MCA Imposes Penalty on Company and its Directors for Non-Appointment of Company Secretary under Section 203 of Companies Act [Read Order]

The Ministry of Corporate Affairs (MCA) in a recent adjudication order through the Registrar of Companies (RoC), Andhra Pradesh, has imposed penalties on Garudadri Infra Private Limited and its directors for failing to appoint a whole-time Company Secretary, as required under Section 203(1) of the Companies Act, 2013.

The adjudicating officer took suo motu cognizance of the default and initiated proceedings under Section 454 of the Companies Act, 2013, citing the company’s prolonged failure to comply with a mandatory provision despite meeting the prescribed financial threshold.

Garudadri Infra Private Limited is a private company incorporated under the Companies Act, 2013, with its registered office in Andhra Pradesh. Based on records and data available with the RoC, the paid-up share capital of the company exceeded ₹10 crore, thus mandating the appointment of a whole-time Company Secretary (CS) as per Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 read with Section 203(1) of the Act.

Despite the applicability of the said provision, the company had not appointed any Company Secretary as of the date of adjudication. The non-compliance had continued over a significant period.

The Registrar of Companies issued a ShowCause Notice (SCN) to the company and its officers in default, seeking an explanation for the continued non-compliance. The notice was duly served, but no reply or evidence of compliance was submitted by the company or its directors, either prior to or during the adjudication proceedings. The adjudicating officer noted that the default was ongoing and deliberate, given the absence of any corrective action from the company’s end even after the issuance of the SCN.

Section 203(1) of the Companies Act, 2013, mandates that certain classes of companies, including every private company with a paid-up share capital of ₹10 crore or more, must appoint a whole-time Company Secretary. Under Section 203(5) of the Act it is stated that the company is liable to a penalty of ₹5 lakh; and that every director and key managerial personnel (if any) who is in default shall be liable to a penalty of ₹50,000, and in case of a continuing default, a further penalty of ₹1,000 for each day after the first during which such default continues, subject to a maximum of ₹5 lakh.

After examining the material on record, the adjudicating officer held that the company was liable for penal action under Section 203(5) for failing to appoint a Company Secretary despite being statutorily obligated to do so.

Garudadri Infra Private Limited is to pay ₹5,00,000 and Each of the Directors is to pay ₹50,000 each. Additional per-day penalties were also noted, considering the continuing nature of the default, though exact computation was reserved pending any future non-compliance. The adjudicating officer further directed the company to appoint a Company Secretary without delay and file the requisite compliance forms, including DIR-12, to update the MCA registry.

The adjudicating officer asserted that compliance with the Companies Act, especially with respect to the appointment of key managerial personnel, is not optional but a statutory obligation. Companies and their directors are expected to be fully aware of the applicable thresholds and must take timely corrective actions to ensure compliance. The order concluded by warning that any further delay or non-compliance may attract more severe consequences, including escalated penalties and potential prosecution.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates