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2020 (12) TMI 471 - HC - Companies LawDirection to respondents to permit them to file e-form ACTIVE, INC-22A without insisting on appointment of a whole-time Company Secretary - declaration that the restriction imposed in filing e-form ACTIVE, INC-22A with regard to non-compliance of Section 203 of a whole-time Company Secretary or Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 - HELD THAT - The petitioners have been permitted to file e-form ACTIVE, INC-22A without insisting the appointment of a whole-time Company Secretary, on a provisional basis - Section 203(5) of the Companies Act provides that if any Company makes any default in complying with the provisions of Section 203 relating to appointment of Key Managerial Personnel, such Company shall be liable to a penalty of ₹ 5 lakhs and every Directors and Key Managerial Personnel of the Company, who is in default, shall be liable to a penalty of ₹ 50,000/- and where the default is a continuing one, with further penalty of ₹ 1,000/- for each day after the first during which such default continues but not exceeding ₹ 5 lakhs. It is evident that the petitioner-Companies have not adhered to the provisions of the Companies Act, especially Section 203 thereof. In such circumstances, the respondents are empowered to proceed against the petitioner-Companies, in accordance with law. The writ petitions are disposed of granting liberty to the respondents to proceed against the petitioner-Companies for violating Section 203 of the Companies Act, if they are so advised.
Issues:
Petition seeking permission to file e-form ACTIVE, INC-22A without appointing a whole-time Company Secretary, challenge to the restriction imposed on non-compliance of Section 203 of a whole-time Company Secretary or Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Analysis: The petitioners, Companies incorporated with the Registrar of Companies, Kerala, filed writ petitions to direct the respondents to allow them to file e-form ACTIVE, INC-22A without mandating the appointment of a whole-time Company Secretary. They argued that the restriction on filing e-form ACTIVE due to non-compliance with Section 203 or Rule 8A is arbitrary and illegal. The petitioners highlighted that the Ministry of Corporate Affairs' website rejected their e-form ACTIVE submissions because their paid-up capital exceeded ?5 Crores, and they had not appointed whole-time Company Secretaries. The petitioners referred to the amendment of the Companies (Incorporation) Rules, 2014 by the Union of India under Section 469 of the Companies Act, 2013. They pointed out that as per the new Rule 25A, Companies incorporated on or before 31.12.2017 were required to file e-form ACTIVE by 25.04.2019. The petitioners argued against the insistence on appointing whole-time Company Secretaries, emphasizing that they had part-time Company Secretaries and Auditors managing their affairs effectively without penalty proceedings. During the hearing, the Central Government Counsel contended that the petitioners must appoint whole-time Company Secretaries as per existing rules, given their paid-up capital exceeding ?5 Crores. The Counsel further highlighted that non-appointment of Company Secretary is an offense under Section 383A (1A) of the Companies (Amendment) Act, 1988, punishable with fines for each day of default. The judgment acknowledged that the petitioners were allowed to file e-form ACTIVE without appointing whole-time Company Secretaries provisionally. However, it emphasized Section 203(5) of the Companies Act, imposing penalties for non-compliance with provisions related to Key Managerial Personnel appointments. The judgment concluded by granting liberty to the respondents to take action against the petitioner-Companies for violating Section 203, clarifying that the interim orders did not determine the legality of Section 203 or Rule 8A.
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