ROC-Hyderabad Order u/s 454 for Signitive Towers Pvt Ltd for violating provisions of Sec. 203

ROC-Hyderabad Order u/s 454 for Signitive Towers Pvt Ltd for violating provisions of Sec. 203. 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: - 
This case involves an appeal reviewed by the Regional Director of the South East Region in Hyderabad. The appeal was filed under section 454(5) of the Companies Act 2013, challenging a decision made by the Registrar of Companies. 
Registrar of Companies in his order of adjudication ha stated that the company has failed to appoint a company secretary as per Section 203 of the Companies Act, 2013 and Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014,  despite the paid up capital has exceeded the prescribed limit as stated in the section 203(1) of the Companies Act, 2013.  
This non-compliance has resulted in a hefty penalty of Rs. 6.50 lakhs being imposed on the company and its directors.  
However, the company did appoint a whole-time company secretary within 4 months and 22 days after the capital increase, which was within the acceptable time frame. The company argued that it had complied with the law but the Registrar did not consider these facts before imposing a penalty of ?6.5 lakhs on the company and its directors. 
During the appeal hearing, the Regional Director recognized the company's compliance and decided to set aside the Registrar's order. The Director also advised the Registrar to thoroughly review all relevant issues before making such decisions in the future. This case highlights the importance of considering compliance efforts before imposing penalties. 
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

Director-1

50,000

Director-1

50,000

Director-1

50,000

Total

6,50,000

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

That the company has appointed a whole-time company secretary well within time i.e., within 4 months 22 days from the date of increase in Paid up capital. Registrar of Companies passed the order without examining all these issues.

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 
In this case, the Regional Director's decision to set aside the Registrar's penalty underscores the importance of a fair evaluation of compliance efforts by companies. This case shows the importance of reviewing a company’s compliance efforts before imposing penalties. The Regional Director’s decision to overturn the penalty highlights that timely actions can fulfill legal requirements. It serves as a reminder for regulatory bodies to carefully consider all facts before making decisions. 
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: -

This case involves an appeal reviewed by the Regional Director of the South East Region in Hyderabad. The appeal was filed under section 454(5) of the Companies Act 2013, challenging a decision made by the Registrar of Companies.

Registrar of Companies in his order of adjudication ha stated that the company has failed to appoint a company secretary as per Section 203 of the Companies Act, 2013 and Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, despite the paid up capital has exceeded the prescribed limit as stated in the section 203(1) of the Companies Act, 2013.

This non-compliance has resulted in a hefty penalty of Rs. 6.50 lakhs being imposed on the company and its directors.

However, the company did appoint a whole-time company secretary within 4 months and 22 days after the capital increase, which was within the acceptable time frame. The company argued that it had complied with the law but the Registrar did not consider these facts before imposing a penalty of ?6.5 lakhs on the company and its directors.

During the appeal hearing, the Regional Director recognized the company's compliance and decided to set aside the Registrar's order. The Director also advised the Registrar to thoroughly review all relevant issues before making such decisions in the future. This case highlights the importance of considering compliance efforts before imposing penalties.

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
	Director-1	50,000
	Director-1	50,000
	Director-1	50,000
	Total	6,50,000

Set aside the order of ROC

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

That the company has appointed a whole-time company secretary well within time i.e., within 4 months 22 days from the date of increase in Paid up capital. Registrar of Companies passed the order without examining all these issues.

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

In this case, the Regional Director's decision to set aside the Registrar's penalty underscores the importance of a fair evaluation of compliance efforts by companies. This case shows the importance of reviewing a company’s compliance efforts before imposing penalties. The Regional Director’s decision to overturn the penalty highlights that timely actions can fulfill legal requirements. It serves as a reminder for regulatory bodies to carefully consider all facts before making decisions.