Penalty for not holding a Board of Directors Meeting as per Section 173 of the Companies Act 2013

Penalty for not holding a Board of Directors Meeting as per Section 173 of the Companies Act 2013. In this article, we will take you through the mandatory Section 173 of the Companies Act, 2013 deals with the holding of Board meetings. It mandates that every company, other than a One Person Company (OPC), must hold its first Board meeting within 30 days of its incorporation. Additionally, a minimum of four Board meetings must be conducted every year, with no more than 120 days between two consecutive meetings. For small companies and dormant companies, the Act allows them to hold at least one Board meeting in each half of the calendar year, ensuring a minimum gap of 90 days between the two meetings. This provision is crucial for maintaining corporate governance and ensuring that the Board actively oversees the company’s affairs at regular intervals
Applicable Provisions
The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the MCA 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 Maheep Marketing Private Limited, concerned ROC had issued adjudication notice dated 30.01.2023 for violation of section 173 of the Act to the company and its officers. In this regard, reply was received vide letter 03.05.2023, from the company and its officers for the aforementioned adjudication notice.
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 05/09/2024.

The authorised representative was asked to make submissions regarding the infirmity if any in the order of Registrar of Companies.

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.

Imposed Penalty
Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty for violation of section 173 of the companies Act 2013, as under: -

On Company: Rs. 30,000 (For 3 years)

On 2 directors: Rs. 30,000 each ( For 3 years)

Reduction in Penalty
As authorised representative had no valid submission with respect to the default in section 173 of the companies Act 2013. Thus RD confirm the order of ROC.   Further RD directed the company and officers in default shall pay the amount of penalty from out of their own pockets. The amount of penalty shall be paid within a period of 90 days from the date of the receipt of the copy of the order. Further, if the company and its directors fail to deposit the penalty amount within the prescribed time limit under section 454 (8) (i) and (ii) of the companies Act 2013.
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 adjudication matter of Maheep Marketing Private Limited company does not fall under the criteria of a small company thus cannot claim the benefit of section 446B of the companies Act 2013.
To conclude:
In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, was carefully examined by the Regional Director and confirm the order of ROC. This adjudication order demonstrates that how important it is to present appeal and submission in the proper way. This order also highlights that the company needs to be compliant with every provision of the companies Act 2013.
Download MCA Adjudication Order

In this article, we will take you through the mandatory Section 173 of the Companies Act, 2013 deals with the holding of Board meetings. It mandates that every company, other than a One Person Company (OPC), must hold its first Board meeting within 30 days of its incorporation. Additionally, a minimum of four Board meetings must be conducted every year, with no more than 120 days between two consecutive meetings. For small companies and dormant companies, the Act allows them to hold at least one Board meeting in each half of the calendar year, ensuring a minimum gap of 90 days between the two meetings. This provision is crucial for maintaining corporate governance and ensuring that the Board actively oversees the company’s affairs at regular intervals

Applicable Provisions

The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the MCA 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 Maheep Marketing Private Limited, concerned ROC had issued adjudication notice dated 30.01.2023 for violation of section 173 of the Act to the company and its officers. In this regard, reply was received vide letter 03.05.2023, from the company and its officers for the aforementioned adjudication notice.

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 05/09/2024.

The authorised representative was asked to make submissions regarding the infirmity if any in the order of Registrar of Companies.
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.

Imposed Penalty

Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty for violation of section 173 of the companies Act 2013, as under: -

On Company: Rs. 30,000 (For 3 years)
On 2 directors: Rs. 30,000 each ( For 3 years)

Reduction in Penalty

As authorised representative had no valid submission with respect to the default in section 173 of the companies Act 2013. Thus RD confirm the order of ROC. Further RD directed the company and officers in default shall pay the amount of penalty from out of their own pockets. The amount of penalty shall be paid within a period of 90 days from the date of the receipt of the copy of the order. Further, if the company and its directors fail to deposit the penalty amount within the prescribed time limit under section 454 (8) (i) and (ii) of the companies Act 2013.

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 adjudication matter of Maheep Marketing Private Limited company does not fall under the criteria of a small company thus cannot claim the benefit of section 446B of the companies Act 2013.

To conclude:

In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, was carefully examined by the Regional Director and confirm the order of ROC. This adjudication order demonstrates that how important it is to present appeal and submission in the proper way. This order also highlights that the company needs to be compliant with every provision of the companies Act 2013.