Case Study | Penalty for Non- appointment of Company Secretary

 Non-Appointment of CS: MCA reduces Penalty from Rs. 35 Lakh to Rs. 9.50 Lakh 

 Introduction: The Ministry of Corporate Affairs (MCA) recently reduced a substantial penalty imposed on Fluiconnect India Private Limited and its directors, shedding light on the intricacies of compliance and penalties under the Companies Act, 2013. The appeal filed under section 454(5) unveils a story of non-appointment of a Company Secretary (CS) and the subsequent efforts to rectify the default. 

Detailed Analysis:

 1. Background and Penalty Imposition: The appeal arises from an adjudication order by the Registrar of Companies, Karnataka, penalizing Fluiconnect India for default in compliance with Section 203 read with 

Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The penalty amounted to ₹ 35 Lakh for the company and six directors.

2. Reasons for Penalty: The Registrar of Companies stated that the company failed to appoint a whole-time company secretary during specific periods, violating Section 203 of the Companies Act, 2013. The penalty was imposed after a suo-motu application by the company acknowledging the non-compliance.

3. Appellants’ Submissions: In response, Mr. Shripad G Bhat, Practicing Company Secretary, represented the appellants and highlighted the challenges faced in finding a suitable candidate during the defaulting period. The company sought an individual capable of handling multiple job descriptions, given the limited secretarial work in the private company.

4. Grounds for Penalty Reduction: The appeal emphasized that despite the default, the company and its directors made earnest efforts to comply. The Board of Directors appointed a Whole Time Company Secretary on 01st July 2022, rectifying the inadvertent contravention. Considering these facts, the appeal sought a reduction in the imposed penalties.

5. Revised Penalty and Compliance: The Regional Director, Dr. Raj Singh, found grounds for reducing the penalty. The final penalty for Fluiconnect India and five directors was set at Rs. 75,000 each, totaling Rs. 4,50,000. The appellants were directed to comply with the order and relevant sections of the Companies Act, 2013. Penalty for one of the director Mr. Michael Peter Wall work who not replied to notices is kept same at Rs. 5 Lakh.

 6. Outstanding Penalty – Mr. Michael Peter Wall work: The order highlighted that Mr. Michael Peter Wall work, one of the directors and officers in default, neither filed an appeal nor paid the penalty. The Registrar of Companies was directed to take necessary action against Mr. Wall work as per Section 454(8) of the Companies Act, 2013. 

7. Compliance and Conclusion: The revised penalty was duly paid by Fluiconnect India and the five directors on November 27, 2023. The order, issued on January 5, 2024, serves as a reminder of the significance of compliance and the responsiveness of the regulatory authorities in considering genuine efforts to rectify defaults.

F.No:9/26/ADJ/SEC.203/2013/KARNATAKA/RD(SER)/2022/6132 BEFORE THE REGIONAL DIRECTOR, SOUTH EAST REGION 

MINISTRY OF CORPORATE AFFAIRS HYDERABAD 

IN THE MATTER OF COMPANIES ACT, 2013

 IN THE MATTER OF FLUICONNECT INDIA PRIVATE LIMITED