Adjudication Order Section 203 Compliance: From Penalty to Relief

Adjudication Order Section 203 Compliance: From Penalty to Relief. In this article we will take you through section 203 of the case of United Conveyor Corporation (India) Private Limited, the company failed to appoint a Whole-time Company Secretary as required under the Act, despite having a paid-up share capital of INR 116 crore. The company contended that its comparatively lower turnover and minimal secretarial workload did not justify the appointment of a full-time Company Secretary.
However, the ROC, Pune, imposed penalties on the company and its directors for non-compliance. Upon appeal, the Regional Director acknowledged the company’s genuine recruitment efforts and its eventual compliance, leading to a significant reduction in penalties. This case highlights that while practical difficulties may arise, adherence to statutory requirements remains crucial, and companies must take proactive steps to ensure compliance.
Applicable Provisions
The violation pertains to Section 203(1) of the Companies Act, 2013, which mandates that every listed company and certain public companies with a paid-up share capital of INR 10 crore or more must appoint Key Managerial Personnel (KMP) consisting of a Managing Director, Company Secretary, and Chief Financial Officer. United Conveyor Corporation (India) Private Limited failed to comply with this provision by not appointing a full-time Company Secretary and CFO, which led to penalties for non-compliance.
Fact of the case
ROC has issued SCN dated 29.03.2021 to the company and its directors’ seeking information. The company in reply stated that the PSC is Rs. 116 Crore and comparatively less turnover. The company is seriously considering a substantial reduction in share capital but is get postponed in the light of some tax implications. The company has full time company secretary till 2012.
The company is diligent in making all the legal compliances even though there is no whole-time company secretary appointed by the company. Further, with two corporate stakeholders, it does not offer quantifiable and justifiable secretarial work to have whole time company secretary in its employment. This is also a challenge for getting a candidate.
In appeal, the company has contended that:
Reasonable efforts have been taken by the company to recruit a suitable candidate through various placements platforms since 2012.
The company could not recruit a suitable candidate due to various reasons like highly experienced, career-oriented company secretary
The company is a private company having only two corporate shareholders, there are minimal core secretarial activities that is evident.
The company after consistent efforts of recruiting a suitable candidate has finally appointed a Whole time Company Secretary
Penalty Imposed
Upon examination, the Adjudicating Officer of the Registrar of Companies (ROC), Pune, levied a penalty on the Association and its officers in default as follows:

On Company: Rs 5,00,000

Jaykumar Jaysingrao Patil: Rs 5,00,000

Venkataraman Jayaraman: Rs 5,00,000

Maria Fiore: Rs 1,93,000

Reduction in Penalties
On appeal filled by the company, concerned RD took the lenient view with respect to penalty and reduce the same as follows:

On Company: Rs 1,25,000

Jaykumar Jaysingrao Patil: Rs 1,00,000

Venkataraman Jayaraman: Rs 1,00,000

Maria Fiore: Rs 49,000

Conclusion
The matter between the ROC, Mumbai, and United Conveyor Corporation (India) Private Limited underscores the importance of compliance with Section 203(1) of the Companies Act, 2013, which mandates the appointment of
Key Managerial Personnel (KMP). While the company initially failed to appoint a Whole-time Company Secretary due to practical challenges such as minimal secretarial workload and recruitment difficulties, the authorities did not find these reasons sufficient to exempt the company from compliance.
The adjudicating officer at ROC, Pune, imposed significant penalties on both the company and its officers in default, reinforcing the principle that statutory obligations under the Companies Act must be fulfilled, regardless of operational constraints. However, the Regional Director, upon appeal, acknowledged the company’s consistent efforts in recruitment and its eventual compliance by appointing a Whole-time Company Secretary. As a result, a substantial reduction in penalties was granted.
This case highlights that while regulatory authorities maintain a strict stance on corporate governance, they also consider genuine difficulties faced by companies in fulfilling statutory requirements. Companies facing similar challenges should document their compliance efforts meticulously and engage proactively with regulatory authorities to seek appropriate relief when justified. Ultimately, timely compliance remains the best course of action to avoid legal complications and financial penalties.
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In this article we will take you through section 203 of the case of United Conveyor Corporation (India) Private Limited, the company failed to appoint a Whole-time Company Secretary as required under the Act, despite having a paid-up share capital of INR 116 crore. The company contended that its comparatively lower turnover and minimal secretarial workload did not justify the appointment of a full-time Company Secretary.

However, the ROC, Pune, imposed penalties on the company and its directors for non-compliance. Upon appeal, the Regional Director acknowledged the company’s genuine recruitment efforts and its eventual compliance, leading to a significant reduction in penalties. This case highlights that while practical difficulties may arise, adherence to statutory requirements remains crucial, and companies must take proactive steps to ensure compliance.

Applicable Provisions

The violation pertains to Section 203(1) of the Companies Act, 2013, which mandates that every listed company and certain public companies with a paid-up share capital of INR 10 crore or more must appoint Key Managerial Personnel (KMP) consisting of a Managing Director, Company Secretary, and Chief Financial Officer. United Conveyor Corporation (India) Private Limited failed to comply with this provision by not appointing a full-time Company Secretary and CFO, which led to penalties for non-compliance.

Fact of the case

ROC has issued SCN dated 29.03.2021 to the company and its directors’ seeking information. The company in reply stated that the PSC is Rs. 116 Crore and comparatively less turnover. The company is seriously considering a substantial reduction in share capital but is get postponed in the light of some tax implications. The company has full time company secretary till 2012.

The company is diligent in making all the legal compliances even though there is no whole-time company secretary appointed by the company. Further, with two corporate stakeholders, it does not offer quantifiable and justifiable secretarial work to have whole time company secretary in its employment. This is also a challenge for getting a candidate.

In appeal, the company has contended that:

Reasonable efforts have been taken by the company to recruit a suitable candidate through various placements platforms since 2012.

The company could not recruit a suitable candidate due to various reasons like highly experienced, career-oriented company secretary

The company is a private company having only two corporate shareholders, there are minimal core secretarial activities that is evident.

The company after consistent efforts of recruiting a suitable candidate has finally appointed a Whole time Company Secretary

Penalty Imposed

Upon examination, the Adjudicating Officer of the Registrar of Companies (ROC), Pune, levied a penalty on the Association and its officers in default as follows:

On Company: Rs 5,00,000
Jaykumar Jaysingrao Patil: Rs 5,00,000
Venkataraman Jayaraman: Rs 5,00,000
Maria Fiore: Rs 1,93,000

Reduction in Penalties

On appeal filled by the company, concerned RD took the lenient view with respect to penalty and reduce the same as follows:

On Company: Rs 1,25,000
Jaykumar Jaysingrao Patil: Rs 1,00,000
Venkataraman Jayaraman: Rs 1,00,000
Maria Fiore: Rs 49,000

Conclusion

The matter between the ROC, Mumbai, and United Conveyor Corporation (India) Private Limited underscores the importance of compliance with Section 203(1) of the Companies Act, 2013, which mandates the appointment of

Key Managerial Personnel (KMP). While the company initially failed to appoint a Whole-time Company Secretary due to practical challenges such as minimal secretarial workload and recruitment difficulties, the authorities did not find these reasons sufficient to exempt the company from compliance.

The adjudicating officer at ROC, Pune, imposed significant penalties on both the company and its officers in default, reinforcing the principle that statutory obligations under the Companies Act must be fulfilled, regardless of operational constraints. However, the Regional Director, upon appeal, acknowledged the company’s consistent efforts in recruitment and its eventual compliance by appointing a Whole-time Company Secretary. As a result, a substantial reduction in penalties was granted.

This case highlights that while regulatory authorities maintain a strict stance on corporate governance, they also consider genuine difficulties faced by companies in fulfilling statutory requirements. Companies facing similar challenges should document their compliance efforts meticulously and engage proactively with regulatory authorities to seek appropriate relief when justified. Ultimately, timely compliance remains the best course of action to avoid legal complications and financial penalties.