Failure to Hold Minimum Four Board Meetings as per S 173(1): MCA Imposes Penalty on Company and its Directors [Read Order]

The Ministry of Corporate Affairs (MCA) has imposed a penalty of Rs 10,000 each on the company and its directors for failing to conduct a minimum of four meetings as required under Section 173(1) of the Companies Act, 2013.

The case arose from the application filed by the company, Compass Group (India) Private Limited, for adjudication of penalties for default under Section 173(1) read with Section 450 of the Companies Act, 2013.

According to the application, the company has convened and held board meetings during the calendar year 2024. The immediately preceding meeting was held on 04.12.2023, and the meeting immediately succeeding 30.09.2024 was held on 17.01.2025.

As per the provisions of Section 173(1) of the Companies Act, 2013, every company is required to hold a minimum of four meetings of its Board of Directors every year in such a manner that not more than 120 days shall intervene between two consecutive meetings of the Board.

It has been observed that the company held only three meetings of its Board of Directors during the calendar year 2024, as against the minimum prescribed number of four meetings under Section 173(1) of the Act.

Accordingly, the company had failed to comply with the provisions of Section 173(1) of the Companies Act, 2013, thereby attracting penal provisions under Section 450 of the Act.

It was observed that the adjudicating officer had reasonable cause to believe that the company and its officers in default have not complied with the provisions of Section 173(1) read with Section 450 of the Companies Act, 2013.

Additionally, the gap between any two consecutive board meetings held in F.Y. 2023-24 and F.Y. 2024-25 did not exceed 120 days. Thus, the default is one-time in nature and thus, the penalty is imposed accordingly under Section 450 of the act subject to the condition that the same is disclosed in the forthcoming Board Report to maintain the necessary disclosures under Corporate Governance.

A show-cause notice was issued to the company. The parties didn't seek an E- hearing. Following the same, a penalty of Rs 10,000 was imposed on each of the company and its three directors, namely, Srikrishnan Ramachandra, Paramita Bagchi and Vikas Chawla .

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