Vertex Customer Management India Pvt. Ltd., In Re, National Company Law Tribunal, Judgment, Law, casemine.com

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Case Number

C.P. No. 16/02/2017 and CA. No

Attorney(S)

Mr. M.N. Khan, Company Secretary

Judges

Ina Malhotra, Judicial Member

Acts

SECTION 203 COMPANIES ACT 2013
u/s. 203(5) of the Companies Act, 2013
u/s. 621A of the Companies Act 1956
COMPANIES ACT 2013

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Smart Summary

Factual and Procedural Background

The petitioner filed an application under Section 621A of the Companies Act, 1956, concerning an offence under Section 203 of the Companies Act, 2013. The company had defaulted in appointing a whole-time Company Secretary, a key managerial personnel, despite having a paid-up share capital exceeding Rs. 5 crores, for the period from 3 April 2014 to 15 April 2016. The petition was routed through the office of the Registrar of Companies (RoC) along with their comments. The company has since rectified the default by appointing a whole-time Company Secretary.

Legal Issues Presented

Whether the offence of default in appointing a whole-time Company Secretary under Section 203 of the Companies Act, 2013, can be compounded after rectification of the default.
What quantum of fine is appropriate for compounding the offence under Section 203(5) of the Companies Act, 2013.

Arguments of the Parties

Petitioner's Arguments

The violation occurred without any malafide intentions.
The company has rectified the default by appointing a whole-time Company Secretary.
Prayed for compounding of the offence on these grounds.

Registrar of Companies' (RoC) Comments

Recommended imposition of the maximum fine on the company and each of the five defaulting officers.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court noted that the company had defaulted in appointing a whole-time Company Secretary as required by Section 203 of the Companies Act, 2013, because the paid-up capital exceeded Rs. 5 crores. The offence is punishable under Section 203(5), which prescribes fines for the company and defaulting officers. The RoC recommended maximum fines; however, the court found no legal impediment to compounding the offence since the default was rectified by appointing the required officer on 15 April 2016. Considering the facts and the rectification, the court deemed it sufficient to impose a fine of Rs. 2 lakhs each on the company and its defaulting director. The court conditioned compounding on payment of the fine within 10 days and ordered compliance reporting and communication to the RoC.

Holding and Implications

The petition is disposed of with the offence compounded upon payment of fines.

The court's decision results in the compounding of the offence of default under Section 203 of the Companies Act, 2013, following rectification by the company. A fine of Rs. 2 lakhs each is imposed on the company and the defaulting director. No new precedent was established; the ruling primarily resolves the matter between the parties and sets the terms for compounding the offence in this instance.

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Vertex Customer Management India Pvt. Ltd., In Re

The petitioner has filed the present application u/s. 621A of the Companies Act 1956 for the offence u/s. 203 of the Companies Act, 2013. The said petition has been routed through the office of the RoC along with their comments. The company had defaulted in appointing a whole time Company Secretary as a key managerial person of the company having exceeded the limit of the paid up share capital of the company for the period commencing from 3 April, 2014 to 15 April 2016 over the threshold of Rs. 5 crores.

2. As per requirement of Section 203 of the Companies Act, 2013:

“Every company belonging to such 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.

3. The period of default is stated to be for two years from 03.04.2014 to 14.04.2016. The paid up capital of the company was more than Rs. 99,721,340/-. Under such circumstances, having the paid up capital more than Rs. 5 crores, it was mandatory to appoint a whole time Company Secretary. It is submitted by the petitioners that the said violation had occurred without any malafide intentions and pray for compounding the offence. The company has now appointed a whole time Company Secretary and therefore put an end to their default.

4. The aforesaid offence is punishable u/s. 203(5) of the Companies Act, 2013 whereby the Company and every officer who is in default is punishable with a fine. The RoC has therefore recommended the imposition of the maximum fine on the Company and each of its five defaulting officers as under:—

Name of Defaulter Amount (in Rs.) approx * Vertex Customer Management India Pvt. Ltd. 5,00,000/- Mr. JS Balaji 7,91,000/-

5. Given the facts of the case, there is no legal impediment in compounding of this offence. Since the default was rectified on 15.04.2016 by appointing a full time Company Secretary, the petitioner/applicants' prayer can be granted. This Bench deems it sufficient to impose a fine of Rs. 2 lakhs each on the Company and its defaulting Director.

6. Subject to the remittance of the aforesaid fine within 10 days, the offence shall stand compounded. Copy of the order be sent to the office of the RoC. Compliance Report be placed on record.

7. Petition stands disposed off in terms of the above and be consigned to Record Room.