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Editorial 789

PENALTY FOR NON-APPOINTMENT OF

COMPANY SECRETARY

SHORT SUMMARY:

As per Section 203 and Rule 8A, every Company having paid up share Capital
of Rs. 10 crore or more required to appoint Whole Time Company Secretary as
Key Managerial Personnel.

However, there are lot of Companies registered with Ministry of Corporate

Affairs, which are falling under this limit, but they are not appointing Company
Secretaries.

MCA and ICSI should take action against such Companies. As they are doing
Non-Compliance of Provisions of Companies Act,2013.

Appreciating Move by Hon’ble ROC Pune:

As per Data available with MCA ROC Delhi have issued adjudication orders for
many Companies registered in Delhi for non-appointment of Company
Secretary and imposed Lakh of Penalties on the Companies.

In this editorial we will discuss one of those order:

“Adjudication Order in the Matter of

Pitchers Internet Private Limited”

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I. FACTS OF THE CASE:

a. In terms provisions of section 203 (1) Companies Act, 2013 r/w Rule 8A
of Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, every company which has a paid up share capital of ten
crore rupees or more shall have a whole time company secretary";

b. In terms of the provisions of section 203(4) of the Act, if the office of any
Whole-Time Key Managerial Personnel is vacated, the resulting vacancy
shall be filled-up by the Board within a period of six months from the
date of such vacancy ; in the instant case the company has not
appointed the Company secretary since 30.11.2019;

c. Accordingly, the adjudication officer has issued adjudication notice vide .

ROC/ D/ Adj/ 2022/ Section 92 & 137/ Jindal / 1743-1746 dated-
25.03.2022 (herein after referred as Adjudication Notice) under Section
454(4) read with 203 of the Companies Act, 2013 read with Rule 3(2) Of
Companies (Adjudication of Penalties), 2014 as amended in Amendment
Rules, 2019, vide notice no. to the company and its officers in default for
the violation of the provisions of the act.

d. It has been noticed that Company Secretary Prakash Jha resigned from
the company w.e.f. 15.10.2019 from the office of whole time company
secretary

e. thereafter company appointed a whole time company secretary on

10.05.2021

(There is gap of more than 6 month between resignation to appointment of

new Company Secretary.)

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f. A reply to the Adjudication notice has been received dated 05.04.2022

from the company stating that the previous company secretary has
vacated the office w.e.f 15.10.2019. Further the company has to appoint
a whole time key managerial personnel within 6 months from the date of
such vacancy and after the vacation the company initiated for finding
suitable candidates. Due to the Corona pandemic and lock down
situation nobody was ready to come during those difficult times. After
opening of lock down the company started the initiatives but could not
find the suitable candidate. Further, the company has found suitable
candidate appointed as Whole time company secretary w.e.f 10.05.2021
and asked for hearing.

g. A hearing was fixed on 18.05.2022 as requested by company vide e-mail

dated 02.05.2022. Sh. Mohit Singhal, CS, the authorized representative
of the company appeared in the hearing.

➢ ORDER:

The applicant company and its officers, who have defaulted the provisions of
section 203(1) r/w 203(4) of the Act for non-appointment of Whole- Time
Company Secretary are liable for penalties under section 203(5) of the Act
w.e.f. w.e.f. 14th April, 2020 to 9th May, 2021. [after excluding the period of
six months as provided under section 203(4)].

In exercise of the powers conferred on the undersigned vide Notification dated

24th March, 2015 and having considered the facts and circumstances of the
case besides oral submissions made by the representative of Notice(s) at the
time of virtual/physical hearing and after taking into account the factors
mentioned herein above, I do hereby impose the penalty on the company and

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CS DIVESH GOYAL Mob: +918130757966
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its officers in default as per table below for violation of section 203(1) of the
Act:-

No. of days Penalty imposed on First Default Total /

of default company/director(s) default (In continues maximum
Rs) (In Rs) penalty (In
Rs)

*391 On Company 500,000 500,000 500,000

Mr. Akshay 50,000 1000*391 441,000

Kumar,
Director
Mr. Siddharth 50,000 1000*391 441,000
Mall,
Director
Mr. Ajinkya Rajendra 50,000 1000*391 441,000
Malasne, Director
TOTAL PENALTY 18,23,000
* No. of days have been calculated from 14.04.2020 till 09.05.2021.

Conclusion:

It was really a great move by the ROC Delhi against the Companies who are
doing Non-compliance of Section 203 of Companies Act, 2013. It is our request
as professional from all the ROC’s in Country to take action and issue notice of
adjudication against all such Companies who are falling under limit of Section
203, but not appointing Company Secretaries.

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CS DIVESH GOYAL Mob: +918130757966
Practicing Company Secretary csdiveshgoyal@gmail.com
GOYAL DIVESH& ASSOCIATES Knowledge Sharing Initiative

As per recent speech of our Hon’ble finance minister, Company Secretaries are
important for Corporate Governance in Companies. Therefore, ROC’s suo-moto
issue notice to Companies to appoint Company Secretary for better Corporate
Governance in such Companies as well as compliance of Section 203.

Further, Companies who are not complying with the provisions of Companies
Act, 2013 must get penalized by the ROC by issue of adjudication orders.

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in

Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).

Disclaimer: The entire contents of this document have been prepared based on relevant
provisions and as per the information existing at the time of the preparation. Although
care has been taken to ensure the accuracy, completeness, and reliability of the
information provided, I assume no responsibility, therefore. Users of this information
are expected to refer to the relevant existing provisions of applicable Laws. The user of
the information agrees that the information is not professional advice and is subject to
change without notice. I assume no responsibility for the consequences of the use of
such information.

IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,

SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR
IN CONNECTION WITH THE USE OF THE INFORMATION

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