[Opinion] ROC Penalizes Co. and Its Directors for Failing to Regularise the Appointment of Additional Director at an AGM
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- Last Updated on 28 August, 2024
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Prof R Balakrishnan – [2024] 165 taxmann.com 709 (Article)
1. Background of this case
This case is pertaining to an order issued by the Registrar of Companies of Kanpur against the company M/s JKJM Infrastructure Private Limited penalizing the company, its present and past directors of the company for violating the provisions of section 161 of the Companies Act 2013. The Registrar of Companies detected the violation committed by the company and its directors through an inspection conducted under the provisions of section 206(5) of the Companies Act 2013 sometime in the first week of April 2024. During the inspection the Registrar of Companies observed that the company appointed an addition director on 4th April 2017 and his appointment was not regularized at the ensuing annual general meeting and he was continuing as an additional director beyond the annual general meeting till date, when inspection took place i.e. around the first week of April 2024. The matter was taken up with the company by issuing a show cause notice for which the company neither responded nor produced any documents with the result the Registrar of Companies/Adjudication Officer proceeded on this matter and issued an ex-parte adjudication order highlighting the irregularity of the appointment of the additional director and the violation committed by the company and its present and past directors. The company and directors were penalized to a tune of Rs. 6 lakh for the violation. Let us go through this case in order to understand the intricacies, requirement of the law and the consequences of default on this matter.
2. Relevant Provision relating to this case under the Companies Act 2013.
The relevant provisions pertaining to this case is that of section 161 and 172 of the Companies Act 2013, read with the relevant rules framed thereunder and the extracts of the relevant provisions are as given below.
| Companies Act 2013 Chapter XI – Appointment and Qualification of Directors Section 161. Appointment of additional director, alternate director and nominee director. |
|
| Section | Provision |
| 161 (1) | The articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier. |
| Companies Act 2013 Chapter XI – Appointment and Qualification of Directors Section 172. Punishment |
|
| Penal section for non-compliance/default if any | |
| 172 | If a company is in default in complying with any of the provisions of this Chapter (chapter XI) and for which no specific 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 rupees 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. |
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