Non-compliance with Section 118(10) Companies Act

Non-compliance with Section 118(10) Companies Act. Section 118 of the Companies Act, 2013, deals with the maintenance of minutes of meetings of the Board of Directors, Committees of the Board, and Shareholders. It mandates that every company should keep minutes of proceedings of its Board meetings, committee meetings, and general meetings in books or electronically, ensuring that the minutes are signed by the chairman. The section emphasizes the importance of maintaining an accurate record, as these minutes serve as official documentation of decisions made and actions taken at such meetings. The minutes should be signed by the Chairman of the meeting or the person acting as chairman of the meeting or the next meeting, ensuring authenticity and clarity.
Clause 7.14 of the Secretarial Standard-1 (SS-1) addresses the same subject, providing further clarity on the maintenance and signing of minutes. It requires that the minutes of the meeting be signed by the Chairman, either at the meeting or at the next meeting. In the case of a meeting that is adjourned, the minutes must be signed at the adjourned meeting. Furthermore, it specifies that the minutes should be recorded in a systematic and chronological order and signed by the Chairman of the meeting. This clause emphasizes the requirement for proper record-keeping and the accuracy of minutes, aligning with the principles set forth in Section 118 of the Companies Act.
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 (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
In Saptastaij Industries Private Limited & ORS, ROC vide adjudication order dated 22/11/2023 held the company, its directors, who have defaulted, liable for penalty under section 118(11) of the Act for non-paginating the minute book of the company.
The punishment for contravention of section 118(1) is prescribed under section 118 (11) of the companies Act 2013 which states that “If any default is made in complying with the provisions of this section in respect of nay meeting, the company  shall be liable to penalty of 25,000 rupees and every officers of the company who is in default shall be liable to a penalty of five thousand rupees”.
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 04/06/2024. The authorised representative has admitted the contravention of section 118 of the Act. Further stated that the:

Company is a small company within the meaning of section 2(85) read with section 446B of the companies Act 2013 and have submitted requisite documents in support of her claim.

ROC further stated via letter dated 03/06/2024 concluded that the ground of appeal relied by the appellants in their submissions are not tenable.
Imposed Penalty
Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty as follows:

Penalty imposed on company/Directors

Total/Maximum penalty

On Company

25,000

On 1st director

5,000

On 2nd director

5,000

Reduction in Penalties, If any
Taking into account the adjudication order of the ROC, submission made by the appellant in their application as well as oral submissions of the authorised representative during the hearing RD is of view that, the company fall under the definition of small company  within the definition of section small company within the meaning of section 2(85) read with 446B of the companies Act  2013 and therefore, the penalty amount imposed by ROC dated  22/11/2023 is modified and reduced by 50%. Modified amount of penalty are as follows:

Penalty imposed on company/Directors

Total/Maximum penalty

Penalty Modified by RD

On company

25,000

12,500

On 1st director

5,000

2,500

On 2nd director

5,000

2,500

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 Saptastaij Industries Private Limited & ORS, being a small company qualify to claim the benefit of section 446B of the companies Act 2013.
To conclude:
From the above case, it is apparent that Saptastaij Industries Private Limited & ORS failed to comply with the provisions of Section 118 of the Companies Act, 2013, leading to adjudication by the Registrar of Companies (ROC). After getting order from the concerned ROC, an appeal filled by the company to claiming the benefit of small company. After considering all the facts and submissions made by the company, RD accept the appeal and reduce the penalty amount by 50%.
Download MCA Adjucation Order

Section 118 of the Companies Act, 2013, deals with the maintenance of minutes of meetings of the Board of Directors, Committees of the Board, and Shareholders. It mandates that every company should keep minutes of proceedings of its Board meetings, committee meetings, and general meetings in books or electronically, ensuring that the minutes are signed by the chairman. The section emphasizes the importance of maintaining an accurate record, as these minutes serve as official documentation of decisions made and actions taken at such meetings. The minutes should be signed by the Chairman of the meeting or the person acting as chairman of the meeting or the next meeting, ensuring authenticity and clarity.

Clause 7.14 of the Secretarial Standard-1 (SS-1) addresses the same subject, providing further clarity on the maintenance and signing of minutes. It requires that the minutes of the meeting be signed by the Chairman, either at the meeting or at the next meeting. In the case of a meeting that is adjourned, the minutes must be signed at the adjourned meeting. Furthermore, it specifies that the minutes should be recorded in a systematic and chronological order and signed by the Chairman of the meeting. This clause emphasizes the requirement for proper record-keeping and the accuracy of minutes, aligning with the principles set forth in Section 118 of the Companies Act.

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 (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

In Saptastaij Industries Private Limited & ORS, ROC vide adjudication order dated 22/11/2023 held the company, its directors, who have defaulted, liable for penalty under section 118(11) of the Act for non-paginating the minute book of the company.

The punishment for contravention of section 118(1) is prescribed under section 118 (11) of the companies Act 2013 which states that “If any default is made in complying with the provisions of this section in respect of nay meeting, the company shall be liable to penalty of 25,000 rupees and every officers of the company who is in default shall be liable to a penalty of five thousand rupees”.

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 04/06/2024. The authorised representative has admitted the contravention of section 118 of the Act. Further stated that the:

Company is a small company within the meaning of section 2(85) read with section 446B of the companies Act 2013 and have submitted requisite documents in support of her claim.

ROC further stated via letter dated 03/06/2024 concluded that the ground of appeal relied by the appellants in their submissions are not tenable.

Imposed Penalty

Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty as follows:

Penalty imposed on company/Directors	Total/Maximum penalty
On Company	25,000
On 1st director	5,000
On 2nd director	5,000

Reduction in Penalties, If any

Taking into account the adjudication order of the ROC, submission made by the appellant in their application as well as oral submissions of the authorised representative during the hearing RD is of view that, the company fall under the definition of small company within the definition of section small company within the meaning of section 2(85) read with 446B of the companies Act 2013 and therefore, the penalty amount imposed by ROC dated 22/11/2023 is modified and reduced by 50%. Modified amount of penalty are as follows:

Penalty imposed on company/Directors	Total/Maximum penalty	Penalty Modified by RD
On company	25,000	12,500
On 1st director	5,000	2,500
On 2nd director	5,000	2,500

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 Saptastaij Industries Private Limited & ORS, being a small company qualify to claim the benefit of section 446B of the companies Act 2013.

To conclude:

From the above case, it is apparent that Saptastaij Industries Private Limited & ORS failed to comply with the provisions of Section 118 of the Companies Act, 2013, leading to adjudication by the Registrar of Companies (ROC). After getting order from the concerned ROC, an appeal filled by the company to claiming the benefit of small company. After considering all the facts and submissions made by the company, RD accept the appeal and reduce the penalty amount by 50%.