Woman Director appointed after 1 year Delay: MCA Imposes ₹2.98 Lakh Penalty on Company & its Directors [Read Order]

The Ministryof Corporate Affairs (MCA) has imposed a penalty of Rs 2,98,000 on the company for the delay of 1 year and 4 months in the appointment of a woman director in its board as per Section 149(1) of the Companies Act,2013 and Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014.

The case arose from the application filed by Mr Velappan Ponnusamy, Managing Director representing the company, Kumbakonam Mutual Benefit Fund Nidhi Limited, for the violation of Section 149(1) of the Companies Act, 2013 read with 3(ii) (b) of the Companies (Appointment and Qualification of Directors), Rules, 2014

It has been noticed from the financial statements filed in Form AOC-4 for the period 31.03.2020 & 31.03.2021 that the company has a turnover of Rs. 31,69,485,000/- & Rs.35,35,652,000/- during the financial years 2019-20 & 2020-21, which is more than Rs. 300 Cr.

However, the company had appointed Elangovan Amika on 08.11.2021 as director of the company. Further, it was observed that the due date of appointment was on 30.06.2020 and therefore, there is a delay of 1 year, 4 months and 7 days.

It was noted that there was a delay in appointing Woman director in the company, hence the company and its officers are in default and are liable as per the provisions of Section 172 of the Companies Act, 2013.

A show cause notice was issued, to which the reply of the company stated that it was due to the circumstances prevalent during the COVID-19 pandemic and the complete lockdown implemented by the Government, the company was unable to identify and appoint a suitable candidate as a woman director within the stipulated timeframe.

Rule of 3 of the Companies (Appointment and Qualifications of Directors) Rules, 2014: Woman Director on the Board.

The following class of companies shall appoint at least one woman director-

(i) every listed company;

(ii) every other public company having -

(a) paid up share capital of one hundred crore rupees or more; or

(b) turnover of three hundred crore rupees or more:

Provided that a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation:

Provided further that any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy whichever is later.

The MCA observed that the company, having a turnover that exceeded the prescribed threshold during the years 31 March 2020 and 31 March 2021, had failed to comply with this statutory requirement, resulting in a default under the applicable provisions.

Thus, the Company violated Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 during the period, and is therefore liable under section 172 of the Companies Act, 2013, and the MCA imposed a penalty of Rs 2,98,000 on the company and a penalty of Rs 1,00,000 on two of its directors.

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