MCA imposes penalties for non compliance with the Secretarial Standards

Yet another time, the Ministry of Corporate Affairs has issued an order dated 20th July 2023 imposing penalties for violations of Section 118 of the Companies Act, 2013. This order concerns Darvi Life Styles International Limited (CIN: U18109DL2008PLC176918) registered under ROC- Delhi and its non-compliance with Secretarial Standards in relation to board meetings during the financial years 2016-17 and 2017-18. A notice on similar grounds was issued in March 2023 to Kudos Finance and Investments Private Limited (U65910PN2009PTC148795) registered under ROC- Pune for non- compliance of secretarial standard with respect to not numbering Board Meeting and the pages in the minute book of the company and Minutes book were not signed by the Chairman, further, the minute book of the Company was not paginated at all. Show cause notice was issued to the companies, and in response, they admitted the error. As a result, the penalty has been imposed on the companies and their officers in default under Section 118(11) of the Companies Act, 2013. Relevant Provisions Section 118 (Minutes of the proceedings of general meeting, meeting of Board of Directors and other meeting and resolutions passed by postal ballot)

• (10) “Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved as such by the Central Government.”


• (11) “If any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of twenty- .five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.”

Please note that in light of Section 446B, if the above non compliance relates to a One Person Company, Small company, Start-up company or Producer Company, or officer in default of such companies then the maximum penalty shall not be more than one-half of the penalty specified in the above provisions. With the Annual filing season fast approaching, the Companies and the officers in default should avoid similar violations and mind the disclosures and compliances to keep the penalties at bay. Compliance with these regulations to the ‘letter & spirit’ is essential for ensuring transparency and accountability in corporate governance affairs.