Timeline for regularization of additional director as per section 161 of the companies act 2013?

Timeline for regularization of additional director as per section 161 of the companies act 2013?. section 161 of the Companies Act, 2013 deals with the appointment of additional, alternate, and nominee directors in a company. It provides flexibility to the Board of Directors to appoint directors under specific circumstances, subject to the provisions of the Articles of Association. Under this section, the Board may appoint an additional director if authorized by the Articles, but such a director holds office only until the next Annual General Meeting. It also allows the appointment of an alternate director to act in place of a director who is absent from India for at least three months. Additionally, a nominee director may be appointed by an institution, such as a financial institution or government entity, in accordance with the terms of agreements or applicable laws. However, these appointments must comply with statutory limitations, ensuring that governance remains in line with regulatory requirements.
Applicable Provisions
The MCA adjudication order involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (ER), Kolkata, for consideration.
Facts of the Case with ROC and RD
In Mayflower Infra Realty Private Limited, concerned ROC had issued adjudication notice for violation of section 161 of the act dated 03.08.2022 to the company and its officers in default. That in this regard, a reply dated 15/09/2022 was received by the ROC, from the company and its officers for adjudication notice which was not found satisfactory by the adjudicating authority.
Considering the fact and circumstances of the case, Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD) and an opportunity of being heard was given by the RD to appellants on 25/06/2024.
The authorised representative was asked to make submissions regarding any infirmity in the order of ROC. The authorised representative had submitted financial statements for 2022-23 along with the reply dated 12.03.2024 that “Our company is a small company as the paid-up share capital of the company is Rs 2.5 lakhs with no revenue since past three years.
Imposed Penalty
Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty as follows:

Relevant Periods

To whom penalty imposed

Amount of Default

Maximum Penalty

30.09.2015-31.12.2015

On Company

50,000

On 1ST director

50,000

Reduction in Penalties, If any
After considering all the facts, circumstances and all the submission made by the appellants, concerned RD impose the penalties as per section 446B of the companies Act 2013: -

Relevant Periods

To whom penalty imposed

Default Continues

Maximum Penalty

Penalty as per section 446B of the companies Act 2013

30.09.2015-31.12.2015

On Company

50,000*3

50,000

25,000

On 1ST director

50,000*3

50,000

25,000

Any Benefit of Section 446B of Companies Act
Section 446B of the Companies Act, 2013 provides a significant relief mechanism for small companies and start-ups by reducing the penalty burden for certain non-compliances. Under this provision, if a small company or a start-up commits a default for which a penalty is prescribed under the Act, the penalty imposed shall not be more than half of the specified penalty, subject to a maximum limit. In adjudication matter of Mayflower Infra Realty Private Limited, authorised representatives have submitted their signed and audited financial statements to claim that company is a small company as per the provisions of companies Act 2013 and after considering all the matter RD grant the benefit of Section 446B of the companies Act 2013.
CCL Observations:
From the above case, it is apparent that Mayflower Infra Realty Private Limited failed to comply with the provisions of Section 158 of the Companies Act, 2013, leading to adjudication by the Registrar of Companies (ROC). After getting order from the concerned ROC, an appeal filled by the company to claim the benefit of section 446B of the companies Act. After considering all the submissions made by the company RD reduce the penalty amount up to half.
Download MCA Adjudication Order

section 161 of the Companies Act, 2013 deals with the appointment of additional, alternate, and nominee directors in a company. It provides flexibility to the Board of Directors to appoint directors under specific circumstances, subject to the provisions of the Articles of Association. Under this section, the Board may appoint an additional director if authorized by the Articles, but such a director holds office only until the next Annual General Meeting. It also allows the appointment of an alternate director to act in place of a director who is absent from India for at least three months. Additionally, a nominee director may be appointed by an institution, such as a financial institution or government entity, in accordance with the terms of agreements or applicable laws. However, these appointments must comply with statutory limitations, ensuring that governance remains in line with regulatory requirements.

Applicable Provisions

The MCA adjudication order involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (ER), Kolkata, for consideration.

Facts of the Case with ROC and RD

In Mayflower Infra Realty Private Limited, concerned ROC had issued adjudication notice for violation of section 161 of the act dated 03.08.2022 to the company and its officers in default. That in this regard, a reply dated 15/09/2022 was received by the ROC, from the company and its officers for adjudication notice which was not found satisfactory by the adjudicating authority.

Considering the fact and circumstances of the case, Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD) and an opportunity of being heard was given by the RD to appellants on 25/06/2024.

The authorised representative was asked to make submissions regarding any infirmity in the order of ROC. The authorised representative had submitted financial statements for 2022-23 along with the reply dated 12.03.2024 that “Our company is a small company as the paid-up share capital of the company is Rs 2.5 lakhs with no revenue since past three years.

Imposed Penalty

Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty as follows:

Relevant Periods	To whom penalty imposed	Amount of Default	Maximum Penalty
30.09.2015-31.12.2015	On Company	50,000	50,000
30.09.2015-31.12.2015	On 1^ST director	50,000	50,000

Reduction in Penalties, If any

After considering all the facts, circumstances and all the submission made by the appellants, concerned RD impose the penalties as per section 446B of the companies Act 2013: -

Relevant Periods	To whom penalty imposed	Default Continues	Maximum Penalty	Penalty as per section 446B of the companies Act 2013
30.09.2015-31.12.2015	On Company	50,000*3	50,000	25,000
30.09.2015-31.12.2015	On 1^ST director	50,000*3	50,000	25,000

Any Benefit of Section 446B of Companies Act

Section 446B of the Companies Act, 2013 provides a significant relief mechanism for small companies and start-ups by reducing the penalty burden for certain non-compliances. Under this provision, if a small company or a start-up commits a default for which a penalty is prescribed under the Act, the penalty imposed shall not be more than half of the specified penalty, subject to a maximum limit. In adjudication matter of Mayflower Infra Realty Private Limited, authorised representatives have submitted their signed and audited financial statements to claim that company is a small company as per the provisions of companies Act 2013 and after considering all the matter RD grant the benefit of Section 446B of the companies Act 2013.

CCL Observations:

From the above case, it is apparent that Mayflower Infra Realty Private Limited failed to comply with the provisions of Section 158 of the Companies Act, 2013, leading to adjudication by the Registrar of Companies (ROC). After getting order from the concerned ROC, an appeal filled by the company to claim the benefit of section 446B of the companies Act. After considering all the submissions made by the company RD reduce the penalty amount up to half.