[Opinion] ROC imposes penalty on Company, Directors & CS for non-compliance of SS-1

[2022] 145 taxmann.com 428 (Article)

1. Secretarial Standard

As per the explanation to sub-section(1) of section 205 of the Companies Act 2013, Secretarial Standards means the “Secretarial Standards” as issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved by the Central Government. The secretarial standards provide clarity on the respective subjects and it does not mean that the secretarial standards are alternative to the original laws enacted by the parliament. One could conclude by saying that wherever the law is not clear it requires an explicit spirit of the law, the secretarial standard provides clarity on the respective subjects to the user. As per the provisions of the Companies Act 2013, adherence by a company to the Secretarial Standard is mandatory.

2. Relevant provisions under the Companies Act 2013

Sub-section (10) of section 118 of the Companies Act 2013 provides that every company shall observe Secretarial Standards with respect of general and board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act 1980 and approved as such by the Central Government.

3. Penal provision for any default/violation under the Companies Act 2013

Sub-section (11) section 118 of the Companies Act 2013 provides inter alia that if any default is made in complying with the provisions of section 118 in respect of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

4. Consequences of default/violation – action from the Regulator

To understand the consequences of any default while in complying with the Secretarial Standard -1 relating to the meetings of the board of directors mandated by the Companies Act 2013, let us go through the decided case law by the Registrar of Companies, NCT of Delhi & Haryana on this matter on 19th January 2022.

5. The relevant case law on this matter

We shall go through the adjudication order by the Registrar of Companies, NCT of Delhi & Haryana on 19th January 2022 in the matter of M/s Polaris India Private Limited, Faridabad, Haryana – the Adjudication order bearing no. No. ROC /D/ADJ Order /118(10)/ Polaris/ 328 to 333 – order of penalties under section 454(3) of the Companies Act 2013 read with Rule 3 of Companies (Adjudication of Penalties) Rules 2014 in the matter of non-compliance of the provisions of sub-section (10) of section 118 of the Companies Act 2013

6. Details of the company

M/s. M/s Polaris India Private Limited is a subsidiary of a Foreign Company, incorporated under the provisions of section 7 of the Companies Act 2013 on 18th February 2011 under the provisions of the Companies Act 1956 having its registered office at Unit No. 6-10. Ground Floor, SSR Corporate Park, 13/6, NH-2, Delhi-Mathura Road, Sector 27B, Badkhal, Faridabad in the state of Haryana and the company falls under the jurisdiction of the Registrar of Companies of NCT of Delhi & Haryana and the Registrar of Company is situated at New Delhi. The company currently have four directors on its board assisted by a company secretary in whole time employment with the company The Company is in the manufacture of machinery and equipment business.

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