Default in the appointment of the whole-time company secretary: MCA imposes 8.92 lakhs on Private Limited Company [Read Order]

In the adjudication order passed by the Ministry of Corporate Affairs (MCA) Registrar of Companies under Section 454 of the Companies Act, 2013,  a total penalty of up to Rs. 8.92 lakh was imposed on a private limited company and its two directors for violating Section 203 of the Companies Act, 2013.

The company named Samyama Jyothi Solar Energy Private Limited has been registered under the provisions of the Companies Act 2013 and has a paid-up capital of Rs. 5.56 crores.

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Section 203(1) of the Companies  Act, 2013 states that:

“(1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel, (i) managing director, or Chief Executive Officer or manager and in their absence, a whole-timeе director.

(ii) company secretary; and

 (iii) Chief Financial Officer.”

Section 203(5) of the Companies  Act, 2013 states that:

 “(5) If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel ofthe company who is in default shall be liable to a penalty offifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.”

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The company, through its Directors, filed a joint application for adjudication under Section 203 of the Companies Act, 2013. The company’s paid-up capital crossed Rs. 5.56 crore as of 31.03.2018, which required them to appoint a full-time Company Secretary by 30.09.2018. However, the appointment was made later, on 28.03.2019.

Later, due to an amendment effective from 01.04.2020, the threshold for mandatory appointment of a company secretary was raised to Rs. 10 crore, and the requirement no longer applied to the company from 08.05.2020. The company has voluntarily submitted this application to acknowledge and regularize the delay in compliance.

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By going through the facts of the present case, the adjudicating authority reached a strong conclusion that the company violated Section 203(1) of the Companies Act and was liable for a penalty under Section 203(5) of the Act.

A total penalty of Rs. 8.92 lakhs was imposed on the company and the 2 directors, and the penalty imposed is clearly given in the table of the order.

The order also stated that, according to Section 454(8) of the Act, if the order is not complied within 90 days, prosecution will be filed under Section 454(8)(ii) of the Companies Act, 2013.

To Read the full text of the Order CLICK HERE

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