ROC-Hyderabad Sec. 454 Order: Sec. 203 Violation by Sarojini Ferro Alloys Pvt Ltd.

ROC-Hyderabad Sec. 454 Order: Sec. 203 Violation by Sarojini Ferro Alloys Pvt Ltd.. 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: - 
In a significant appeal decision by the Regional Director of the South Eastern Region, Hyderabad, the case involved an appeal under Section 454(5) of the Companies Act, 2013, against an adjudication order from the Registrar of Companies (ROC) in Andhra Pradesh. The ROC had penalized a company and its directors with a fine of ? 8 lakh for failing to appoint a whole-time company secretary, as mandated by Section 203 of the Companies Act and Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.  
After reviewing the circumstances of the violation, the Regional Director set aside the order passed  by the ROC. The appellants must comply with the order and relevant provisions of the Companies Act. On hearing, the practising company secretary, reiterated that the company has failed to appoint Whole Time Company Secretary since the applicable provisions of the Act came into force on 02.11.2018 to till date despite paid up capital has exceeded the prescribed limit as stated in the provisions of Section 203(1) 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 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

(i) Order of ROC set aside 
(ii) Matter returned back to ROC 
(iii) Directed to re-examine and pass fresh orders.

Managing Director

50,000

Director

50,000

Director

50,000

Director

50,000

Director

50,000

Director

50,000

Total

8,00,000

Reduction in penalty 
The ground stated for the reduction of penalty are as follows: 
1. That the company had incurred huge losses ever since its incorporation and could not be able to repay its dues to banks and became a Non-Performing Asset in the books of the bank.           
2. With a view to exist with dignity from Bank, the Company was forced to dispose of its Standalone Ferro Alloy unit to settle the bank dues under one time settlement. After disposal of the Company's standalone ferro alloy unit, the company has been left with no business to carry on.                                                       
3. There was no operations and all the employees of the company left the organization. Company and its promoters do not intend to carry on any business as they have not been left with any resources whatsoever after setting the back dues and as such looking for dissolving 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 Sarojini Ferro Alloys 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: -

In a significant appeal decision by the Regional Director of the South Eastern Region, Hyderabad, the case involved an appeal under Section 454(5) of the Companies Act, 2013, against an adjudication order from the Registrar of Companies (ROC) in Andhra Pradesh. The ROC had penalized a company and its directors with a fine of ? 8 lakh for failing to appoint a whole-time company secretary, as mandated by Section 203 of the Companies Act and Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

After reviewing the circumstances of the violation, the Regional Director set aside the order passed by the ROC. The appellants must comply with the order and relevant provisions of the Companies Act. On hearing, the practising company secretary, reiterated that the company has failed to appoint Whole Time Company Secretary since the applicable provisions of the Act came into force on 02.11.2018 to till date despite paid up capital has exceeded the prescribed limit as stated in the provisions of Section 203(1) 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 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	(i) Order of ROC set aside (ii) Matter returned back to ROC (iii) Directed to re-examine and pass fresh orders.
	Managing Director	50,000
	Director	50,000
	Director	50,000
	Director	50,000
	Director	50,000
	Director	50,000
	Total	8,00,000

Reduction in penalty

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

1. That the company had incurred huge losses ever since its incorporation and could not be able to repay its dues to banks and became a Non-Performing Asset in the books of the bank.

2. With a view to exist with dignity from Bank, the Company was forced to dispose of its Standalone Ferro Alloy unit to settle the bank dues under one time settlement. After disposal of the Company's standalone ferro alloy unit, the company has been left with no business to carry on.

3. There was no operations and all the employees of the company left the organization. Company and its promoters do not intend to carry on any business as they have not been left with any resources whatsoever after setting the back dues and as such looking for dissolving 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 Sarojini Ferro Alloys 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.