[Opinion] Corporate Accountability | RoC Takes Action Against Co. Executives for Incomplete POSH Act Disclosures

Prof R Balakrishnan – [2023] 155 taxmann.com 459 (Article)

1. Background of the case

The Registrar of Companies of Bangalore recently passed an adjudication order penalizing the company, its managing director, chief financial officer and company secretary to the tune of Rs. 9 lakh for not including the mandatorily required statement on the constitution of the internal complaints committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal Act 2013 in the company’s board report for the year 2019-20 and 2020-21 (two years). The above is a violation of the provisions of section 134(3)(q) of the Companies Act 2013. Let us try to understand the details of this case, its intricacies, the requirement of mandated disclosure in board reports and finally the rationale behind the penalties levied by the Registrar of Companies.

2. Protection of Women from Sexual Harassment at Workplace Act 2013 (POSH Act 2013)

The Protection of Women from Sexual Harassment at Workplace Act, 2013 (POSH Act 2013) is a landmark legislation in our country superseding the Vishakha Guidelines that existed earlier. The POSH Act seeks to protect women from sexual harassment. This law has enabled women to stand up for their rights and assert their autonomy in the workplace. Through this POSH Act, the Government has sought to provide women with a safe and secure working environment and has put in place mechanisms to prevent and redress complaints of sexual harassment.

Disclosure relating to the Protection of Women from Sexual Harassment at Workplace Act 2013 (POSH Act 2013) in the board report 2. Sub-section (3)(q) of section 134 of the Companies Act 2013, specifies that there shall be attached to statements laid before a company in a general meeting, a report by its board of directors, which shall include such other matters as may be prescribed. In this connection, one of the prescribed items on which the disclosure is required to be made in the board report is that of “Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013”

As per Rules 8 and 8A of the Companies (Accounts), Rules 2014 other than one person Company or small company were mandated to disclose a statement that the company had complied with the provisions relating to the constitution of Internal Complaint under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 which was made effective from 31st July 2018.

3. Required disclosure pursuant to the POSH Act in the board report

The company is required to state that the company has in place a policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. The company has to further disclose that an Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment and all employees (permanent, contractual, temporary, trainees) are covered under this policy.

The report is also required to make disclosure/report the number of complaints filed, if any and their disposal under the POSH Act apart from intimating and reporting the matter to the District Officer as per the provisions of the POSH Act. If there have been no complaints, then the report needs to disclose that during the year under review, neither any complaints of sexual harassment were received by it from the Internal Compliance Committee, nor were there any complaints relating thereto which required any disposal thereof. In case, the company does not have any women employees, yet, under this caption, the company needs to report that the company does not have any woman employees and therefore the POST Act is not applicable to the company as on this date.

3.1 Specific Requirements for Listed Companies

All listed company companies are required to provide the details in the Corporate Governance report and it is a mandatory requirement as per Schedule V(C) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 under item 10(l). Additionally, the top 1000 listed companies are required to report the number of cases filed by the employees during the year and the number of cases pending at the end of the financial year in the Business Responsibility and Sustainability Report prescribed under Regulation 34 of LODR. Further to this, data of the previous financial year is also required to be reported in the same format. This forms part of Principle-5 of the Business Responsibility and Sustainability Report “Business should respect and promote human rights”. It may be noted that the stock exchange (s) rely on the data provided by the listed companies in their annual report.

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