Penalty levied on company on failure to appoint company secretary

The Registrar of Company Under Ministry of Corporate Affairs has levied the penalty on company on failure to appoint company secretary.

As per Sec. 203(1) of the Companies Act, 2013, every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel – (i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; (ii) company secretary; and (iii) Chief Financial Officer: Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless, – (a) the articles of such a company provide otherwise; or (b) the company does not carry multiple businesses. Provided further that nothing contained in the first proviso shall apply to such class of companies engaged in multiple businesses and which has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government.

As per Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company and every other public company having a paid up share capital of ten crore rupees or more shall have whole-time key managerial personnel. Pursuant to Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every company which has a paid-up capital of ten crores or more shall have a Whole-time Company Secretary.

The company being an unlisted public limited one with a paid-up capital of Rs. 29,70,00,000/- failed to appoint Whole-time Company Secretary within 06 (six) months from the date of casual vacancy i.e. from 17.02.2020 to 10.06.2022, in accordance ‘with Sec. 203(4) of the Companies Act, 2013 and also not appointed Chief Executive Officer (CEO-KMP) within 06 (six) months from the due date i.e. from 31.11.2020 to 10.06.2022.

The Registrar of Companies, Chennai, Tamil Nadu examined the said default and passed the Adjudication Order No. ROC/CHN/Thanjavur/ADJ Order/S.203/2022, dated 14.06.2022 (impugned order) under Section 454 (3) and (4) of the Companies Act, 2013 for default in compliance with the requirements of Sec. 203 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Appellants have contended the impugned order and pleaded that the delay had occurred due to unavoidable circumstances and default was unintentional.

An opportunity of being heard was given to the Appellants on 15.06.2022. The Authorized Representative Shri. B. Gnanagurusamy, Authorized Signatory of the company has appeared for the Appellants while reiterating the grounds taken in the appeal had stated that the Company had stopped its operation and decided to sell the assets to repay the loans and other financial liabilities, as a result of which the KMPs have resigned and the company had put strenuous effort for searching of KMPs, but no candidate shown interest to join. The Company had filed a scheme of arrangement for reduction of share capital, if the scheme is approved, the necessity of appointment of KMPs may not arise and hence prayed for lenient view.

Though there is a default committed, there is a ground in interfering with the impugned adjudication order of the Registrar of Companies to the extent of reducing the quantum of penalty. Accordingly, the penalties imposed are reduced from Rs. 5,00,000/- to Rs. 50,000/- for the Company; Rs. 5,00,000/- to Rs. 25,000/- for Shri. Poosapadi Jagadeeswara Raja Ramkumar Rajha, Director; Rs. 5,00,000/- to Rs. 25,000/- for Shri. Poosapadi A Sankar Raja Krishnama Rajha, Director; Rs. 5,00,000/- to Rs. 25,000/- for Shri. Kanthimathinathan Subramanian, Director and Rs. 5,00,000/- to Rs. 25,000/- for Shri. Gurumoorthy Ramachandran, Chief Financial Officer. The Appellants shall pay the penalty in 15 days.

For Official Order Download PDF Given Below: