ROC Imposes Penalty on Directors for not holding Board Meeting

The Registrar of Companies initiated adjudication proceedings against the company and its directors for non-compliance with the provisions relating to Board Meetings under the Companies Act, 2013. During the course of the inquiry, it was observed that the company had failed to hold the mandatory Board Meetings as required under the Act.

A show cause notice was issued and several opportunities were provided to the company and its directors to submit their replies through the e-adjudication system. However, the company and most of the directors neither appeared nor filed proper responses. One of the directors submitted a reply stating that his responsibility in the company was limited, but the same was not supported by any documentary evidence or official records.

The adjudicating authority also observed that any private arrangements between directors, including indemnity agreements, cannot override statutory obligations imposed under the Companies Act. Directors cannot avoid legal responsibility based on internal arrangements among themselves.

Main Issue: The main issue for consideration was whether failure to hold mandatory Board Meetings would attract penalty on the officers in default under the Companies Act.

Tribunal’s Decision: The Registrar of Companies held that the company had clearly violated the statutory provisions relating to Board Meetings and was therefore liable for penalty. The defence taken by the director claiming limited responsibility was rejected on the ground that he was actively involved in the affairs of the company and was responsible for ensuring compliance. The argument regarding indemnity through private agreements was also rejected as such arrangements are not legally valid against statutory liability.

Accordingly, a penalty of ₹25,000 each was imposed on the directors. They were directed to pay the penalty within 90 days and also take steps to rectify the default. The order further clarified that the penalty must be paid personally by the directors and that they have the right to file an appeal before the Regional Director within the prescribed time period.

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