Mangalagiri Textile Mills Pvt Ltd penalized by ROC Hyderabad for Sec. 203 breach u/s 454

Mangalagiri Textile Mills Pvt Ltd penalized by ROC Hyderabad for Sec. 203 breach u/s 454. 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: - 
The Regional Director of the Ministry of Corporate Affairs in Hyderabad issued a revised order concerning an appeal by Mangalagiri Textile Mills Private Limited and its directors. The company was originally found in violation of Section 203 of the Companies Act, 2013, for failing to appoint a Whole Time Company Secretary within the required timeframe, leading the Registrar of Companies, Andhra Pradesh, to impose a penalty of Rs. 6,00,000.  
After reviewing the circumstances of the violation, the Regional Director reduced the total penalty to Rs. 1,00,000 on company and for three Directors Rs.50,000/- each. The appellants must comply with the order and relevant provisions of the Companies Act. On hearing, the practising company secretary, reiterated that the submitted that the company being in-operative since 2018 and incurred losses since 2016 and become sick company and operations of the company was shut down. The registered office of the company is situated in a remote place and company is private limited company and making huge losses and there is no injury to the public interest. Due to the Covid-19 pandemic, the Company was unable to appoint Whole Time Company Secretary as none shown interest despite the company's effort during that period. 
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 set aside.

Violation of section

Penalty imposed on company/ directors

Penalty imposed by ROC

Revised penalty imposed by RD

Sec. 203 of the Companies Act, 2013

Company

5,00,000

Set aside the order

Managing Director

50,000

Additional Director

50,000

Total

6,00,000

Set aside the order of ROC 
The grounds stated for the set aside the order of ROC are as follows: 
(a) The Company is incurred losses since 2016 and since 2018 it is in operation and became sick and shut down its operations.                
(b) State Bank of India has filed an application with the Hon'ble National Company Law Tribunal (NCLT), Amaravathi to initiate Corporate Insolvency Resolution Process (CRP) against the Company 
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 Mangalagiri Textile Mills 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 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: -

The Regional Director of the Ministry of Corporate Affairs in Hyderabad issued a revised order concerning an appeal by Mangalagiri Textile Mills Private Limited and its directors. The company was originally found in violation of Section 203 of the Companies Act, 2013, for failing to appoint a Whole Time Company Secretary within the required timeframe, leading the Registrar of Companies, Andhra Pradesh, to impose a penalty of Rs. 6,00,000.

After reviewing the circumstances of the violation, the Regional Director reduced the total penalty to Rs. 1,00,000 on company and for three Directors Rs.50,000/- each. The appellants must comply with the order and relevant provisions of the Companies Act. On hearing, the practising company secretary, reiterated that the submitted that the company being in-operative since 2018 and incurred losses since 2016 and become sick company and operations of the company was shut down. The registered office of the company is situated in a remote place and company is private limited company and making huge losses and there is no injury to the public interest. Due to the Covid-19 pandemic, the Company was unable to appoint Whole Time Company Secretary as none shown interest despite the company's effort during that period.

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 set aside.

Violation of section	Penalty imposed on company/ directors	Penalty imposed by ROC	Revised penalty imposed by RD
Sec. 203 of the Companies Act, 2013	Company	5,00,000	Set aside the order
	Managing Director	50,000
	Additional Director	50,000
	Total	6,00,000

Set aside the order of ROC

The grounds stated for the set aside the order of ROC are as follows:

(a) The Company is incurred losses since 2016 and since 2018 it is in operation and became sick and shut down its operations.

(b) State Bank of India has filed an application with the Hon'ble National Company Law Tribunal (NCLT), Amaravathi to initiate Corporate Insolvency Resolution Process (CRP) against the Company

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 Mangalagiri Textile Mills 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 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.