794 DAYS DELAY IN COMPANY SECRETARY PPOINTMENT-MCA IMPOSES 15 LAKH PENALTY

Securities and Exchange Board of India

INTRODUCTION

Recently, Dorin India Private Limited was hit with a hefty fine by the Indian Ministry of Corporate Affairs for their protracted delay in selecting a company secretary. This article goes into great length about this case, looking at the facts underlying the delay, the legal background, the punishment considerations, and the final order.

BACKGROUND AND LEGAL FRAMEWORK

  • In India, the Companies Act, 2013 and its implementing regulations govern the work of the Ministry of Corporate Affairs (MCA). The Act’s Section 203 addresses the designation of Key Managerial Personnel, such as the Company Secretary. Based on the paid-up capital of the firm, Rule 8A of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 lays forth precise guidelines for choosing a company secretary.

FACTS ABOUT THE CASE

  • In March 2014, Dorin India Private Limited—henceforth referred to as “the company”—was founded. Gurgaon, Haryana, served as its registered office. The firm only engaged a full-time firm Secretary on January 4, 2021, which was a notable delay given that it had a sizable paid-up capital. 

    The issue concerns a 794-day gap between November 2, 2018, and January 4, 2021, in order to comply with Section 203 of the Companies Act, 2013. On May 30, 2023, the MCA sent out a Show Cause Notice (SCN), and on June 15, 2023, the corporation responded.

    The company’s approved representatives and a director, Mr. Keiichi Lizuka, made their case during a hearing on September 12, 2023. They said that Mr. Lizuka was in charge of following Indian legislation, such as the Companies Act of 2013, and they asked for forgiveness because of the business’s prior financial setbacks.

FACTORS CONSIDERED FOR ADJUDICATION OF PENALTIES

  • The case study took into account a number of factors, including: 

    1. The business willingly applied for adjudication after acknowledging its default. 2. At the time of submitting Form-32, records indicated that Mr. Tetsuji Akase and Mr. Keiichi Lizuka were both non-executive directors.
    2. Both directors were responsible for compliance because there were no Form GNL-3 submissions. 
    3. For such defaults, the firm and its officers are subject to stipulated fines under the law.

ADJUDICATION OF PENALTY

  • Following the analysis, the adjudicating officer assessed the following penalties: 

    • For 794 days of default, Dorin India Private Limited (Company) was fined 5,00,000 INR. Administrator.
    • Mr. Keiichi Lizuka: 5,00,000 INR for 794 days of nonpayment, up to a maximum of 5,00,000 INR. 
    • Mr. Tetsuji Akase, the Director: 5,00,000 INR for 794 days of nonpayment, with a 5,00,000 INR cap.

CONCLUSION

  • Finally, in accordance with Section 203 of the Companies Act of 2013, the Ministry of Corporate Affairs has adopted a strict position regarding the appointment of Company Secretaries. Due to the high penalties imposed due to Dorin India Private Limited’s delay, it is imperative that business sector regulations be followed on time. 

    This article has covered the issue of Dorin India Private Limited, which was hit with a 15 lakh penalty by the Ministry of Corporate Affairs after a 794-day delay in selecting a company secretary. The article outlined the case’s facts, reviewed the criteria taken into account when determining penalties, and finished with a discussion of the importance of compliance for businesses.

Government of India Ministry of Corporate Affairs
Office of Registrar of Companies
NCT of Delhi & Haryana
4th Floor, IFCI Tower, 61
Nehru Place
New Delhi – 110019

G Akshay Associates