MCA Penalises Private Company and its Director for Improper Appointment of Non‑Resident Managing Director [Read Order]

The Ministry of Corporate Affairs (MCA) has issued an adjudication order underSection 454 of the Companies Act, 2013, penalising a public company and its director for violation of Section 196(4) read with Part I of Schedule V(e).

The order followed a suo motu application filed by the company acknowledging non‑compliance in the appointment of a non‑resident managing director.

According to the facts recorded, the company appointed Mr Krishna Prasad Surapaneni, a non‑resident director, as managing director on February 3, 2023, for a five‑year term. However, the appointment was made without obtaining the necessary approval from the Central Government as required under Section 196(4) and Schedule V.

The lapse continued until March 20, 2024, when the director resigned, resulting in a default period of 412 days. The company subsequently filed Form DIR‑12 to record the resignation.

The adjudication process involved the issuance of show cause notices in February 2025, followed by replies from the directors. Former whole‑time director Mr. Sooda Hemachandra Shetty clarified that he had resigned earlier in October 2022, with Form DIR‑12 duly filed, and was therefore not liable for penalty. His submission was accepted, and no penalty was imposed on him.

An e‑hearing was conducted in August 2025, attended by the company’s authorised representative. During the hearing, it was admitted that the company had neither filed Form MR‑1 nor sought approval from the Central Government for the appointment.

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It was also submitted that no substantial board decisions were taken during the period of default, apart from routine matters.

In its order, the MCA imposed penalties of ₹2,00,000 on the company and ₹50,000 on Mr. Surapaneni, while exempting Mr. Shetty.

The MCA directed the company to make a post‑facto application to the Central Government in Form MR‑2 to regularize the appointment for the default period. The order further instructed that penalties be paid within 90 days via the MCA’s e‑Adjudication portal, with the stipulation that the director’s penalty must be paid personally.

The MCA noted that the company does not qualify as a “small company” under Section 2(85), and therefore the benefit of reduced penalty under Section 446B was not applicable. It also warned that failure to pay penalties within the prescribed period would attract consequences under Section 454(8), including potential prosecution.

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