The Ministry of Corporate Affairs (MCA) has issued an order under Section 454 imposing a fine of Rs. 11 Lakhs for failure to appoint a company secretary, in contravention of Section 203 of the Companies Act of 2013.
Elanco India Private Limited is a registered company with Ministry of corporate affairs and Registrar of companies in India. From 20.09.2021 to 20.01.2021, a delay of 122 days, the company failed to employ a full-time company secretary, in violation of Section 203 of the 2013 Companies Act.
For every director and KMI, Section 203(5) of the Companies Act, 2013 imposes a penalty of Rs. 50,000 and Rs. 1,000 per day for a continuing offence. Section 203(4) of the Companies Act, 2013 mandates that “If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within six months from the date of such vacancy.” As a result, the entire Board is jointly responsible for the appointment of the Key Managerial Person.
In accordance with Sections 2(60) and 2(51), a Whole-Time Director is also considered a “Officer in Default” and Key Managerial Personnel, and as a result, the MD and Whole-Time Directors are subject to fines. The MCA imposed a penalty on the Company and its Officers in default for violating the provisions of Section 203 of the Companies Act 2013 for a delay of 122 days after taking into account the reasons made by both sides. The punishment is listed in the table below. “The infringement of the terms of Section 203 of the 2013 Companies Act is from 20 September until 20 January 2022, a delay of 122 days.
The aforementioned people were Officers in default during the period of violation, according to signature information on the MCA-21 portal, the order stated. Within 30 days of receiving this order, the Notice must pay the specified penalty through the “Ministry-of Corporate Affairs” portal and provide proof of payment for inspection.
Section 203 of Companies Act 2013 : Appointment of Key Managerial Personnel.
(1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—
(i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;
(ii) company secretary; and
(iii) Chief Financial Officer :
Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articlesof the company, as well as the managing director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless,—
(a) the articles of such a company provide otherwise; or
(b) the company does not carry multiple businesses:
Provided further that nothing contained in the first proviso shall apply to such class of companies engaged in multiple businesses and which has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government.
(2) Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.
(3) A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time:
Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from being a director of any company with the permission of the Board:
Provided further that whole-time key managerial personnel holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel:
Provided also that a company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the Directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the Directors then in India.
1[(4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.]
(5)4[3[ 2[If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.]]]
Exceptions/ Modification/ Adaptation
1. In case of government Company, after sub-section (4) of Section 203, the following sub-section shall be inserted, namely ;-
“(4A) The provisions of sub-sections (1), (2), (3) and (4) of this section shall not apply to a managing director or Chief Executive Officer or manager and in their absence, a whole-time director of the Government Company.” – Inserted by Notification dated 5th june, 2015.
Amendment
2. Substituted by the Companies (Amendment) Ordinance,2018 dated 02.11.2018
for sub-section (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 following sub-section shall be substituted, namely:
If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.
3. Substituted by the Companies (Amendment) Ordinance,2019 dated 12.01.2019 [Companies (Amendment) Ordinance 2018 is repealed on 12th January 2019]
4. Substituted by the Companies (Amendment) Act,2019 -: Effective From 02nd November 2018 [Companies (Amendment) Second Ordinance 2019 is repealed on 31st July 2019]
