Non Appointment of Company Secretary – NCLT fines Rs. 339,000 to the Company for inadvertent delay

Atyati Technologies Private Limited (The Company) was incorporated under Companies Act, 1956 as a Private Limited Company with Registered Office in Bangalore. The Paid-up capital of the Company was Rs. 8.81 Crores. As per Rule 8A, it is mandatory for every company to appoint a Company Secretary in all the Companies having Paid up capital of Rs. 5 Crores or more.
The Company filed a suo-motto filed a petition under Section 203 of the Companies Act, 2013 (The Act) read with Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 with a prayer for compounding violation committed under Section 441 of the Act.
The Company pleaded that though since the commencement of new Companies Act, 2013, i.e. April 01, 2014 the Company could not appoint any Professional as a CS as no CS was willing to work with the Company as Company being a Private Limited Company there was very limited scope of work.
As per Section 203 (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.
The NCLT noted that since the delay was inadvertent and the Company had filed application suo motto, NCLT levied following fine:
Particulars
Violation under Section 203
Delay of 845 days
Total Penalty
(Rs.)
Penalty on application Company
Rs. 150,000
(Minimum penalty under Section is Rs. 100,000)
845 *100 days = 84,500
(No minimum fine for continuous offence but maximum fine per day of delay is Rs. 1,000)
234,500
Penalty on CEO/Director
(2nd applicant)
Rs. 20,000
(No minimum penalty, maximum penalty is Rs. 50,000 for each director and KMP)
845*100 days = 84,500
104,500
T O T A L
339,000

Conclusion:

The compounding fees is astonishing if it is levied considering the fact that the delay was inadvertent and beyond the control of the Company and application was filed suo-motto by the Applicant. This amount can be way more in companies where they have not appointed CS and has more number of Directors /KMP in the Company.

To read NCLT Order, Click Here

Comments

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