2023 (8) TMI 999 - SCH - Companies Law

Validity of amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 vide notification dated 03.01.2020 - guidelines for enforcement of corporate governance and formation of a High Power Committee to look into lapses leading to closure of more than 6 lakh companies - HELD THAT - At this stage, the petitioner - Suman Kumar, who appears in person and has been heard, raises a grievance regarding non-issue/non-compliance of E-FORM INC-22A (ACTIVE) on mismatch etc. - no comment made in this regard. The petitioner Suman Kumar, if advised, may make a representation or file appropriate proceedings, which proceedings, if filed, will be decided in accordance with law. Petition dismissed.

Summary

Issues involved: Challenge to amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, guidelines for enforcement of corporate governance, formation of a High Power Committee to look into lapses leading to closure of more than 6 lakh companies, non-issue/non-compliance of E-FORM INC-22A (ACTIVE).

Challenge to Amended Rule 8A:
The amended Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, requiring every private company with a paid-up share capital of Rs.10 crores or more to have a whole-time company secretary, was challenged. The Court noted that the increase in the threshold from Rs.5 crores to Rs.10 crores was to nullify the effect of inflation and enhance ease of doing business. Referring to legal precedents, the Court emphasized that matters of economic policy should be left to expert bodies and unless the increase is shown to be arbitrary, capricious, or lacking nexus with the objective, it cannot be held unconstitutional under Article 14 of the Constitution of India.

Enforcement of Corporate Governance and High Power Committee:
The prayers regarding enforcement of corporate governance guidelines and the formation of a High Power Committee to investigate lapses leading to closure of numerous companies were considered by the Court as far-fetched and not warranting detailed consideration. The counter-affidavit by the Union of India highlighted steps taken to de-register paper companies and shell companies involved in wrongful activities. The Companies Act, 2013, provisions for dealing with fraud cases, establishment of the Serious Fraud Investigation Office (SFIO), and stringent penalty provisions were cited. The Court held that relief cannot be granted to defaulting companies as approaching the Court with unclean hands due to non-compliance with the law is not permissible.

Non-Issue/Non-Compliance of E-FORM INC-22A (ACTIVE):
The petitioner, Suman Kumar, raised concerns regarding non-issue/non-compliance of E-FORM INC-22A (ACTIVE) due to mismatch, but the Court made no specific comment on this matter. Suman Kumar was advised to make a representation or file appropriate proceedings, which would be decided in accordance with the law. The writ petition was ultimately dismissed, and pending applications were disposed of accordingly.