The complexity of compliance and penalties under the Companies Act, 2013 were highlighted when the Ministry of Corporate Affairs (MCA) recently lowered a significant fine levied on Fluiconnect India Private Limited and its directors. The story of the non-appointment of a Company Secretary (CS) and the ensuing attempts to correct the default is revealed in the appeal filed under section 454(5).
1. Context and Application of Penalties:
The appeal stems from an adjudication ruling issued by the Karnataka Registrar of Companies, penalising Fluiconnect India for failing to comply with Section 203 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The background of the penalty imposition is as follows. The fine for the company and its six directors was Rs. 35 lakh.
According to the Registrar of Companies, the business violated Section 203 of the Companies Act, 2013 by failing to designate a full-time company secretary during particular times. Following the company’s suo-motu application admitting the non-compliance, the penalty was applied.
In response, the appellants were represented by Mr Shripad G. Bhat, a practising company secretary, who emphasised the difficulties in locating a qualified applicant during the defaulting time. The company was looking for someone who could handle several job descriptions because the private company did not do much secretarial work.
The appeal highlighted the company’s and its directors’ sincere attempts to comply, even in the face of the default. To correct the unintentional violation, the Board of Directors nominated a Whole Time Company Secretary on July 1, 2022. In light of these circumstances, the appeal requested a decrease in the fines assessed.
Dr. Raj Singh, the Regional Director, discovered justification for lessening the fine. The ultimate fine for five directors and Fluiconnect India was fixed at Rs. 75,000 per, or Rs. 4,50,000. The appellants were instructed to abide by the ruling and the pertinent provisions of the 2013 Companies Act. The same Rs. 5 Lakh penalty is still imposed on one of the directors, Mr Michael Peter Wall, for failing to respond to notices.
The order made clear that one of the directors and officers who were in default, Mr Michael Peter Wall work, had not paid the fine or filed an appeal. Section 454(8) of the Companies Act, 2013 directed the Registrar of Companies to take appropriate action against Mr Wall ow.
On November 27, 2023, Fluiconnect India and the five directors duly paid the revised penalty. The January 5, 2024, order is a timely reminder of the importance of compliance and the regulatory authorities’ attentiveness in taking sincere attempts to address defaults into account.
Present: Mr Shripad G Bhat, PCS ORDER This is an appeal filed under section 454(5) of the Companies Act, 2013 by the above appellants in e-form ADJ vide SRN F65198897 dated 27.09.2023 against the adjudication order No. ROC(B)Adj. Ord.454-203/Fluiconnecto/Co.No.111072/2023 dated 09.08.2023 under section 454 passed by the Registrar of Companies, Karnataka 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. 2. Registrar of Companies in his order of adjudication has stated that the company has filed a suo-motu application on 16.03.2023 regarding the non-appointment of a whole-time company secretary i.e., violation of section 203 of the Act.
The company has submitted that its paid-up capital crossed the required threshold of Rs.5 crores on 02.06.2015 and it was required to appoint a company secretary from this date, but it has failed to appoint a company secretary for the period starting from 02.06.2015 to 30.11.2018 and again from 01.12.2019 to 30.06.2022 after the resignation of the incumbent company secretary. The hearing was held before the Registrar of Companies on 24.05.2023 and after the hearing, the authorized representative levied a penalty of Rs.5.00 Lakhs on the Company and 6 directors i.e., Mr Chandra Pratap Mr Jayaramachandran Giridhar, Mr Giuseppe Bucci, Mr Michael Peter Wall work, Mr Luca Pozzi and Ms Prashant Sadanand Shanbhag (total aggregating to Rs.35.00 Lakhs).