RoC Imposed Penalty on Listed Company for Failure to Appoint Women Director

In the case of 

M/s S. S. Forgings and Engineering Limited

M/s S S Forgings and Engineering Limited (“The Company”) is having a registered office in the state of Maharashtra. The Company is listed on the Bombay Stock Exchange. As per Section 149 read with Rule 3(i) of the Companies (Appointment and Qualification of Directors) Rules, 2014, the Company is required to appoint a woman director. However, the company failed to appoint any women director in the company.

As per Rule 3(i), the Women director is to be appointed within 6 months for newly incorporated companies. Further, any intermittent vacancy shall be filled up by the board at the earliest but no later than the immediate next Board meeting or three months from the date of such vacancy, whichever is later. However, in the given case, the company does not fall under any of these categories. Therefore, through a harmonious reading, a period of 3 months was granted to the company from the beginning of the Financial Year.

Accordingly, a penalty is imposed on the company of INR 1.85 Lacs and INR 1 Lac on the Managing Director for non-compliance with Section 149 of the Companies Act, 2013.

Article:

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1. Brief Facts of the case:

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• M/s S. S. Forgings and Engineering Limited (“The Company”) has a registered office in the state of Maharashtra.

• As per the Financial statements of the company, the following are particulars:
  • Paid Up share Capital: INR 7.80 Crores
  • Turnover: INR 5.96 Lakhs

• The Company is a listed Company on the Bombay Stock Exchange. 

• Being a Listed Company, the company is mandatorily required to appoint a Woman Director as per Rule 3(i) of the Companies (Appointment and Qualification of Directors) Rules, 2014.

• However, the company failed to appoint any women directors. Accordingly, a Show Cause notice was issued to the company, which remained unanswered.

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Read Also: RoC Imposed Huge Penalties for Failure to Furnish Copy of Resolution with the RoC in form MGT-14

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2. Relevant Legal Extract

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Relevant extracts of Company law are reiterated below for ready reference:

• Provisions related to the appointment of women directors in the company are given under Section 149 of the Companies Act read with Rule 3 of the Companies (Appointment and qualification of Directors) Rules, 2014.

• Section 149:

“(1) Every company shall have a Board of Directors consisting of individual as directors and shall have-

(a) A minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and

(b) A maximum of fifteen directors:

Provided that a company may appoint more than fifteen directors after passing a special resolution:

Provided further that such class or classes of companies as may be prescribed shall have at least one woman director.

• Rule 3 of the Companies (Appointment and qualification of Directors) Rules, 2014:

“The following class of companies shall appoint at least one-woman director-

(i) Every Listed Company;

(ii) Every other public company having-

(a) Paid-up share capital of one hundred crore rupees or more; or

(b) Turnover of three hundred crore rupees or more:

Provided that a company, which has been incorporated under the Act and is covered under the provision of the second proviso to sub-section (1) of section 149, shall comply with such provisions within six months from the date of its incorporation:

Provided further that any intermittent vacancy of a women director shall be filled-up by

the Board at the earliest but no later than the next Board meeting or three months

from the date of such vacancy, whichever is later.

Explanation- For this rule, it is hereby clarified that the paid-up share

capital or turnover, as the case may be, as on the last date of the latest audited $financial

statements shall be taken into account.”

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3. Analysis and Findings by the Hon’ble RoC

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Hon’ble RoC made the following findings:

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• The Company is a listed company on the Bombay Stock Exchange. Being a listed Company, it is required to appoint a woman director as per Rule 3(i) of Companies (Appointment and Qualification of Directors) Rules, 2014;

• As per the MCA Database, the company has not appointed even a single Woman Director to date. 

• Now, the issue for determination is whether the period of default shall begin from 1st April 2022 or the Company may be provided with a certain time frame to find a suitable candidate.

• As per Rule 3, a newly incorporated company is required to appoint a woman director within 6 months. Further, any intermittent vacancy shall be filled up by the board at the earliest but no later than the immediate next Board meeting or three months from the date of such vacancy, whichever is later. 

• In the given case, the matter does not fall under either of these categories. Therefore, through harmonious reading, a period of 3 months may be provided to the company from the beginning of the Financial Year to find a suitable candidate and comply with the provisions of the law. 

• Hence, the period of default in the present case is being considered from 1st July of the financial year of default.

4. Order

The Hon’ble RoC held that:

• The penalty shall be imposed on the company for non-compliance with the provisions of Section 149 of the Companies Act.

• Accordingly, the following penalty is imposed on the Company:

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Conclusion:

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Considering the stringent actions being taken by the RoC and the huge penalties being imposed on the company, it is mandatory for the companies to comply with provisions without any failure. RoC is imposing penalties on multiple companies on a regular basis for even a minor default.