.
The Respondent admitted that he had verified the proof of dispatch of only three notices for the Board meetings held on 9th June, 2009, 16th July, 2009 and 10th December, 2009 and for other meetings he had only relied on the information provided by the management that the notices were duly dispatched but did not physically check the proof of dispatch.
Before the Disciplinary Committee, the Respondent pleaded guilty for non-exercising due diligence in the issuance of Compliance Certificate for the year 2009-2010 with reference to the issue of proper notices to the Directors for Board Meetings of the company.
However, he further pleaded not guilty for the other alleged acts, to have been committed by him in the conduct of his professional duties, since: (i) He has exercised due diligence in certification of Form 2 for allotment of shares on 31st March 2009, on the basis of audited Balance Sheet duly signed by two Directors and audited by the Statutory Auditor of the company; and also on the basis of details available in the master data of the Company on the MCA21 portal with respect to its authorised Share Capital of Rs. 50 lakhs. (ii) He has adequately disclosed the fact in the Compliance Certificate that Annual General Meeting of the Company was convened on 1st January 2010.
Based on the above facts, the Disciplinary Committee asked the respondent to remit a fine of Rs. 10,000/- on the failure of which, he shall be removed from the rolls for 30 days.
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