[Opinion] RD Sets Aside RoC’s Order w.r.t Non-appointment of CS as Co. had Incurred Losses & Itself Got Delisted

Prof R Balakrishnan – [2023] 153 taxmann.com 318 (Article)

1. Background of the case

This is a case of appeal decided by the Regional Director of South Eastern 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 Andhra Pradesh, Vijayawada.

The adjudication order was passed by the Registrar of Companies for default in compliance with the requirements of section 203 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. The default committed by the company was that the company failed to appoint a whole-time company secretary despite the company’s paid-up capital exceeding the prescribed limits as stated in the provisions of section 203(1) of the Companies Act 2013. As a result, penal proceedings were initiated against the company and the company and its directors were penalized for an amount of Rs.6.50 lac.

The Regional Director, upon hearing the submissions set aside the order of the Registrar of Companies and returned the matter back to the Registrar with a direction that due consideration be given to all aspects before passing an order of penalty and advising him to take suitable action. Let us go through this interesting case in threadbare in order to understand the rationale behind setting aside the order of the Registrar of Companies.

2. Details of the Company

M/s Sibar Media and Entertainment Limited is a listed company subsequently delisted and was incorporated on 12th March 1999 under the provisions of the Companies Act 1956, having its registered office at VMC Sibar Disnee Land, Ajit Singh Nagar, Vihayawada, Srikakulam in the state of Andhra Pradesh. The company falls under the jurisdiction of the Registrar of Companies of Andhra Pradesh and the office of the Registrar of Companies is situated at Vijayawada. The company is having currently three directors on board. Sibar Media and Entertainment Sibar Media & Entertainment Ltd is a media and entertainment company engaged primarily in broadcasting and content development, production and delivery having various channels that serve the widest array of content choices

3. Default committed by the company

The Registrar of Companies, Vijayawada, Andhra Pradesh, stated in his order that the company had failed to appoint a whole-time company secretary since the applicable provisions of the Companies Act 2013 came into force till the date of passing the adjudication order, despite the company’s paid-up capital exceeded the prescribed limits as stated in the provisions of section 203(1) of the Companies Act 2013. Due to the above default/non-compliance, the Registrar of Companies passed an adjudication order after following the due process of law. Accordingly, the Registrar of Companies passed the order as stated below.

4. The order passed by the Registrar of Companies

The Registrar of Companies/Adjudicating Officer of Vijayawada, Andhra Pradesh passed an adjudication order dated 18th August 2022 under section 454 of the Companies Act 2013, for default in compliance with the requirements of section 203 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, by M/s Sibar Media and Entertainment Limited for the non-appointment of company secretary.

Click Here To Read The Full Article