[Opinion] Consequences for non-appointment of women director under the Companies Act

[2023] 147 taxmann.com 344 (Article)

1. Appointment of woman director

As per the provisions of the Companies Act 2013, appointment of a woman director is mandatory in a listed company, and in other unlisted public companies whose share capital is Rs.100 crore or more or turnover of Rs.300 crore or more in terms of provisions of section 149 of the Companies Act 2013.

The Private Limited companies are out of the purview of the above requirement barring those Private Limited companies, which are subsidiary of a public limited company under section 2(71) of the Companies Act 2013, who exceeds the above-mentioned limits shall appoint of woman director would be mandatory.

2. The relevant provision in respect of the appointment of the women director in a company as per the Companies Act 2013

The following are the relevant provisions of the Companies Act 2013 in this respect.

3. Penalty provisions for violation

Non-compliance with section 149 of the Companies Act 2013 read with Rule 3 of Companies (Appointment and Qualification of Directors) Rules 2014 would give rise to liability under section 172 of the Companies Act 2013 which read as under:-

3.1 Section 172 of the Companies Act 2013- If a company is in default in complying with any of the provisions of this chapter (i.e. Chapter XI) and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand, and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default.

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

To understand the consequences relating to default in the appointment of a woman director pursuant to the provisions of section 149(1) of the Companies Act 2013, let us go through one of the decided case law on this matter decided on 21st October 2022 – by the Registrar of Companies NCT of Delhi & Haryana penalising the company, its company secretary, chief financial officer, manager and two of the directors to the tune of Rs.7.50 lakhs.

5. The relevant case law on this matter

We shall go through a case law relating to an adjudication order passed by the Registrar of Companies NCT of Delhi & Haryana, who was the Adjudicating Officer in this case vide order no. ROC/D/Adj/2022/Section 149(1) / 6278 to 6281 dated 21st October 2022 order for adjudication of penalty for violation of section 149(1) of the Companies Act 2013, in the matter of Terrestrial Foods Limited.

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