Non-Appointment of CS due to poor financial condition during Covid: RD reduces penalty to Rs.500000

The Regional Director of Ministry of Corporate Affairs has reduced ROC penalty to Rs.500000 in case of Non-Appointment of CS due to poor financial condition during Covid.

Registrar of Companies in his order of adjudication has stated that the company has failed to appoint Whole Time Company Secretary as specified in section 203( 1) of the Companies Act, 2013 after cessation of the previous Company Secretary on 15.09.2021 to 01.07.2022. Hearing was held before Registrar of Companies on 08.09.2022 and after hearing the authorized representative had levied a penalty of Rs.5.00 Lakhs on the Company and Rs.50,000/- each for, Venkata Koteswara Rao Mittapalli, Whole Time Director, Chakravarthi Srinivasa Mittapalli, Managing Director, Mittapalli Ramesh Babu, Bheemeswara Venkata Satya Narayana Mittapalli, Sairam Reddy Gaddam, Mittapalli Kishore Kumar and Madhu Raghunayakula, Directors (total aggregating to Rs.8.50 Lakhs).

Though there is a default committed, there is a ground in interfering with the impugned adjudication order of Registrar of Companies to the extent of reducing the quantum of penalty due to the following reasons:

(a) pandemic caused by Covid-19, company has been facing various challenges.

(b) consequently, among the candidates who have consented for relocation to remote area for appointment as Company Secretary in the company demanded a higher pay scale (above and beyond industry standards).

(c) imposing maximum penalty by the Registrar of Companies on the company, its Managing Director and other directors is harsh, burdensome on the Company.

(d) Registrar of Companies have not taken into consideration all the above issues and when Company is having a Managing Director, other non-executive directors should not have been penalized.

Taking into consideration the facts of the appeal and submissions made by the authorized representative. I deem it would meet the end of justice if the penalty imposed by Registrar of Companies is reduced for Company to Rs.4,00,000/- and for 2 appellants i.e., Chakravarthi Srinivasa Mittapalli, Managing Director and Venkata Koteswara Rao Mittapalli, Wholetime Director to Rs.50,000/- each (total aggregating to Rs.5,00,000/-) and no penalty was imposed on 5 directors i.e., Mittapalli Ramesh Babu, Bheemeswara Venkata Satya Narayana Mittapalli, Sairam Reddy Gaddam, Mittapalli Kishore Kumar and Madhu Raghunayakula as the Company is having a Managing Director who looks after the job of day to day activities. The appellants are directed to comply with this order also provisions of Section 454(8) of the Companies Act, 2013 read with Companies (Adjudication of Penalties} Rules, 2014.

Accordingly, penalty was paid by the Company amounting to Rs.4,00,000/-, Chakravarthi Srinivasa Mittapalli, Managing Director and Venkata Koteswara Rao Mittapalli, Wholetime Director to Rs.50,000/- each (total aggregating to Rs.5,00,000/-) vide SRN’s X35978279, X35978576 and X35979749 dated 17.02.2023 respectively. Accordingly, this order is issued to the Appellants with a copy to Registrar of Companies, Andhra Pradesh and Joint Secretary, E-Governance Cell, Ministry of Corporate Affairs, New Delhi for information and necessary action.

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