Chandigarh ROC Levies Rs. 10 Lakh Combined Penalties on Company and Director for CFO Appointment Default Under Companies Act 2013

Overview of the Adjudication Proceedings

The Registrar of Companies stationed in Chandigarh recently delivered an adjudication order pursuant to the authority vested under Section 454 of the Companies Act, 2013. This order pertains to contraventions of the mandatory provisions outlined in Section 203(1)(iii) when read in conjunction with Section 203(5) of the Companies Act, 2013, along with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The matter originated from a voluntary application submitted by the corporate entity on its own motion, wherein it acknowledged an inadvertent failure to designate a Chief Financial Officer within the stipulated timeframe. This lapse occurred after the company's paid-up share capital exceeded the mandatory regulatory threshold of ₹10 crore, thereby triggering the statutory requirement to appoint key managerial personnel.

The adjudicating authority, after examining the facts and circumstances, determined that both the corporate entity and its designated officer in default were liable for the statutory breach. Consequently, financial penalties aggregating to ₹5.50 lakh were imposed—₹5 lakh upon the company and ₹50,000 upon the individual officer. Notably, the order explicitly states that no continuing daily penalties have been levied beyond the base penalty amounts.

Detailed Background of the Company

SAEL INDUSTRIES LIMITED, identified by Corporate Identification Number U40106PB2022PLC055755, is a registered corporate entity operating under the regulatory framework of the Companies Act, 2013. The company maintains its registered office premises at House Number 44, Model Town, NA Guruharsahai, Firozpur, Punjab, bearing the postal code 152022.

The individual officer identified in the proceedings is JASBIR SINGH, bearing Director Identification Number 01668231, who was held accountable as the officer in default during the relevant period of non-compliance.

Appointment of Adjudicating Authority

The Ministry of Corporate Affairs, through its Gazette notification bearing reference number S.O. 831(E) dated March 24, 2015, formally designated the Registrar of Companies as the Adjudicating Officer. This appointment was executed under the powers conferred by Section 454 of the Companies Act, 2013, read together with the Companies (Adjudication of Penalties) Rules, 2014. The adjudicating authority possesses jurisdiction to determine and impose penalties for contraventions of various provisions enshrined within the Act.

Relevant Statutory Provisions Under Section 203

Section 203 of the Companies Act, 2013 mandates that certain categories of companies must appoint specific key managerial personnel, including a Chief Financial Officer. When a company's paid-up share capital crosses the prescribed threshold of ₹10 crore, the statutory obligation to appoint a CFO becomes immediately applicable.

The penal consequences for non-compliance with Section 203(5) are explicitly defined in the legislation. Any corporate entity that defaults in adhering to these provisions becomes liable to a monetary penalty amounting to five lakh rupees. Additionally, every director and key managerial personnel who are determined to be officers in default face an individual penalty of fifty thousand rupees.

Furthermore, where the default assumes a continuing character, the statute prescribes additional penalties of one thousand rupees for each subsequent day following the initial day of default. However, this continuing penalty is subject to a maximum ceiling of five lakh rupees, ensuring proportionality in the penal framework.

Rule 8A of Managerial Personnel Rules

Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 provides the operational guidelines and procedural requirements for the appointment of key managerial personnel, including Chief Financial Officers. This rule works in tandem with Section 203 to establish a comprehensive regulatory regime governing senior management appointments.

Chronology of Default and Non-Compliance

Share Capital Enhancement Triggering CFO Requirement

On July 4, 2022, SAEL INDUSTRIES LIMITED undertook an allotment of additional shares, resulting in a substantial increase in its paid-up share capital. Following this allotment, the company's total paid-up share capital reached ₹46,12,90,970, significantly surpassing the statutory threshold limit of ₹10 crore prescribed under the relevant provisions.

This capital enhancement immediately triggered the mandatory obligation to appoint a Chief Financial Officer as part of the company's key managerial personnel structure. Under the statutory framework, companies are required to fulfill such appointment obligations within a period of six months from the date when the threshold criteria are met.

Period of Default

Given that the share capital crossed the threshold on July 4, 2022, the statutory six-month grace period for appointing a CFO would have expired on January 4, 2023. However, the company failed to appoint a Chief Financial Officer by this deadline, thereby commencing the period of statutory default.

The actual appointment of a CFO was eventually made on July 3, 2023, thereby concluding the period of non-compliance. Consequently, the company remained in default for approximately one year from the date the threshold was crossed, or alternatively, for approximately six months from the expiry of the statutory grace period.

Acknowledgment Through Suo Moto Application

Recognizing the inadvertent default, SAEL INDUSTRIES LIMITED proactively filed a suo moto application for adjudication purposes. This application, bearing Service Request Number AB7888732, was submitted on October 1, 2025, seeking adjudication of penalties for the acknowledged non-compliance.