MCA Penalizes Company and Directors for Failing to Hold Independent Directors’ Meeting [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 penalty was imposed on the company as well as the directors for the failure to hold an independent directors’ meeting.

In this case, during the inquiry, it was found that the company Anheuser Busch Inbev India Limited had that the independent directors of the company failed to hold a separate meeting in accordance with Schedule IV of the Companies Act, 2013, for FY 2021-22.

The Schedule IV Code for Independent Directors that deals with the mandate for the holding of separate meetings for independent directors states that:

“VII. Separate meetings:

 (1) The independent directors of the company shall hold at least one meeting ‘in a financial year’, without the attendance of non-independent Directors and members of management; (2) All the independent Directors of the company shall strive to be present at such a meeting; (3) The meeting shall:

 (a) review the performance of non-independent directors and the Board as a whole;

(b) Review the performance of the Chairperson of the company, taking into account the views of executive Directors and non-executive Directors;

(c) assess the quality, quantity, and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.”

Read More: MCA Imposes Penalty on Company and Directors for Non-Compliance with S.118(10) of Companies Act

In the adjudication application that was filed by the company, it was stated that the default to hold a separate meeting for the independent directors was caused by the unavailability of independent directors in the aftermath of the COVID-19 pandemic.

During the hearing, the company's representative contended that the above-mentioned default was not of such nature as to prejudice the interest of members or creditors of or others dealing with the applicant company in a significant manner, and further declared that the nature of the offence has not materially affected public interest.

The adjudicating authority, B. Mishra, imposed a total penalty of Rs 9 lakhs on both the company and the directors for violation of Section 149(11) of the Companies Act, 2013. The division of penalty imposed on the company and the directors is given in the table of the adjudication order.

The order also stated that prosecution will be filed under Section 454(8)(i) and (ii) of the Companies Act, 2013, if the company fails to pay the fine imposed.

To Read the full text of the Order CLICK HERE

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