Company shall be Penalized for Non Appointment of Whole time Company Secretary (CS)

Company shall be Penalized for Non Appointment of Whole time Company Secretary (CS). In this article, we will take you through the provisions of Section 203 of the Companies Act, 2013, which deals with the appointment of key managerial personnel, including the requirement for companies to appoint a whole-time Company Secretary, Managing Director, or Chief Executive Officer. The section aims to ensure proper corporate governance and compliance with regulatory standards by mandating the presence of qualified professionals in key roles.
Applicable Provisions
The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the RD adjudication orders of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (WR), Hyderabad, for consideration.
Facts of the Case with ROC and RD
SVR Spinning Mills Private Limited, a company, was found to be in default of Section 203 of the Companies Act 2013. The appellants have filed the appeal under section 454 (4) of the Companies Act, 2013 against the adjudication order dated 15.11.2023 passes by the ROC for violation of section 203 of the companies Act 2013.
ROC in his order of adjudication stated that the company has not appointed the whole-Time company secretary after the cessation of previous Company Secretary on 31.08.2020. Hence the office of whole Time Company Secretary is lying vacant beyond 6 months which means contravening the provisions of section 203 of the companies Act 2013.
The 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 a PCS, appeared on the behalf of the appellants.
Imposed Penalty
The ROC after considering the fact and circumstances of the case levied penalties. The penalty amount was determined based on the company's failure to comply with the relevant legal requirements. The details of the penalty, are as follows
For non-appointment of Company Secretary:

On Company: Rs, 5,00,000

On 2 directors: Rs 1,80,000 each

Reduction in Penalty
The then Regional Director upon the hearing the authorized Representative and upon considering the facts of the case had reduced the penalty to 20% (of the penalty imposed by the ROC) i.e
For non-appointment of Company Secretary:

On Company: Rs, 1,00,000

On 2 directors: Rs 36,000 each

Any Benefit of Section 446B of Companies Act
Section 446B of the Companies Act, 2013, provides for lesser penalties in cases involving small companies and startups. However, in this case, concerned RD after considering all the submission made by the company reduce the quantum of penalty up to a great extent.
Findings:
The case of SVR Spinning Mills Private Limited highlights the procedural aspects of penalty adjudication under the Companies Act, 2013. While the ROC initially imposed penalties for non-compliance, the RD provided a reconsideration platform, leading to a reduction in the penalty. This highlights the importance of timely appeals and the discretion available under the law to mitigate financial liabilities in justified cases. Companies must ensure adherence to statutory requirements to avoid penalties while also leveraging available legal remedies for relief when necessary.
Download MCA Adjudication Order

In this article, we will take you through the provisions of Section 203 of the Companies Act, 2013, which deals with the appointment of key managerial personnel, including the requirement for companies to appoint a whole-time Company Secretary, Managing Director, or Chief Executive Officer. The section aims to ensure proper corporate governance and compliance with regulatory standards by mandating the presence of qualified professionals in key roles.

Applicable Provisions

The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the RD adjudication orders of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (WR), Hyderabad, for consideration.

Facts of the Case with ROC and RD

SVR Spinning Mills Private Limited, a company, was found to be in default of Section 203 of the Companies Act 2013. The appellants have filed the appeal under section 454 (4) of the Companies Act, 2013 against the adjudication order dated 15.11.2023 passes by the ROC for violation of section 203 of the companies Act 2013.

ROC in his order of adjudication stated that the company has not appointed the whole-Time company secretary after the cessation of previous Company Secretary on 31.08.2020. Hence the office of whole Time Company Secretary is lying vacant beyond 6 months which means contravening the provisions of section 203 of the companies Act 2013.

The 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 a PCS, appeared on the behalf of the appellants.

Imposed Penalty

The ROC after considering the fact and circumstances of the case levied penalties. The penalty amount was determined based on the company's failure to comply with the relevant legal requirements. The details of the penalty, are as follows

For non-appointment of Company Secretary:

On Company: Rs, 5,00,000
On 2 directors: Rs 1,80,000 each

Reduction in Penalty

The then Regional Director upon the hearing the authorized Representative and upon considering the facts of the case had reduced the penalty to 20% (of the penalty imposed by the ROC) i.e

For non-appointment of Company Secretary:

On Company: Rs, 1,00,000
On 2 directors: Rs 36,000 each

Any Benefit of Section 446B of Companies Act

Section 446B of the Companies Act, 2013, provides for lesser penalties in cases involving small companies and startups. However, in this case, concerned RD after considering all the submission made by the company reduce the quantum of penalty up to a great extent.

Findings:

The case of SVR Spinning Mills Private Limited highlights the procedural aspects of penalty adjudication under the Companies Act, 2013. While the ROC initially imposed penalties for non-compliance, the RD provided a reconsideration platform, leading to a reduction in the penalty. This highlights the importance of timely appeals and the discretion available under the law to mitigate financial liabilities in justified cases. Companies must ensure adherence to statutory requirements to avoid penalties while also leveraging available legal remedies for relief when necessary.