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2021 Supreme(Online)(KER) 45222
HIGH COURT OF KERALA
N. NAGARESH, J
KAYALTHEERAM BUILDERS AND REALTORS INDIA PRIVATE LTD. – Appellant
Versus
UNION OF INDIA – Respondent
WP(C)/7510/2020
SRI.DEEPU THANKAN, SMT.UMMUL FIDA, SMT.LAKSHMI SREEDHAR, SRI.P.VIJAYAKUMAR ASGI
The judgment reaffirms the binding nature of statutory compliance for companies and the enforcement powers of regulatory authorities under the Companies Act.
Headnote:
Compliance - Companies Act - ['Section 203', 'Section 469'] - The court examined the legality of directives requiring companies with a certain paid-up capital to appoint a whole-time company secretary under the Companies Act, emphasizing compliance requirements and potential penalties for non-adherence.
Fact of the Case:
Petitioners, companies incorporated in Kerala, sought permission to file e-form ACTIVE without appointing a whole-time company secretary as mandated for companies with paid-up capital exceeding ₹5 Crores, highlighting their adherence to regulations with part-time secretaries.
Issues: The main issue was whether the insistence on appointing a whole-time company secretary for companies over a certain capital threshold was arbitrary and if exemptions could be granted.
Ratio Decidendi: The court maintained that compliance with statutory provisions is non-negotiable and that the government holds authority to enforce penalties for failures in appointing required personnel under the Companies Act.
Final Decision: Writ petitions disposed, permitting respondents to proceed against petitioners for violations.
J U D G M E N T
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Dated this the 19th day of February, 2021 [WP(C) Nos.7510, 7995 & 8334 of 2020]
The petitioners, who are Companies incorporated with the Registrar of Companies, Kerala, have filed these writ petitions seeking to direct the respondents to permit the petitioners to file e-form ACTIVE, INC-22A without insisting on appointment of a whole-time Company Secretary. The petitioners have also sought to declare that the restriction imposed in filing e-form ACTIVE, INC-22A with regard to non- compliance of Section 203 of a whole-time Company Secretary or Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is arbitrary and illegal.
2. The petitioners submit that the 1st respondent-
Union of India, in exercise of its powers under Section 469 of the Companies Act , 2013 amended the Companies (Incorporation) Rules, 2014 as per Notification dated 21.02.2019. As per the new added Rule 25A, every Company incorporated on or before 31.12.2017 shall file the particulars of the Company and its registered office in e-form ACTIVE (Active Company Tagging Identities and Verification) on or before 25.04.2019. It is the contention of the petitioners that the website of the Ministry of Corporate Affairs is not accepting e-form ACTIVE submitted by the petitioners for the reason that the paid up capital is more than ₹5 Crores and still the petitioners-Companies have not appointed whole-time Company Secretary.
3. It is the case of the petitioners that as per Section
203(5), if any Company makes any default in complying with the provisions, such Company shall be liable for a penalty of ₹5 lakhs and Directors and Key Managerial Personnel are personally liable for a penalty of ₹50,000/- and if the default is a continuing one, with a further penalty of ₹1,000/- for each day.
4. The petitioners contend that they have part-time Company Secretaries and Auditors to properly look after the affairs of their Companies and for the last so many years, they have been functioning well within the provisions of the Act without giving any room for initiating any penalty proceedings. On these premises, the petitioners contend that they should not be forced to appoint a whole-time Company Secretary and should be permitted to file e-form ACTIVE, INC-22A without insisting on the appointment of a whole-time Company Secretary.
5. When these writ petitions came up for admission, interim orders were passed by this Court permitting the petitioners to file e-form ACTIVE, INC-22A, Form PAS-03 (change in paid up capital) and Form DIR-12 (change in Director except cessation) without insisting on appointment of a whole-time Company Secretary provisionally, pending further orders in these writ petitions.
6. When these writ petitions came up for hearing today, the Central Government Counsel representing the respondents argued that as per the existing rules, the petitioners are bound to appoint whole-time Company Secretaries, as their paid up capital is more than ₹5 Crores. The petitioners cannot be granted any exemption from the Rules.
7. The Central Government Counsel further argued that non-appointment of Company Secretary by petitioners- Companies is an offence under Section 383A (1A) vide Companies (Amendment) Act, 1988 with effect from 01.12.1988. If a Company fails to comply with the requirement regarding the appointment of Company Secretary, the Company and every officer of the Company who is in default shall be punishable with fine which may extend to ₹500/- per every day during which the default continues.
8. Heard learned counsel for the petitioners and learned Central Government Counsel appearing for the respondents.
9. As things stand now, the petitioners have been permitted to file e-form ACTIVE, INC-22A without insisting the appointment of a whole-time Company Secretary, on a provisional basis. Section 203 (5) of the Companies Act provides that if any Company makes any default in complying with the provisions of
