Adjudication officer, Appointment & Power: Company Law (MCA Notification)

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Enforcement of Act and Rules on Stringent Basis through Adjudicating Officer.

After increasing penalties for every default to be made by the Company or officer, Ministry is coming up with the procedure for enforcing the Compliance of Law by prescribing and delegating powers to Adjudicating Officer to curb any default on very serious Note.

MCA comes with Its Companies (Adjudication of Penalties) Amendment Rules, 2019, Substituting Rule 3 of Companies (Adjudication of Penalties) Rules,2014.

• .       CG may appoint an adjudicating officer, not below the rank of Registrar for adjudicating penalty under the Act.
• .       If adjudicating officer is of the opinion that there is some default in the Company, he shall issue a show cause notice to the Company and to the Officer in Default, clearly indicating the nature of Non – Compliance and the default along with penal provision and the maximum penalty to be imposed.
• .       The Company and the Officer in default shall make a reply within period specified (within 15 to 30 days), it shall be filed in electronic mode. (in the reply they can make request for oral representation/physical appearance before the Authority).
• .       Adjudicating authority  may grant Extension to the Company and the Officer in default, if he is satisfied on the production of sufficient cause for not responding within stipulated time or the officer has reason to believe that the Company and the Officer in default has received Shorter Notice and did not have sufficient time to respond.
• .       Adjudicating officer may issue a notice within a period of 10 working days for Physical appearance through its authorised representative. (this notice shall contain date of Appearance).
• .       After hearing Officer may require the concerned person to submit his reply in writing on some other issues related to the Notice for the determination of Default.
• .       Adjudicating officer shall pass an order within :

a. In case no appearance or hearing is conducted- within 30 days of issue of Notice

b. In case of any extension or hearing is conducted- within 90 days of issue of Notice

c. In case of any delay for passing order, the Adjudicating officer shall record reason for such delay and order shall not be treated Invalid.

•  The officer shall pass the copy of order to the Company and to the Officer in Default and to the CG and a copy of order shall be uploaded on the website.
•  If any any penalty is imposed, it shall be paid through MCA Portal only.
• .       For serving the Notice/ documents Section 20 of Companies Act, 2013 shall be complied with and CG may use KYC for the address and email id.
• Submission  of Reply is mandatory after the creation of e-adjudication Platform.

*It shall be applicable on the date of publication in Official Gazette, therefore yet not notified but will update soon as it gets published in OZ.

Officer in default - Section 2(60) of the Companies Act 2013 provides,

"officer who is in default", for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:—

(i) whole-time director;

(ii) key managerial personnel;

(iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;

(iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;

(v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;

(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;

(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer.

Note - This notification is available on the website of MCA but it is yet to be notified in Official Gazette and will be enforceable only after its publication in Official Gazette, although procedure will remain same.

ABOUT THE AUTHOR 

Shefali Gupta: Economics Honours Graduate from Delhi University and Qualified Company Secretary, Currently working as Legal Analyst with SVR & Co. - Company Secretaries 

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