[Opinion] RD Grants Relief for Delayed Filing of Board Resolutions in Form MGT-14 Due to COVID-19 Pandemic

Prof R Balakrishnan – [2024] 160 taxmann.com 498 (Article)

1. Background of the case

This is a case relating to the non-filing of the specified board resolutions passed by M/s Stanley Lifestyles Limited to the Registrar of Companies in the specified form MGT-14 requiring filing as per the provisions of section 117(1) of the Companies Act 2013. The company had passed three resolutions vide its board meetings dated 20th May 2019, 16th December 2019 and 27th September 2021 and these resolutions ought to have been filed in e-form MGT-14 as per the provisions of section 117(1) of the Companies Act 2013 within 30 days of passing of the resolutions. All these resolutions had been filed by the company only on 13th October 2023 with a delayed period of 1577 days, 1367 days and 716 days respectively. The company filed suo-moto applications for these delayed compliance and the Registrar of Companies, Bangalore after following the due procedure of law, passed an adjudication order levying penalty upon the company, its directors and its KMPs to the tune of Rs. 10.74 lakh.

Against the order of the Registrar of Companies of Bangalore, the company filed an appeal challenging the penalty of RS. 10.74 lakh levied, before the Regional Director (South Eastern Region) Ministry of Corporate Affairs, Hyderabad. Upon hearing the appeal, the Regional Director slashed the penalty amount from Rs.10.75 lakh to Rs.2.15 lakh based on his observations and considerations that the default committed by the company was due to over sightedness and the disruptions caused by the Covid-19 pandemic, the company’s business was affected and the main focus of the company was to maintain its existing turnover and profits of the company coupled with the fact that the company’s employees were working from home which had its limitations. Considering the above fact and the request made by the to consider these facts and grant relief from the maximum penalty imposed upon the company, its directors, chief financial officer and the company secretary would be burdensome and harsh, the Regional Director granted the appropriate relief. Let us go through the case in detail to understand the intricacies, related provisions, the stand taken by the company and the consideration by the Regional Director while deciding the appeal.

2. Details of the company

M/s Stanley Lifestyles Limited was incorporated on 11th October 2007 under the provisions of the Companies Act 1956 and the company falls under the jurisdiction of the Registrar of Companies, Karnataka and the office of the Registrar is situated at Bangalore. This company has its registered office situated at SY No.16/2 and 16/3 Part, Hosur Road, Veerasandra village, Attibele Hobli, Anekal Taluk, Bangalore in the state of Karnataka. The company, as per the details shown at the MCA portal has six directors on its board and one of them is a managing director and one of them is a whole-time director. The company also have a chief financial officer and a company secretary in whole time employment. The company manufactures home furniture products such as sofa sets, beds, coffee and dining tables, chairs and other products.

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