9911796707
TMI Blog2025 (2) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... to be subject to adjudication by the Registrar of Companies. Such discretion associates with it, responsibility of the adjudicating authority to consider any mitigating or alleviating circumstances which might have visited the Company for not adhering to the statutory provision. The Hon'ble Supreme Court in the matter of Chairman, SEBI [2006 (5) TMI 191 - SUPREME COURT] interpreted the words 'shall be liable' under the SEBI Act and the regulations framed thereunder and held the same as mandatory provision for imposition of monetary penalties for breaches or non-compliance with the provisions of the Act and the regulations - The Court clearly laid down that penalty is attracted as soon as the contravention of the statutory obligation contemplated by the Act and the regulations are established and intention of the parties committing such violation becomes wholly irrelevant. Once contravention is established, the penalty is to follow. The Court was of the view that the power to impose penalty would be severely curtailed if the presence of mens rea is to be considered. The same would set the stage for various market players to violate statutory regulations with impunity and subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany incorporated under the Companies Act, 1956 in the year 1981 and the petitioner nos. 2 to 4 are the Directors and office bearers of the petitioner no. 1. The Company is registered with the Calcutta Stock Exchange which is practically defunct for nearly a decade. The Company claims to be a very small one with only 270 shareholders of which more than 81% holds less than 100 shares and there has been no movement or trading in respect of the shares of the Company for the last twenty years. The Company has been suspended from the Kolkata Stock Exchange with effect from 21st March, 2023. 3. The requirement of having a whole time Company Secretary could not be strictly followed by the petitioners as no suitable candidate for appointment of Company Secretary could be found. The petitioners were able to appoint Company Secretary only on 2nd January, 2023 to comply the provision of Section 203 (1) (ii) of the Companies Act, 2013 and intimated the same to the Registrar of Companies in June, 2023. 4. In September 2022 the Registrar of Companies and the adjudicating officer under the Companies Act issued a notice to the petitioners intimating violation of Section 203 of the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their discretion while fixing up the quantum of penalty. As the Company is a very small one, imposing such huge amount of penalty is highly prejudicial. The respondent authorities ought to have pragmatically considered the genuine difficulties on the part of the petitioners in not being able to appoint a wholetime Company Secretary. 11. Prayer has been made to set aside the order passed by the adjudicatory authority and the order passed by the appellate authority affirming the order passed by the adjudicatory authority. 12. In support of the aforesaid submission the petitioners rely on the order delivered by a coordinate Bench of this Court on 3rd May, 2024 in WPO 349 of 2024 in the matter of Apex Traders and Exporters Ltd. & Anr. -vs- The Registrar of Companies, West Bengal, Ministry of Corporate Affairs & Anr. wherein, under similar circumstances, the Court was of the opinion that there was non-application of mind on the part of the authority while adjudicating the subject issue and while considering the imposition of penalty. In the absence of any real consideration worth the name of the mitigating circumstances of the Company and the small size of the Company, including its n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trar of Companies does not have any discretion to waive the penalty after the default has been noticed and found to be true. The reason for arriving at the quantum of penalty has also been mentioned in the adjudication order. 19. It has been denied that there has been violation of the principles of natural justice or that the impugned orders were passed mechanically. It has also been denied that there has been non-application of mind at the time of passing the impugned orders. There has neither been any illegality nor perversity in the orders as alleged. 20. As regards the order passed by the coordinate Bench in Apex Traders (supra) it has been submitted that the said order is an ex parte one and the stand of the respondents were not before the said Bench when the issue was decided. 21. In support of the submission that the Registrar of Companies does not have any discretion with regard to imposition of penalty, reliance has been placed on the judgment delivered by the Hon'ble Supreme Court in the matter of Chairman, SEBI -vs- Shriram Mutual Fund & Anr. reported in (2006) 5 SCC 361 wherein the Court was of the opinion that mens rea is not an essential ingredient for contraventio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature in its wisdom had not included mens rea or deliberate or wilful nature of default as a factor to be considered by the adjudicating officer in determining the quantum of liability to be imposed on the defaulter. The provisions of penalty for non-compliance with the mandate of the Act are with an object to have an effective deterrent to ensure better compliance of the statutory provisions. 28. The Court clearly laid down that penalty is attracted as soon as the contravention of the statutory obligation contemplated by the Act and the regulations are established and intention of the parties committing such violation becomes wholly irrelevant. Once contravention is established, the penalty is to follow. 29. The Court was of the view that the power to impose penalty would be severely curtailed if the presence of mens rea is to be considered. The same would set the stage for various market players to violate statutory regulations with impunity and subsequently claim ignorance of law or lack of mens rea to escape imposition of penalty. Imputing mens rea against the plain language of the statute would frustrate the entire purpose and the object of the Act to secure strict complian ..... 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