This Article is an primitive attempt to highlight the procedural status of Adjudication before Registrar of Companies. At the threshold, it is imperative to note that the Registrar of Companies is an classic case of studying administrative law. Largely ROC performs three kind of functions namely:-
1.
Legislative Functions where
ROC assigned with delegated form of legislation in nature of Rules, Regulations
and bye laws.
2.
Administrative functions where
function is to ensure policy implementation and to sort out the glitches faced
by stakeholders.
3.
Quasi-Judicial functions where
It is to sort out the controversy between the parties.
The term adjudication means “to judge” and when we read this
term in context of bodies like ROC, SEBI, CCI it means to judge the controversy
between parties to a dispute.
POSITION UNDER COMPANIES
ACT, 2013 & RULES MADE THEREUNDER
The Companies Act 2013 under section 454 read with companies
(adjudication of penalties) Amendment Rule 2019 provides for adjudication
mechanism.
The reason for introduction of In house Adjudication
Mechanism (IAM) is to promote ease of doing business, to reduce the burden of NCLT
and special court because the adjudication is handled by bureaucracy, here ROC
will be adjudication officer.
In Companies (Amendment) Bill 2020, Companies (Amendment) Act
2019 in various sections fines are re-categorized in penalties.
The inherent benefit of prescribing civil liabilities (as
stated in report of committee to review offence under Companies Act 2013) for
procedural lapses as it would remove the requirement of providing mens
rea normally associated with criminal trial and hence it will save the
time of company and will cost effective too.
Therefore, it will be easier for company to rectify there
defaults, pay the penalty and become compliant with law through IAM framework
rather than fighting a criminal trial.
Adjudicating officer As per section 454 of companies Act 2013
read with rule 3(1) The Central government (CG) may appoint any of its officer
not below the rank of registrar as adjudicating officer for adjudging
penalties.
The ROC has been shouldered with the responsibility of AO.
The ROC can impose penalty in case any non- compliance of provision is made by
the company or officer in default (as per 2(60) of Companies Act 2013) ,or any
other person.
Now ROC has been given more power he can impose penalty on
any person if he was a party in contravention even though is not a part of the
company.
It is to be clearly noted ROC can impose penalty in case any
no- compliance is made by company or officer in default or any other person.
|
FINE |
PENALTY |
|
Fine can be imposed after successful prosecution means
it is required to be handled by court of judicature Fine is imposed
by NCLT, special court Appeal to NCLAT, higher court Time consuming process More Stringent
offence |
No prosecution is required to impose penalty Penalty is imposed by adjudicating officer. Appeal to RD Not time consuming Comparatively less stringent offence |
POWER OF ADJUDICATION OFFICER
As per
3(10) Companies (Adjudication of Penalties) Amendment, rule 2019 the
adjudicating officer shall exercise the following power.
To
summon and enforce the attendance of the person acquainted with the facts and
circumstances of the case after recording reason in writing
To order
for evidence or to produce any document which in the opinion of AO may be
relevant to subject matter.
The Adjudication officer role is confined to only adjudging
penalty As per sec 454 read with rule 3(1) of Companies Act 2013 the AO may by
order impose penalty on company, officer in default or any other person in case
of non-compliance and in rules it is stated that adjudication officer will be
appointed for the purpose of adjudging penalty.
The emphasis is on quantum of penalty and the adjudication is
not on the merit or demerit of the offence.
The AO will send show cause notice as stated in Rule 3(2) and
from the response of defaulting party AO will confirmed existence of non-
compliance.
The notice issued under sub rule 2 shall clearly indicate the
nature of non- compliance or default alleged to have been committed by company,
officer in default or any other person
– Rule 3(3)
Hence, AO
will first confirm that there is non – compliance and then decide quantum of penalty
While
adjudging quantum of penalty, the adjudicating officer shall have due regard to
the following factors, namely:-
1.
size of the company
2.
nature of business carried on by the company
3.
injury to public interest
4.
nature of the default
5.
repetition of the
default
6.
the amount of disproportionate gain
or unfair advantage, wherever quantifiable, made as a result of the default and
7.
the amount of loss caused to an
investor or group of investor or creditor as a result of default – stated in
Rule 3(12)
Provided
that, in no case, the penalty imposed shall be less than the minimum penalty prescribed,
if any, under the relevant section of the act.
PROCESS OF ADJUDICATION (BRIEF)
The AO shall issues show cause notice to company, officer in
default, any other person to show cause within not less than 15 days and not
extending more than 30 days why penalty should not impose.
The reply notice shall be filed in electronic mode
AO can
extend for further 15 days if he satisfied that there is sufficient cause of
not responding.
If AO is of
the opinion that physical appearance is required then he shall issues notice
within 10 working days from the date of receipt of reply.
The person to whom notice is issues can also make oral
representation if he has already mentioned in his reply After giving reasonable
opportunity of being heard AO can pass order he think fit including order of
adjournment. The AO shall pass order after expiry of last date of submission of
reply.
In case of physical appearance not required within
30 days
In case physical appearance required within 90 days
If any delay is made in passing order by AO the reason of
delay is recorded and order of AO shall be valid.
The AO shall send a copy of order to company, officer in
default , or any other person or all of them and to the CG and copy of order
shall be uploaded in website. In case any person did not reply or appear before
AO, the AO may pass an order imposing penalty in absence of such person.
APPEAL
As per sec 454(5) any person aggrieved by the order of AO may
prefer appeal to regional director(RD) having jurisdiction in the matter. Every
appeal shall be filed within 60 days from the date copy of adjudication order
is received by aggrieved person.
Compliance
of Default
Under section 454(8) of companies Act 2013 punishment is
prescribed in respect of company or officer in default or any other person
where penalty imposed by AO or RD remain unpaid.
As of now the section does not require AO to give any other
direction beside imposition of penalty but now as per Companies(Amendment) Act
2019 AO by order direct company or officer in default or any other person to as
the case may be to rectify default whenever he considered fit .It is necessary
because intension is not only to impose penalty but also to ensure compliance.
In case
of repeated default
As per section 454A (newly inserted) it is similar to sec
451. Where a company, or an officer in default or any other person having
already subjected to penalty for default again commit such default within a
period of 3 years from the date of order of imposing penalty passed by AO or RD
as the case may be shall be liable for second or subsequent default for an amount
equal to twice the amount of penalty.
CONCLUSION
The Government aim of Good Governance and Ease of doing
business can be achieved only if the scope of Flexibility and easy access to
grievance mechanism be provided to the stake holder. The Companies amendment
Bill is a step towards achieving such a goal.
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