MCA Imposed penalty of Rs.3,18,500 on Company and WTD for not having Women Director

MCA Imposed penalty of Rs.3,18,500 on Company and WTD for not having Women Director . Any listed company and any other public registered company are required to appoint women director on its board of director.
 In  this MCA adjudication order company being a listed company has not appointed a women director on its board, contending that declared as Sick Industrial Company by Board for Industrial and Financial Reconstruction (BIFR).
Though as per section 149 of the companies Act Every company shall have a Board of Directors consisting of individual as directors and shall have: -
1. A minimum number of three directors in the case of public company, two directors in the case of a private company, and one director in the case of a One Person Company; and,
2. A maximum of fifteen directors.
Provided that a company may not appoint more than fifteen directors after passing a special resolution.
Provided further that, as per Rule 3 of the Companies (Appointment and qualification Of Directors) Rules, 2014:
The following class of companies shall appoint at least one-woman director-

Every listed company

Every other public company having-

Paid-up share capital of one hundred crore rupees or more; or

Turnover of three hundred crore rupees or more:

Provided that a company, which has been incorporated under the Act and is covered under provision of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation.
Provided further that any intermittent vacancy of a women director shall be filled up by the Board at the earliest but no later than immediate next Board meeting or three months from the date of such vacancy whichever is later.
For the purposes of this rule, it is hereby clarified that the paid-up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.
Facts About of the case:
In TPI INDIA LTD is a listed Company on the Bombay Stock Exchange since 26.12.2000. Being a Listed Company, it is required to appoint a woman director.
Show Cause Notice dated 28.03. 2023 was issued to the Company and its officers in default. Reply dated 27.04.2023 received from the Company wherein the Company stated that it had been declared as Sick Industrial Company by Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985, in the year 2004. It has been observed from the Annual Return filed by the Company as on 31.03.2023 that the Net-worth of the Company is negative. The Company further requested for a personal hearing to decide upon the matter.
During hearing the authorised representative of the company has stated that: -
1. The Company is a listed Company. He further stated that the Company was in BIFR and even today its financial status is of concern due to which its compliances are getting affected.
2. He also submitted that Mrs. Darshana Bharat Parekh, was earlier appointed as a director but she passed away
3. Subsequent to her demise and cessation of directorship on 12.11.2021, Ms. Anjali Sapkal was appointed as an Additional Director with effect from 16.01.2023.
Upon finding it has been observed that being a listed Company, it is required to appoint a woman director, but it failed to do so. Further, the Company is no longer a 'Sick Company' falling within the purview of the Sick Industrial Companies (Special Provision) Act, 1985. Hence, it does not have any legally tenable grounds for failure to comply with the above provision.
The authorized representative submitted that the Company has already appointed a Woman Director and filed the DIR-12 for the same.
Adjudication of Penalty
After considering facts, circumstances and submissions made by the authorised representative on the behalf of the company, the concerned ROC impose a penalty of Rs. 3,18,500/ (Rupees Three lakh Eighteen thousand and five hundred only) on the company and its Officers in default as per the table below for violations of provisions of section 149(1) of the Companies act, 2013.

No. of Days of default.

Penalty imposed            on company/director(s)/KMPS

First default penalty in (Rs.)

Default continues Penalty in(Rs.)

Total Penalty in (Rs. )

MaximumPenalty in

TotalPenalty levied in

337

TPI INDIA LIMITED (COMPANY)

50,000/-

337 x 500 = 1,68,500

50,000 + 1,68,500=2,18,500

3,00,000

Bharat chimanlalParekh (Whole TimeDirector

50,000/-

337 x 500 =1,68,500

50,000 +

1,00,000

TOTAL

3,18500/-

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 this MCA adjudication order the company being a listed company does not attract provision of lesser penalty as provided under Section 446(B) of the Companies Act, 2013.
CCL Observation:
This adjudication order signifies the mandatory nature of appointing a woman director for listed companies under Section 149(1) of the Companies Act, 2013. It states that financial distress or past classification as a sick company does not exempt a company from statutory compliance. Additionally, it also highlights the importance of timely replacement in case of vacancy, as failure to do so results in financial penalties. The case also demonstrates that listed companies cannot benefit from reduced penalties under Section 446B, emphasizing the need for timely following of corporate governance to avoid regulatory actions and financial liabilities.
Download ROC Order

Any listed company and any other public registered company are required to appoint women director on its board of director.

In this MCA adjudication order company being a listed company has not appointed a women director on its board, contending that declared as Sick Industrial Company by Board for Industrial and Financial Reconstruction (BIFR).

Though as per section 149 of the companies Act Every company shall have a Board of Directors consisting of individual as directors and shall have: -

1. A minimum number of three directors in the case of public company, two directors in the case of a private company, and one director in the case of a One Person Company; and,

2. A maximum of fifteen directors.

Provided that a company may not appoint more than fifteen directors after passing a special resolution.

Provided further that, as per Rule 3 of the Companies (Appointment and qualification Of Directors) Rules, 2014:

The following class of companies shall appoint at least one-woman director-

Every listed company
Every other public company having-

Paid-up share capital of one hundred crore rupees or more; or
Turnover of three hundred crore rupees or more:

Provided further that any intermittent vacancy of a women director shall be filled up by the Board at the earliest but no later than immediate next Board meeting or three months from the date of such vacancy whichever is later.

For the purposes of this rule, it is hereby clarified that the paid-up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.

Facts About of the case:

In TPI INDIA LTD is a listed Company on the Bombay Stock Exchange since 26.12.2000. Being a Listed Company, it is required to appoint a woman director.

Show Cause Notice dated 28.03. 2023 was issued to the Company and its officers in default. Reply dated 27.04.2023 received from the Company wherein the Company stated that it had been declared as Sick Industrial Company by Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985, in the year 2004. It has been observed from the Annual Return filed by the Company as on 31.03.2023 that the Net-worth of the Company is negative. The Company further requested for a personal hearing to decide upon the matter.

During hearing the authorised representative of the company has stated that: -

1. The Company is a listed Company. He further stated that the Company was in BIFR and even today its financial status is of concern due to which its compliances are getting affected.

2. He also submitted that Mrs. Darshana Bharat Parekh, was earlier appointed as a director but she passed away

3. Subsequent to her demise and cessation of directorship on 12.11.2021, Ms. Anjali Sapkal was appointed as an Additional Director with effect from 16.01.2023.

Upon finding it has been observed that being a listed Company, it is required to appoint a woman director, but it failed to do so. Further, the Company is no longer a 'Sick Company' falling within the purview of the Sick Industrial Companies (Special Provision) Act, 1985. Hence, it does not have any legally tenable grounds for failure to comply with the above provision.

The authorized representative submitted that the Company has already appointed a Woman Director and filed the DIR-12 for the same.

Adjudication of Penalty

After considering facts, circumstances and submissions made by the authorised representative on the behalf of the company, the concerned ROC impose a penalty of Rs. 3,18,500/ (Rupees Three lakh Eighteen thousand and five hundred only) on the company and its Officers in default as per the table below for violations of provisions of section 149(1) of the Companies act, 2013.

No. of Days of default.	Penalty imposed on company/director(s)/KMPS	First default penalty in (Rs.)	Default continues Penalty in(Rs.)	Total Penalty in (Rs. )	MaximumPenalty in	TotalPenalty levied in
337	TPI INDIA LIMITED (COMPANY)	50,000/-	337 x 500 = 1,68,500	50,000 + 1,68,500=2,18,500	3,00,000
337	Bharat chimanlalParekh (Whole TimeDirector	50,000/-	337 x 500 =1,68,500	50,000 +	1,00,000
TOTAL						3,18500/-

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 this MCA adjudication order the company being a listed company does not attract provision of lesser penalty as provided under Section 446(B) of the Companies Act, 2013.

CCL Observation:

This adjudication order signifies the mandatory nature of appointing a woman director for listed companies under Section 149(1) of the Companies Act, 2013. It states that financial distress or past classification as a sick company does not exempt a company from statutory compliance. Additionally, it also highlights the importance of timely replacement in case of vacancy, as failure to do so results in financial penalties. The case also demonstrates that listed companies cannot benefit from reduced penalties under Section 446B, emphasizing the need for timely following of corporate governance to avoid regulatory actions and financial liabilities.