[Opinion] ROC Penalizes Club & Managing Committee Members Heavily for Maintaining Incomplete Register of Members

Prof R Balakrishnan – [2024] 158 taxmann.com 505 (Article)

1. Brief of this case

Ahmed Nagar Club which was established prior to independence was registered as a section 8 company after the Indian Companies Act 1956 came into force under the provisions of the Act. The club is situated in Ahmed Nagar and falls under the jurisdiction of Registrar of Companies, Pune in the state of Maharashtra. The Registrar of Companies on his scrutiny observed that the club had not been maintaining the register of members with complete details as envisaged by the provisions of the Companies Act 2013. During the inspection, the Registrar had pointed out the non-compliance/default for which the club replied that club was registered in the year 1947 and had several members who were admitted 20 to 30 years ago and earlier, the register of members were maintained in physical format but after the digitization for the purpose of ease of operation record was transferred to the computer system in which MGT-1 and the club did not had all the all the details of few members with the club and club was taking steps to obtain the details in order to update the register of members.

However the club admitted the default/non-compliance of maintaining the register of members with incomplete details. The Registrar of Companies, after following the adjudication procedure levied penalty upon the club and its managing committee members to a tune of Rs. 8 lakhs. Let us go through this case and understand the issues involved with reference to the applicable laws read with the provisions and the club and the consequences of non-compliance resulting into financial liability.

2. Maintenance of statutory registers by a company

Every company (including club) incorporated under the Companies Act 2013, is required to keep and maintain certain specified statutory registers pursuant to section 88 of the Companies Act 2013, in such form and in such manner as prescribed under rule 3 and 4 of the Companies (Management and Administration) Rules 2014. One of the specified register under the provisions of the Companies Act 2013 is that of Register of Members which is required, separately for each class of equity and preference shares in the specified form MGT-1.

3. Place of maintenance of the statutory registers

According to sub-rule (2) of rule 5 of the Companies (Management and Administration) Rules 2014, the registers are required to be maintained at the registered office of the company.

However, by passing a special resolution, as per proviso to section 128(1) of the Companies Act 2013, the company may keep the books of accounts at any other place within the city, town or village in which the registered office is situated or any other place in India in which more than one-tenth of the total members entered in the register of members reside. Hence, for maintaining the books of accounts at any place other than registered office, approval of members is required and the company is also required to intimate with the Registrar of Companies giving the full address of that other place where the books of accounts are maintained within seven days of the resolution passed by the members.

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