Non Appointment of Company Secretary – NCLT Levied Penalty

Case: In the matter of Atyati Technologies Pvt Ltd.

NCLT Bench: Bengaluru Bench

Applicant -   

1.      Atyati Technologies Pvt Ltd – Company.

2.      Mr. Prakash Ramchandra Prabhu- CEO and Director.

Violations:

Provisions of sections 203 of the companies Act, 2013 read with Rule 8A of companies (Appointment and Remuneration of Managerial Personals) Rule,2014.

Section 203-  Appointment of Key Managerial Personnel:

(1)    Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—

(i)                 managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;

(ii)               company secretary; and

(iii)             Chief Financial Officer…………….

(2)…………

(3)………….

(4)…………

(5) If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues.

Rule 8 - Appointment of Key Managerial Personnel:

Every listed company and every other public company having a paid-up share capital of ten crore rupees or more shall have whole-time key managerial personnel.

Rule 8A - Appointment of Company Secretaries in Companies Not Covered above:

A company other than a company covered under rule 8 which has a paid up share capital of five crore rupees or more shall have a whole-time company secretary.

Default: Company failed to appoint its full time Company secretary.

Period of violation:  Period of default- From 9^th June, 2014 (i.e. from the date on which Rule 8A notified) to 30^th September, 2016 (845 Days).

Maximum Fine as per sections:

·         For Company- Maximum Fine Rupees 5,00,000/- (Fixed payable)

                      If continuing default Rupees 1,000/- every day.

·         For Every Director and KMP in default- Maximum Fine Rupees 50,000/- (Fixed payable)

                                                        If continuing default Rupees 1,000/- every day.

Facts considered while passing Order:

·         Company has failed to appoint its full time company secretary as required under section 203 of the Companies Act, 2013, although Companies has a capital of more than 5 crore rupees.

·         The reason for non-appointment of CS was that, non-availability of suitable candidate for the position as no one was interested in joining, because the exposure in Company was minimal.

·         The applicants made suo-moto application for compounding of violation.

·         However, company made the default good by appointing Ms. Shruti Gupta, as CS in Board meeting dated 29^th September, 2016 and filed DIR 12 for the same.

·         Company contended that, violation was neither deliberate nor intentional and it was due to reasons which were beyond control of the applicants.

Conclusion:

Tribunal compounded offence under section 203 of the Companies act 2013 by levying compounding fees payable within 15 days from the date of order.

Calculation as follows:

Applicants	Fixed payables (Rupees)		Continuing default Per day (Rupees)		Total Fees levied (rupees)
	Maximum	Actual	Maximum	Actual	Actual
Atyati Technologies Pvt Ltd -Company	5,00,000	1,50,000	845X1000= 8,45,000	845X100= 84,500	2,34,500/-
Mr. Prakash Ramchandra Prabhu- CEO and Director	50,000	20,000	845X1000= 8,45,000	845X100= 84,500	1,04,500/-
Total					3,39,000/-