As per section 203 of the companies Act the appointment of KMP must be made by a resolution of the Board of Directors, and any vacancy in these positions must be filled within six months from the date of such vacancy to maintain smooth corporate functioning. Additionally, the section restricts a whole-time KMP from holding a similar position in more than one company, except in its subsidiary company, ensuring that key managerial personnel dedicate their efforts effectively to their respective organizations.
Applicable Provisions
The MCA adjudication order involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (ER), Kolkata, for consideration.
Facts of the Case with ROC and RD
In Checons Limited, concerned ROC had issued adjudication notice for violation of section 203 (1) of the companies Act dated 29.09.2022 to the company and its officers. In this regard, no adequate reply to the notice has been received from the company and its officers in default as to why penalty shall not be imposed.
Considering the fact and circumstances of the case, Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD) and an opportunity of being heard was given by the RD to appellants on 01/02/2024. The authorised representative submitted:
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The Authorised Representative had submitted a reference letter issued by the Calcutta Stock Exchange Limited (CSE) to the appellant company stating the fact that the said company is suspended from the records of exchange w.e.f 21st March 2014.
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Apart from the above submission appellant company did not have any cogent reason for interference with respect to the order of Adjudicating Authority imposing penalties on the company and other directors. Hence the order of the Adjudicating officer to that extent is confirmed.
As authorised representative had no valid submissions in this regard requiring interference with the order of ROC. Hence the order of ROC is confirmed as no cogent ground was made out by the appellant.
Imposed Penalty
Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty on companies and officers in default as follows:
Violation of Section |
Period of default |
To whom penalty imposed |
Maximum Penalty |
Section 203(4) r/w 203 (5) of the companies Act 2013 |
788 |
On Company |
5,00,000 |
788 |
On 1st Director |
5,00,000 |
|
788 |
On 2nd Director |
5,00,000 |
|
788 |
On 3rd Director |
5,00,000 |
Confirming ROC Order
The appeal was heard on 01/02/2024 Authorised Representative was asked to make submissions regarding any infirmity in order of ROC. The Authorised Representative had no valid submissions in this regard. Hence the order of ROC is confirmed as no cogent ground was made out by the authorised representative.
Further RD directed that the amount shall be paid within a period of 90 days from the date pf receipt of the copy of the order. In the company and its directors fail to deposit the penalty amount within the prescribed time limit action under section 454 (8)(i) and (ii) of the companies Act 2013 shall be initiated against the company and its directors.
Any Benefit of Section 446B of Companies Act
Section 446B of the Companies Act, 2013 provides a significant relief mechanism for small companies and start-ups by reducing the penalty burden for certain non-compliances. Under this provision, if a small company or a start-up commits a default for which a penalty is prescribed under the Act, the penalty imposed shall not be more than half of the specified penalty, subject to a maximum limit. In adjudication matter of Checons Limited being a public company does not fall under the criteria of section 446B of the companies Act 2013.
Findings:
In this MCA adjudication order the proceedings against Checons Limited for non-compliance with Section 203 of the Companies Act, 2013, resulted in the confirmation of penalties imposed by the Registrar of Companies (ROC). Despite being given an opportunity to present valid submissions, the company's authorised representative failed to provide any substantial grounds for interference with the ROC's order. Consequently, the Regional Director (RD) upheld the penalties, directing the company and its directors to pay the imposed amounts within 90 days, failing which further action under Section 454(8) of the Act would be initiated.