[Opinion] Company and Its Directors Penalized for Delayed Intimation of Resignation of Company’s Director

Prof R Balakrishnan – [2023] 154 taxmann.com 92 (Article)

1. Background of the case

This is a case of appeal decided by the Regional Director of South East Region, Hyderabad. This case is pertaining to an appeal filed under section 454(5) of the Companies Act 2013, against the adjudication order passed by the Registrar of Companies of Vijayawada, Andhra Pradesh. The adjudication order was passed by the Registrar of Companies for default in compliance with the requirements of section 168 of the Companies Act 2013. The default committed by the company was that the company did not intimate the resignation of its director, from the directorship of the company within the stipulated time – instead, they intimated the same after a delayed period of fourteen days. As a result, penal proceedings were initiated against the company and the company and its directors were penalized for an amount of Rs.2.28 lakh.

The Regional Director, upon hearing the submissions made by the company and its directors reduced the penalty amount imposed by the Registrar of Companies from six lakh rupees to sixty thousand rupees. Let us go through this interesting case in threadbare in order to understand the rationale behind providing relief to the company for the default committed by the company and its directors along with the framework of the Act and the related provisions.

2. Framework of the Companies Act on the resignation of a director

A director may resign from his office of the directorship by giving a notice in writing to the company and the board of the company, shall on receipt of such notice take note of the same and the company shall intimate the resignation of the director to the Registrar of Companies via MCA online portal by filing the e-form DIR-12. The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later. Form DIR-12 is the form in which the intimation is required to be given to the Registrar of Companies in respect of particulars of the appointment of directors and the key managerial personnel and the e changes among them. DIR 12 form is required to be filed pursuant to sections 7(1)(c), 168 & 170(2) of the Companies Act 2013 read with rule 17 of the Companies (Incorporation) Rules 2014 and Rules 8, 15 & 18 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

The director may also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar of Companies within thirty days of resignation in the prescribed e-form No. DIR-11 which is a notice of resignation of a director to the Registrar of Companies which could be filed pursuant to the proviso to sections 168 (1) of the Companies Act 2013 read with rule 16 of the Companies (Appointment and Qualification of Directors) Rules 2014. It may be noted that the director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure as a director in the company.

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