Adjudication Order- Failed to appoint Whole Time Company Secretary

Adjudication Order- Failed to appoint Whole Time Company Secretary. In this article we will take you through section 203 of the Companies Act, 2013, states that certain companies must appoint Key Managerial Personnel (KMP). These key positions include Managing Director (MD) or Chief Executive Officer (CEO) or Manager, and if none are present, a Whole-Time Director (WTD), Company Secretary (CS), Chief Financial Officer (CFO). All listed companies and other specified companies must appoint these personnel for smooth operations and legal compliance. If a company fails to do so, it can face penalties under Section 203(5) of the Act
Applicable Provision
The case involves a violation of Section 203 of the Companies Act, 2013, which mandates the appointment of Key Managerial Personnel (KMP) such as the Managing Director, Chief Executive Officer, or Manager, and in their absence, a Whole-Time Director, Company Secretary, and Chief Financial Officer. On-compliance with this provision can lead to penalties under Section 203(5) of the Act.
Facts of the Case
Sogefi ADM Suspensions Private Limited, a company incorporated on June 17, 2010, with its registered office in Pune, Maharashtra, failed to appoint a Whole-Time Company Secretary as required under Section 203.The Registrar of Companies (RoC), Pune, upon discovering this non-compliance, imposed a penalty on the company and its officers in default.
Company had filled and stated that, Due to complete lockdown was imposed in the entire country by the GOI and company was unable to appoint whole time company secretary. After unlocking of lockdown no one was ready to join due to the fear of spreading of infector of virus.
Additionally, company is loss making and being situated at the outskirt of city, the post for CS in the company was not attractive option for the various company secretaries leads to further delay.
After conducting a few interviews, the company could finally appoint CS Snehal Rupesh Sarda for the post of company secretary in April 2021.
The company being in loss since its formation, imposing such heavy penalty would put the company under acute financial stress.
Penalty Imposed and Reduction
Initially, the RoC Pune levied a penalty for the violation of Section 203. subsequently, the company filed an appeal under Section 454(5) of the Companies Act, 2013, which allows for appeals against orders of adjudicating officers. The concerned ROC after considering the fact and circumstances-imposed penalty as under:
For default of 304 days:

On company: Rs, 5,00,000

Aman Mehtani: Rs 3,53,000

For default of 102 days:

Rajesh Kumar Gupta: Rs 1,51,000

Reduction in penalties
The Regional Director (RD) Mumbai, upon reviewing the appeal, issued an order on February 1, 2022, reducing the penalty imposed by the RoC Pune as under:
For default of 304 days:

On company: Rs, 1,00,000

Aman Mehtani : Rs 70,600

Rajesh Kumar Gupta: Rs 70,600

For default of 102 days:

Kapil Arvind Papade: Rs, 30200

Conclusion
This case underscores the importance of adhering to statutory requirements regarding the appointment of Key Managerial Personnel under the Companies Act, 2013.While the law provides mechanisms to appeal and seek reductions in penalties, companies should proactively ensure compliance to avoid such situations.
Download MCA Adjudication Order

In this article we will take you through section 203 of the Companies Act, 2013, states that certain companies must appoint Key Managerial Personnel (KMP). These key positions include Managing Director (MD) or Chief Executive Officer (CEO) or Manager, and if none are present, a Whole-Time Director (WTD), Company Secretary (CS), Chief Financial Officer (CFO). All listed companies and other specified companies must appoint these personnel for smooth operations and legal compliance. If a company fails to do so, it can face penalties under Section 203(5) of the Act

Applicable Provision

The case involves a violation of Section 203 of the Companies Act, 2013, which mandates the appointment of Key Managerial Personnel (KMP) such as the Managing Director, Chief Executive Officer, or Manager, and in their absence, a Whole-Time Director, Company Secretary, and Chief Financial Officer. On-compliance with this provision can lead to penalties under Section 203(5) of the Act.

Facts of the Case

Sogefi ADM Suspensions Private Limited, a company incorporated on June 17, 2010, with its registered office in Pune, Maharashtra, failed to appoint a Whole-Time Company Secretary as required under Section 203.The Registrar of Companies (RoC), Pune, upon discovering this non-compliance, imposed a penalty on the company and its officers in default.

Company had filled and stated that, Due to complete lockdown was imposed in the entire country by the GOI and company was unable to appoint whole time company secretary. After unlocking of lockdown no one was ready to join due to the fear of spreading of infector of virus.

Additionally, company is loss making and being situated at the outskirt of city, the post for CS in the company was not attractive option for the various company secretaries leads to further delay.

After conducting a few interviews, the company could finally appoint CS Snehal Rupesh Sarda for the post of company secretary in April 2021.

The company being in loss since its formation, imposing such heavy penalty would put the company under acute financial stress.

Penalty Imposed and Reduction

Initially, the RoC Pune levied a penalty for the violation of Section 203. subsequently, the company filed an appeal under Section 454(5) of the Companies Act, 2013, which allows for appeals against orders of adjudicating officers. The concerned ROC after considering the fact and circumstances-imposed penalty as under:

For default of 304 days:

On company: Rs, 5,00,000
Aman Mehtani: Rs 3,53,000

For default of 102 days:

Rajesh Kumar Gupta: Rs 1,51,000

Reduction in penalties

The Regional Director (RD) Mumbai, upon reviewing the appeal, issued an order on February 1, 2022, reducing the penalty imposed by the RoC Pune as under:

For default of 304 days:

On company: Rs, 1,00,000
Aman Mehtani : Rs 70,600
Rajesh Kumar Gupta: Rs 70,600

For default of 102 days:

Kapil Arvind Papade: Rs, 30200

Conclusion

This case underscores the importance of adhering to statutory requirements regarding the appointment of Key Managerial Personnel under the Companies Act, 2013.While the law provides mechanisms to appeal and seek reductions in penalties, companies should proactively ensure compliance to avoid such situations.