Adjudication Order u/s 454 for violating Sec. 203 against Avanti Leathers Ltd by ROC-Hyderabad.

Adjudication Order u/s 454 for violating Sec. 203 against Avanti Leathers Ltd by ROC-Hyderabad.. In this article, we will take you through the mandatory provisions under Section 203 of the Companies Act, 2013. According to this section, every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel- 
(i) Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; 
(ii) Company secretary; and 
(iii) Chief Financial Officer 
Failure to comply with these requirements may result in penalties for both the company and the officers in default, as specified under Section 450 of the Companies Act, 2013. Therefore, it is essential to adhere to these provisions to avoid any legal consequences. 
Applicable Provisions: - 
As per section 203(1) of Companies Act 2013, Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel, 
(i) Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; 
(ii) Company secretary; and 
(iii) Chief Financial Officer 
Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless, — 
(a) The articles of such a company provide otherwise; or 
(b) The company does not carry multiple businesses: 
If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees. 
Facts of the case: - 
Avani Leathers Limited was penalized for non-compliance with Section 203 of the Companies Act, 2013, specifically regarding the mandatory appointment of a Company Secretary. The Registrar of Companies identified multiple instances where the company operated without a Company Secretary, resulting in a heavy penalty. 
The company appealed the penalties, explaining that the delay was unintentional and due to COVID-19 pandemic. The Regional Director reviewed the case and decided to reduce the penalties significantly. Instead of the original fines, Mangalagiri Realty had to pay Rs. Rs.1,06,000 for the company, Rs.56,000 for Mr. Vasudeva Rao Dhanekula (Managing Director), and Rs.46,000 for Mr. Sivaji Narla (CFO). The penalties imposed on other directors were waived off, considering the presence of a Managing Director and CFO in the company. 
Penalty Imposed by Registrar of Companies on Company and Officers in Default 
Taking into consideration the facts of the appeal and submissions made by the authorized representative, the penalty imposed by Registrar of Companies is reduced.

Violation of section

Penalty imposed on company/ directors

Revised penalty imposed by RD

Sec. 203 of the Companies Act, 2013

Company

1,06,000

Managing Director

56,000

CFO

46,000

Total

2,08,000

The penalties were reduced to Rs.1,06,000 for the company, Rs.56,000 for Mr. Vasudeva Rao Dhanekula (Managing Director), and Rs.46,000 for Mr. Sivaji Narla (CFO). The penalties imposed on other directors were waived off, considering the presence of a Managing Director and CFO in the company. 
Reduction in penalty 
The ground stated for the reduction of penalty are as follows:

That the failure to appoint a Company Secretary was affected by the impact of the COVID-19 pandemic and was unintentional.

Exemption to Startup/ Small Company/OPC under section 446B:  
As per sec. 446B of the Companies Act, 2013, if penalty is payable for non-compliance of any of the provisions of this Act by a One Person Company, small company, start-up company or Producer Company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be. 
In this case, Section 446B does not apply, as the company does not meet the criteria. 
Conclusion 
The MCA's decision to support Avanti Leathers in India is a clear example of how regulators can adapt to unusual situations. It highlights the need for regulatory bodies to take into account global issues like the COVID-19 pandemic when evaluating how businesses manage their operations and follow rules. 
This case sets a new standard for how violations are judged, showing that the importance of complying with all legal provisions, as failure to do so led to significant penalties. 
Download MCA adjudication order:

In this article, we will take you through the mandatory provisions under Section 203 of the Companies Act, 2013. According to this section, every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel-

(i) Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;

(ii) Company secretary; and

(iii) Chief Financial Officer

Failure to comply with these requirements may result in penalties for both the company and the officers in default, as specified under Section 450 of the Companies Act, 2013. Therefore, it is essential to adhere to these provisions to avoid any legal consequences.

Applicable Provisions: -

As per section 203(1) of Companies Act 2013, Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,

(i) Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;

(ii) Company secretary; and

(iii) Chief Financial Officer

Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless, —

(a) The articles of such a company provide otherwise; or

(b) The company does not carry multiple businesses:

If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.

Facts of the case: -

Avani Leathers Limited was penalized for non-compliance with Section 203 of the Companies Act, 2013, specifically regarding the mandatory appointment of a Company Secretary. The Registrar of Companies identified multiple instances where the company operated without a Company Secretary, resulting in a heavy penalty.

The company appealed the penalties, explaining that the delay was unintentional and due to COVID-19 pandemic. The Regional Director reviewed the case and decided to reduce the penalties significantly. Instead of the original fines, Mangalagiri Realty had to pay Rs. Rs.1,06,000 for the company, Rs.56,000 for Mr. Vasudeva Rao Dhanekula (Managing Director), and Rs.46,000 for Mr. Sivaji Narla (CFO). The penalties imposed on other directors were waived off, considering the presence of a Managing Director and CFO in the company.

Penalty Imposed by Registrar of Companies on Company and Officers in Default

Taking into consideration the facts of the appeal and submissions made by the authorized representative, the penalty imposed by Registrar of Companies is reduced.

Violation of section	Penalty imposed on company/ directors		Revised penalty imposed by RD
Sec. 203 of the Companies Act, 2013	Company		1,06,000
		Managing Director	56,000
		CFO	46,000
	Total		2,08,000

Reduction in penalty

The ground stated for the reduction of penalty are as follows:

That the failure to appoint a Company Secretary was affected by the impact of the COVID-19 pandemic and was unintentional.

Exemption to Startup/ Small Company/OPC under section 446B:

As per sec. 446B of the Companies Act, 2013, if penalty is payable for non-compliance of any of the provisions of this Act by a One Person Company, small company, start-up company or Producer Company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be.

In this case, Section 446B does not apply, as the company does not meet the criteria.

Conclusion

The MCA's decision to support Avanti Leathers in India is a clear example of how regulators can adapt to unusual situations. It highlights the need for regulatory bodies to take into account global issues like the COVID-19 pandemic when evaluating how businesses manage their operations and follow rules.

This case sets a new standard for how violations are judged, showing that the importance of complying with all legal provisions, as failure to do so led to significant penalties.