[Opinion] ROC Cracks Down on Company | Directors | CS for Mishandling of Minute Records for 16 Years

Prof R Balakrishnan – [2024] 163 taxmann.com 467 (Article)

1. Background of this case

This is the classic case where the regulators have gone back in identifying the non-compliance almost 16 years back regarding the company named M/s Wind World (India) Limited having its registered office at Daman under the Register of Companies of Goa, Daman and Diu. While conducting the inspection and enquiry, the Registrar of Companies came across that the minutes of board meetings dated back to 29th November 2007 were not dated and did not mention the place of signing. Moreover, the minutes were also not bound.

The Registrar initiated the penal action for violating section 118(10) of the Companies Act 2013, read with Secretarial Standard -1 issued by the Institute of Company Secretaries of India. Looking at the fact that the Companies Act 2013 came into force with effect from 12th September 2013 and the Secretarial Standards were made mandatory for the first time in 2013 of the Companies Act; a question arises in the minds of the reader whether the penal action initiated by the regulator is justified. To answer this, we must first look into the Companies Act 1956 provisions.

In the erstwhile Companies Act of 1956, in section 193, it clearly stated that every company shall cause minutes of all proceedings of every general meeting and all proceedings of every meeting of its board of directors or every committee of the board, to be kept by making within 30 days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered and each page of every such book shall be initialled or signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed.

This provision is similar to the provisions of the Companies Act 2013. Secondly, though Secretarial Standards were made mandatory in the 2013 Companies Act, the secretarial Standards were issued by the Companies Secretaries of India right from the year 2000, and it was voluntary. and many companies have been adhering to the secretarial standards, which are again complimentary to the Companies Act 2013 and supplementing the provisions of the Companies Act. In view of the above, the penal action initiated by the Adjudication Officer is very much justifiable, and this case exhibits that the regulators could go back to any number of years to identify the default / non-compliance and initiate action.

In his particular case, the Adjudication Officer initiated penal action against the company, its directors, and the company secretary, penalizing them to the tune of ninety thousand rupees. Let us go through this case in order to understand the intricacies, the requirements of the law and the consequences of default on this matter.

2. Relevant provisions of the Companies Act 2013 pertaining to this case

Sub-section (10) of section 118 of the Companies Act 2013 provides that every company shall observe secretarial standards with respect to general and board meetings specified by the Institute of Company Secretaries of India, constituted under section 3 of the Company Secretaries Act 1980 (56 of 1980) and approved as such by the Central Government.

3. Penal provisions in case of default/non-compliance, if any

Sub-section (11) of section 118 of the Companies Act 2013 provides that if any default is made in complying with the provisions of this section 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.

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