Additional Director Continued Beyond Statutory Tenure: MCA penalises Scania India and Board [Read Order]

Scania Commercial Vehicles India Private Limited and its Board was imposed with penalties for allowing an Additional Director to continue beyond the statutory tenure prescribed under the Companies Act, 2013 by the Ministryof Corporate Affairs (MCA).

The order, passed under Section 454 of the Act for violation attracting Section 172, held that the company and its directors failed to regularise the Additional Director within the legally permitted period and for permitting him to continue in office for 174 days without valid authority.

A suo motu application was filed by Scannia before the ROC, Bangalore on 18 November 2024 admitting non-compliance with Section 161(1) of the Companies Act, 2013.

As per the record, the Board had appointed Mr. Sven Johan Persson Schlyter as an Additional Director through a board resolution dated 10 June 2021. Under Section 161(1), an Additional Director can hold office only up to the date of the next Annual General Meeting (AGM) or the last date on which the AGM should have been held, whichever is earlier.

In this case, the statutory last date for holding the AGM was 30 November 2021. However, the director was regularised by shareholders only at the AGM held on 23 May 2022.

The authorities found that his lawful tenure as Additional Director ended and yet he continued to act as director for a period of 174 days without statutory backing.

After considering the application, replies, and oral submissions, MCA concluded that there was a violation.

The authority also clarified that Scania Commercial Vehicles India Private Limited does not qualify as a “small company” under Section 2(85), and therefore the benefit of lesser penalty under Section 446B was not available.

A penalty of ₹1,36,500 was imposed on the company. Separate penalties were imposed on directors and officers in default, including ₹1,00,000 each on several foreign directors and the concerned Additional Director.

While certain other directors were penalised at slightly lower computed amounts based on the period and role in default such as ₹97,500 and ₹75,500 respectively subject to the statutory caps applicable to officers.

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