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2021 (3) TMI 308 - HC - Companies LawSeeking to direct the respondents to permit the petitioners to file e-form ACTIVE, INC-22A without insisting on appointment of a whole-time Company Secretary - seeking to declare 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 is arbitrary and illegal - 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. Petition disposed off.
Issues:
Petitioners seeking permission to file e-form ACTIVE, INC-22A without appointing a whole-time Company Secretary; Challenge on the restriction imposed on filing e-form ACTIVE; Non-compliance with Section 203 of the Companies Act; Penalty provisions for non-compliance; Central Government's argument on the mandatory appointment of Company Secretaries for Companies with paid-up capital exceeding &8377; 5 Crores; Legal consequences of non-appointment of Company Secretary; Adherence to Companies Act provisions; Disposal of writ petitions with liberty for the respondents to take action against petitioner-Companies. Analysis: The petitioners, Companies incorporated in Kerala, filed writ petitions seeking permission to file e-form ACTIVE, INC-22A without mandating the appointment of a whole-time Company Secretary, challenging the restriction imposed. They argued that the Ministry of Corporate Affairs rejected their e-form ACTIVE submissions due to paid-up capital exceeding &8377; 5 Crores without a whole-time Company Secretary, deeming it arbitrary and illegal. The petitioners highlighted their compliance with the Act using part-time Company Secretaries and Auditors, avoiding penalty proceedings historically. The Central Government Counsel contended that the petitioners must appoint whole-time Company Secretaries as per existing rules, emphasizing the mandatory nature for Companies with paid-up capital surpassing &8377; 5 Crores. Failure to appoint a Company Secretary constitutes an offense under Section 383A (1A) of the Companies Act, with potential fines for non-compliance. The Court acknowledged the provisional permission granted to file e-form ACTIVE but noted the petitioners' non-adherence to Section 203 of the Companies Act, empowering the respondents to take legal action against them. The judgment emphasized the consequences of non-compliance with Section 203, highlighting penalties for Companies and Key Managerial Personnel. Despite the interim relief, the Court disposed of the writ petitions, allowing the respondents to proceed against the petitioner-Companies for violating Section 203. It clarified that the interim orders did not determine the legality of Section 203 or Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, leaving room for further legal action based on compliance issues.
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