Registrar of Companies Imposes Maximum Penalty for Long-Standing Failure to Appoint Independent Directors:

Registrar of Companies Imposes Maximum Penalty for Long-Standing Failure to Appoint Independent Directors Topsun Energy Limited, a company incorporated under the Companies Act, 1956/2013, filed a suo motu adjudication application in Form GNL-1 on 29.07.2025 before the Registrar of Companies, Ahmedabad. During internal due diligence, the company discovered that it fell within the criteria prescribed under Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2013, as amended in 2017, requiring appointment of independent directors under Section 149(4) of the Companies Act, 2013. However, the company failed to appoint the required independent directors from 05.07.2017 onwards. The default continued uninterrupted until 31.03.2025 and was rectified only on 01.04.2025 by appointing three independent directors. The suo motu application was filed jointly by the company and its Managing Director, Mr. Chintan Gandabhai Patel. Issue Raised: Whether prolonged failure to appoint independent directors under Section 149(4) of the Companies Act, 2013 attracts penalty under Section 172, even when the default is subsequently rectified through suo motu compliance. Tribunal's Decision: The Registrar of Companies, Ahmedabad, held that Topsun Energy Limited and its Managing Director were in continuous default of Section 149(4) read with Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2013, from 05.07.2017 to 31.03.2025. As no specific penalty is prescribed for violation of Section 149(4), the general penalty provision under Section 172 of the Companies Act, 2013 was invoked. The Adjudicating Officer imposed the maximum statutory penalty of Rs. 3,00,000 on the company and Rs. 1,00,000 on the Managing Director. The authority directed that the penalty be paid within 90 days and clarified that penalties imposed on the officer in default must be paid from personal sources. Liberty to appeal before the Regional Director, Ahmedabad, was granted. To Read Full Order, Download the PDF Given Below