[2023] 146 taxmann.
com 258 (Article)
[2023] 146 taxmann.com 258 (Article)
Date of Publishing: January 13, 2023
RD slashes penalty imposed by RoC on Co. for delayed appointment of a CS
during Covid-19 pandemic
PROF R BALAKRISHNAN
FCS – FCWA
Background of the case
1 . This is a case in which the Registrar of Companies / Adjudication Officer of Pune passed an order of
adjudication of penalty under sub-section (5) of section 454 of Companies Act 2013 read with Rule 3 of
Companies (Adjudication of Penalties) Rules 2014 vide his adjudication order No.RoCP/ADJ/Order/203/21-
22/Kirloskar/850 dated 15th September 2021 for violation of provisions of section 203 of the Companies Act
2013 read with Rule 8 of the Companies Appointment and Remuneration of Managerial Personnel) Rules 2014
in respect of Kirloskar Integrated Technologies Private Limited.
Against the order of the Registrar of Companies of Pune, an appeal was filed by Kirloskar Technologies Private
Limited challenging the penalty of Rs. 25,64,000 levied, before the Regional Director (Western Region)
Ministry of Corporate Affairs, Mumbai. Upon hearing the appeal, the Regional Director slashed the penalty
amount from Rs.25,64,000 lakhs to Rs.5,12,800 and we shall go through this case in detail in order to
understand the rationale behind the reduction in penalty granted by the Regional Director.
The Company
2 . M/s Kirloskar Integrated Technologies Private Limited incorporated on 28th March 1970 under the
provisions of the Companies Act 1956 having its registered office at Training Centre Facility, Laxmanrao
Kirloskar Road, Khadki Pune in Maharashtra. The company falls under the jurisdiction of the Registrar of
Companies of Maharashtra & Goa and the office of the Registrar is situated in Pune. The company is currently
having three directors on its board. The company is in the business of manufacturing grain mill products,
starches and starch products and prepared animal feeds.
Default committed by the company
3 . T h e company's company secretary resigned with effect from 31st October 2019 and the position of the
company secretary has not been filled up within six months from the due date. The position of the company
secretary was finally filled up by the company after a delayed period of 325 days i.e. on 22nd March 2021. The
period of non-appointment of the position of the company secretary was a contravention of the provisions of
section 203 of the Companies Act 2013 committed by the company for which the adjudication order was passed
by the Registrar of Companies, Pune.
The penalty levied by the Registrar of Companies / Adjudication Officer
4. The Registrar of Companies / Adjudicating Officer of Pune, Maharashtra passed an adjudication order dated
15th September 2021 under section 454(3) of the Companies Act 2013, for default in compliance with the
requirements of section 203 read with Rule 8A of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules 2014, by Kirloskar Integrated Technologies Private Limited regarding the
non-appointment of company secretary within the period of six months and levied a penalty of Rs. 5,00,000 on
the company and Rs. 3,74,000 on three of the directors, Rs 3,13,000 to another director, Rs 3,11,000 to yet
another director and Rs. 3,18,000 to one more director, thereby making a total penalty of Rs. 25,64,000 in all.
Appeal filed by the company
5 . The adjudication order was passed by theRegistrar of Companies, Pune on 15th September 2021 on this
matter. As per provisions of section 454(6), an appeal under sub-section (5) of section 454 is to be filed within a
period of 60 days from the date of which the copy of the order made by the adjudicating officers is received by
the aggrieved person. The company filed an appeal under Section 454 (5) of the Companies Act, 2013 in Form
ADJ on 13th November 2021
On examination of the Application/Appeal it was seen that the said appeal was filed within sixty days from the
date of passing the adjudication order by the Registrar of Companies, Pune Hence, the appeal was filed within
the stipulated period of sixty days in terms of provisions of section 454(6) of the Companies Act 2013.
The main Contention of the appeal
6. The appeal filed by the company mainly contended on the following grounds:-
(a) The Company had appointed a whole-time company secretary of the company (not designated as
KMP) with effect from 12th January 2017. The whole time company secretary vacated the office with
effect from 31st October 2019.
(b) Post-vacation of office of the erstwhile whole-time company secretary, the company diligently carried
out the interview process of candidates from November 2019 till April 2020 for the purpose of filling
up the vacated position of the office of the whole time company secretary.
(c) However, in view of the COVID-19 pandemic situation, the Government of India imposed a lockdown
all over India with effect from 25th March 2020.
(d) As a result of the lockdown, the company was unable to hold and conduct physical interviews of
candidates for the position of a whole-time company secretary.
(e) The company had put strenuous effort into searching for a suitable candidate by conducting virtual
interviews of candidates for the post of whole time company secretary in order to fill up the aforesaid
vacated office at the earliest and to avoid any kind of non-compliance.
(f) Further, to adhere to the compliance of the aforesaid section and rules, the company after conducting
various rounds of interviews, complied with the requirements and appointed a whole time company
secretary with effect from 22nd March 2021.
(g) The company also stated that the delay of 325 days in filling up the casual vacancy of the whole time
company secretary had occurred due to unavoidable and compelling circumstances of the COVID-19
pandemic situation and without any mala-fide intentions from the company's side.
Personal hearing
7. Upon receipt of the appeal, the Regional Director granted an opportunity of being heard and the personal
hearing by a virtual mode through video conferencing was fixed as on 30th December 2021 and accordingly the
company and its directors / officers were asked to be present for the personal hearing before the appeal is being
heard.
The day of the personal hearing
8. Kirloskar Integrated Technologies Private Limited and its directors had appointed an authorized
representative – a practicing company secretary - who had appeared on behalf of the company and its directors
and represented the matter through video conferencing and made the submissions on the day of the personal
hearing i.e. on 30th December 2021.
The authorized representative during the personal hearing once again reiterated the grounds taken while filing
the appeal stating that the company. Further to the above, the practicing company secretary, submitted the
company had tried the best possible efforts for recruiting a whole time company secretary, post-vacation of the
office of the erstwhile company secretary. As stated in the appeal, the company could not conduct interviews
due to the COVID-19 pandemic situation during which time the complete lockdown was announced by the
Government of India across the country. Later the company could conduct virtual interviews of candidates for
the post of whole time company secretary and finally the company had appointed the company secretary on
22nd March 2021 with a delayed period of 325 days.
The practicing company secretary made a prayer to the authorities that a lenient view may be taken while
deciding the appeal having regard to the extraordinary situation which prevented the company from recruiting
the company secretary in time.
The conclusion reached by the Regional Director
9. Upon carefully considering the impugned order passed by the Registrar of Companies, Pune and after taking
into the ground of appeal made out by the company and considering the oral submission of the practicing
company secretary made on the day of personal hearing i.e. 30th December 2021 on behalf of the company and
its directors, the Regional Director decided to allow the appeal.
Order passed by the Regional Director
1 0 . The Regional Director after allowing the appeal revised the penalties imposed by the Registrar of
Companies, Pune and directed the company and its directors to make the revised amount of penalty through
the MCA portal.
The following table shows the reduced amount of penalty.
The revised amount of penalty fixed by the RD
(violation of section 203)
No of days of A penalty imposed on Penalty imposed by ROC Reduced
default company / directors by RD
First Default Total Revised
default continues penalty penalty
Rupees Rupees Rupees Rupees
325 Company 5,00,000 ---- 5,00,000 1,00,000
Present Directors
325 Director-1 50.000 1000 x 324 3,74,000 74,800
325 Director-2 50.000 1000 x 324 3,74,000 74,800
325 Director-3 50.000 1000 x 324 3.74,000 74,800
Past Directors
264* Director-4 50.000 1000 x 263 3.13,000 62,600
269** Director-5 50.000 1000 x 268 3,18,000 63,600
262*** Director-6 50.000 1000 x 261 3,11,000 62,200
Total 8,00,000 17,64,000 25,64,000 5,12,800
*resigned on 20th January 2021 **resigned on 25th January 2021
***resigned on 18th January 2021
Total penalty comes to Rs. 5,12,800/- for violation of Section 203(1) of the Companies Act, 2013.
Action taken by the Company and its directors
11. Pursuant to the directions given by the Regional Director of Mumbai during the virtual hearing held on 30th
December 2021, the company paid the penalty amount of Rs. 5,12,800 on 14th January 2021 via the Ministry of
Corporate Affairs portal. The company thereafter submitted via e-mail on 18th January 2022, stating that the
payment has been made and also enclosed the copies of the challan / payment receipt for penalties paid as
directed for the violation of section 203(1) of the Companies Act 2013 by the Company and its directors in
default. The company also provided the details of SRNs.
Despatch of the order
12. The order in the appeal was sent by the Regional Director to the company with a copy marked to the
Registrar of Companies at Pune. The order copy was also sent to the Officer in Charge, e-Gov.Cell, Ministry of
Corporate Affairs, A-Wing, Shastri Bhavan, Dr. Rajendra Prasad Road, New Delhi with a request to upload this
order on the website of the Ministry.
The complete order for reading
13. The readers may like to read thecomplete details of the order in appeal passed by the Regional Director
(Western Region) Mumbai on 25th January 2022 bearing no.
RD/WR/sec/454(5)/Appeal/Kirloskar/T58164534/2021/4437in the matter of the Companies Act, 2013 section
454(5) of Companies Act, 2013 in the matter of M/s. Kirloskar Integrated Technologies Private Limited and the
relevant website is https:// www.mca.gov.in/content/mca/global/en/data-and-reports/ rd-roc-info/rd-
adjudication-orders.html (file name Order u/s 454 (5) of C.A 2013 dated 24.01.2022 Kirloskar Integrated
Technologies uploaded under RD – west on 28-01.2022).
Conclusion
14. As readers may be aware that the adjudication mechanism / appeal procedure was introduced by the
Government in order to promote ease of doing business, to reduce the burden of the National Company law
Tribunal / Special Court because the adjudication is being handled by bureaucracy. This process really quick
and one can get the order within the time framed manner.
Appeal against the adjudication order passed by the Registrar of Companies could be made by any of the
aggrieved persons by the order as per the provisions of section 454 (5) of the Companies Act 2013. Such
appeals are required to be made to the Regional Director having jurisdiction in the matter within a period of 60
days from the date of copy of the adjudication order is received by the aggrieved person.
In the instant case, the Regional Director of Mumbai reduced the penalty amount from Rs. 25,64,000 to Rs.
5,12,800 after carefully considering the grounds taken by the company and the company could not act in time
due to COVD-19 pandemic situation since the complete lockdown was prevalent across India during the period
of the default in question. The companies should review the adjudication order at their end and take a call on
whether or not to go on appeal against the order since the appeal is decided based on the merits of the case. If a
company is having very valid reason by which the default has taken place, the appellate authorities would
consider the same and the company could get the right justice. This particular case is one such example which
is decided on valid reasons and merits.
Reference:-
1. Companies Act 2013
2. Companies (Amendment) Act 2019
3. Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014
4. Companies (Adjudication of Penalties) Rules 2014
5. Companies (Adjudication of Penalties) Amendment Rules 2019
6. Adjudication order dated 15th September 2021 passed by the Registrar of Companies Pune bearing
No. ROCP/ADJ/Order/ 203/ 21-22/Kirloskar/ 846 to 853 – adjudication order of penalties in the
matter of Kirloskar Integrated Technologies Private Limited under section 454 of Companies Act
2013.
7. Appeal order passed by the Regional Director (Western Region) Mumbai dated 25th January 2022
bearing number RD / WR / sec /454(5) / Appeal / Kirloskar/ T58164534/2021/4437in the matter of
the Companies Act, 2013 section 454(5) of Companies Act, 2013 in the matter of M/s. Kirloskar
Integrated Technologies Private Limited
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