Finding Compliance Difficult and Costly Try Non-Compliance

Overview

In a world where everyone is taking the corporate laws casually, a statutory body The INSTITUTE OF COMPANIES SECRETARIES OF INDIA(ICSI) tied a knot with the regulatory authorities especially THE MINISTRY OF CORPORATE AFFAIRS(MCA), SECURITIES BOARD OF INDIA (SEBI), RESERVE BANK OF INDIA etc by taking  initiatives like framing LAWS,RULES, ACTS, SECTIONS, CLAUSES and SUB-CLAUSES and also coming up with amendments time to time as required to regulate the companies, whether being a Private Company covering small company or One Person Company or Section 8 Company etc or Public Companies whether listed or unlisted. I am being an Aspirant of the ICSI, would like to come up with instances of Company Law, which is the core part of the corporate world, as from Start to the End Company is regulated with an ACT named as “COMPANIES ACT 2013 or previous other companies act”. 

From the Name Approval to Incorporation to Winding up (end of a company), it is this act which binds companies to comply all the requirements that needs to be complied, for which Act has authorised PROFESSIONALS like CS, CA, CMA, Advocates, who are responsible for all the Legal Compliances. The noncompliance's for which may levy hefty penalties/fines/or even imprisonment as mentioned in the Companies Act.  The Company’s non-compliances matters are dealt under authorities named NATIONAL COMPANY LAW TRIBUNAL(NCLT) and the NATIONAL LAW APPELATE TRIBUNAL(NCLAT) and other higher judiciaries. Everyone is talking about the PAYTM CASE which has been violating the laws governed by SEBI and RBI, as a result its shares were crashed abruptly. 

From its rise to downfall, it's all about compliances to non-compliance. 

In the year 2016, when demonetisation was announced, Paytm’s business boomed to another level taking advantage of a situation being favourable, from mobile recharge, metro card recharge to money account transfer Paytm was offering every possible service and its customers increased to 185 million. Paytm's CEO Vijay Shekhar Sharma took all the possible efforts to take its business to the phase of growth by heiring almost 10,000 agents so to spread their QR CODES to each house in India, everyone was encouraged to use it and it was successful and a game changer too.  

In the year 2017, PAYTM’S PAYMENT BANK was launched, which focused into the area of banking services different from existing banking system. Paytm’s Bank could not offer loans and credit card to its customers like other existing NBFCs. Some controversies occurred when governmental agencies alleged that Paytm was exploiting personal information of customers, violating the MONEY LAUNDERING ACT 2002, by not following proper KYC (KNOW YOUR CUSTOMERS) norms and it was charged with PENALTY OF ONE CRORE RUPEES.    

In OCTOBER 2023, it was again fined with 2 crores rupees. Then recently in February 2024, RBI restricted all the activities of Paytm bank such as the entrance of new customers, new deposits etc. There are many more examples where layman is unaware of the non-compliances by the companies where NCLT and NCLAT as well as ROC (registrar of companies) has passed many judgements/penalties on companies and its officers in default, relating to the non-compliances by companies. 

For instance, In cases of TATA CONSULTANCY SERVICES vs CYRUS INVESTMENTS PRIVATE LIMITED, 

Tata Group is an Indian multinational conglomerate founded in 1868 by Jamshedji Tata. The mission of TATA GROUP is “To improve the livelihood quality of communities which can serves globally through long-term stakeholder value creation based on Leadership with belief” In the above case where Cyrus Mistry a Former chairperson of the Tata Group was replaced from the post of Executive Chairman with immediate effect on the grounds of growing belief deficit and repeated departures from the culture and ethos of Tata group. Tata Sons filed caveats (a petition for making themself a party to a decision in a court, as to its part could also be bought at front) in Supreme Court, Bombay High Court and NCLAT to prevent Cyrus Mistry from getting an ex-parte order against his sacking and MR Ratan Tata won the case. 

HIGHLIGHTS OF THE SUPREME COURT JUDGEMENT: 

• The removal of Mr. Cyrus Mistry does not amount to OPPRESSION and MANAGEMENT under section 241 and 242 of the Companies Act, 2013 
• Considering various factors like the philanthropy nature of TATA trust, majority rule, no malafied intention from their part and various other factors, order was made in favour of Ratan Tata. 
• Mistry was offered to sell their shares to tata and exit from the company for 1.25 crores, whereas TATA was offering 80,000 corers. 
• Supreme court suggested to settle the price outside the court, or judicially if no settlement was arrived. 
• By mentioning these huge examples the purpose is to make people aware, that if these big giants of the country had to face the legal compliances, then let’s assume what would happen if small companies would not make small quarterly or yearly compliance like Conducting board meetings U/S 173, quorum u/s174 filling minutes, follow Secretarial Standards framed by ICSI, filling AOC4, MGT7, DIR3 KYC, MGT14 etc.  
• In the case M/s kudos Financial and Investment Private Limited, ROC had imposed the penalty of 5 lakhs om the company and its director's, for the default of filing of Financial Statement  i.e filing the unsigned annexures to the board report. 
• In the recent past ROC has been levying huge penalties for the violation of Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel). 
• In the Case FIRST DATA (INDIA) PRIVATE LIMITED, ROC HAD IMPOSED PENALTY OF 21LAKH RUPEES FOR NON-APPOINTMENT OF COMPANY SECRETARY, even though the company Suo-moto declared for the default, due to difficulty in finding the suitable candidate for the post of the CS. 
• It’s the era where business should conduct and govern themselves with integrity in a manner that is ethical, transparent and accountable. Business should provide goods and services in a manner that is sustainable and safe to the environment, its customers and other's .

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