ROC-Hyderabad Adjudication Order u/s 203 for NDO India Pvt Ltd: Sec. 454 Violation

ROC-Hyderabad Adjudication Order u/s 203 for NDO India Pvt Ltd: Sec. 454 Violation. 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 company was incorporated in 2000, the company appointed a whole-time company secretary who resigned on April 8, 2008. The vacancy remained unfilled until June 10, 2016, during which the company failed to appoint a new secretary, violating Section 383(A)(1) of the Companies Act, 1956, and Section 203 of the Companies Act, 2013. The position was finally filled on June 11, 2016. This failure to appoint a company secretary rendered the company and its directors liable for penal actions under Section 203(5) of the Companies Act, 2013. 
The company had filed a suo-moto application for adjudication online via GNL-1 form dated 27th June 2022 for violation of the provisions of section 383 (A) (1) of the Companies Act 1956 / section 203 of the Companies Act 2013. 
The Registrar of Companies / Adjudicating officer, based on the adjudication application made by the company and the written submissions received from the directors / authorized representative of the company and also taking into consideration the submissions made during the personal hearing came to the conclusion that the company and its directors had violated the provisions of section 383 (A) (1) of the Companies Act 1956 / section 203 of the Companies Act 2013 by not filling up the vacancy of the company secretary's position which remained vacant for a period from 9th April 2008 to 10th June 2016 and therefore the company and its directors were liable for punishment under the provisions of section 203 (5) of the Companies Act 2013. 
The Registrar of Companies / Adjudication Officer, having reviewed the facts and circumstances of the case and considered the submissions from the company and its current and former directors through their authorized representative, regarding the violation of the requirement to appoint a company secretary under section 383(A)(1) of the Companies Act 1956 and section 203 (1) of the Companies Act 2013, in conjunction with the applicable rules, has imposed a penalty in accordance with the authority granted under section 454 (3) of the Companies Act 2013.  
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

Penalty imposed by ROC

Revised penalty imposed by RD

Sec. 203 of the Companies Act, 2013

Company

5,00,000

75,000

Ex-Director

5,00,000

75,000

Ex-Director

5,00,000

75,000

Ex-Director

5,00,000

75,000

Ex-Director

5,00,000

75,000

Ex-Director

5,00,000

75,000

Ex-Director

5,00,000

75,000

Ex-Director

5,00,000

75,000

Director

2,34,000

35,100

Director

2,34,000

35,100

Director

2,34,000

35,100

Director

2,34,000

35,100

Total

49,36,000

7,40,400

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

That the Company is under the process of voluntary winding up

That the Company has not carried any business activities since the year 2016-17.

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 NDO India 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: -

The company was incorporated in 2000, the company appointed a whole-time company secretary who resigned on April 8, 2008. The vacancy remained unfilled until June 10, 2016, during which the company failed to appoint a new secretary, violating Section 383(A)(1) of the Companies Act, 1956, and Section 203 of the Companies Act, 2013. The position was finally filled on June 11, 2016. This failure to appoint a company secretary rendered the company and its directors liable for penal actions under Section 203(5) of the Companies Act, 2013.

The company had filed a suo-moto application for adjudication online via GNL-1 form dated 27th June 2022 for violation of the provisions of section 383 (A) (1) of the Companies Act 1956 / section 203 of the Companies Act 2013.

The Registrar of Companies / Adjudicating officer, based on the adjudication application made by the company and the written submissions received from the directors / authorized representative of the company and also taking into consideration the submissions made during the personal hearing came to the conclusion that the company and its directors had violated the provisions of section 383 (A) (1) of the Companies Act 1956 / section 203 of the Companies Act 2013 by not filling up the vacancy of the company secretary's position which remained vacant for a period from 9th April 2008 to 10th June 2016 and therefore the company and its directors were liable for punishment under the provisions of section 203 (5) of the Companies Act 2013.

The Registrar of Companies / Adjudication Officer, having reviewed the facts and circumstances of the case and considered the submissions from the company and its current and former directors through their authorized representative, regarding the violation of the requirement to appoint a company secretary under section 383(A)(1) of the Companies Act 1956 and section 203 (1) of the Companies Act 2013, in conjunction with the applicable rules, has imposed a penalty in accordance with the authority granted under section 454 (3) of the Companies Act 2013.

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	Penalty imposed by ROC	Revised penalty imposed by RD
Sec. 203 of the Companies Act, 2013	Company	5,00,000	75,000
	Ex-Director	5,00,000	75,000
	Ex-Director	5,00,000	75,000
	Ex-Director	5,00,000	75,000
	Ex-Director	5,00,000	75,000
	Ex-Director	5,00,000	75,000
	Ex-Director	5,00,000	75,000
	Ex-Director	5,00,000	75,000
	Director	2,34,000	35,100
	Director	2,34,000	35,100
	Director	2,34,000	35,100
	Director	2,34,000	35,100
	Total	49,36,000	7,40,400

Reduction in penalty

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

That the Company is under the process of voluntary winding up

That the Company has not carried any business activities since the year 2016-17.

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 NDO India 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.