CAN A COMPANY BE PENALIZED BY FOR THE VIOLATION OF NON CONDUCTING BOARD MEETINGS DUE TO DIRECTOR IMPRISONMENT AND SEALING OF OFFICE AND ASSETS?
ROC CHHATTISGARH VS YALSCO REAL ESTATE & AGRO
FARMING LIMITED
CORE LEGAL ISSUE
The company failed to conduct Board Meetings as
mandated under Section 173 of the Companies Act, 2013.
The defense cited:
·
Imprisonment
of key directors
·
Sealing of
registered office and assets by authorities
STATUTORY REQUIREMENT UNDER SECTION 173:
·
Minimum 4
Board Meetings every year
·
Gap between
two meetings should not exceed 120 days
Non-compliance attracts penalties under Section 450
(general penalty provision where no specific penalty is prescribed).
PENALTY IMPOSED UNDER SECTION 450 (GENERAL PENALTY FOR
NON-COMPLIANCE)
PENALTY IMPOSED:
Company: ₹2,00,000
Directors: ₹50,000 each
IF ALL THE DIRECTORS OF THE COMPANY ARE UNDERGOING
IMPRISONMENT , HOW THE DIRECTORS OF A COMPANY WILL CONDUCT A BOARD MEETING?
IF ALL DIRECTORS ARE IMPRISONED, PRACTICAL ISSUES
ARISE:
·
No physical
presence possible
·
Access to
VC facilities inside prison is highly unlikely and subject to prison regulations
So, quorum itself fails, making the meeting invalid.
DOCTRINE OF IMPOSSIBILITY (KEY LEGAL PRINCIPLE)
Courts and tribunals often recognize that:
· Law does not compel a person to do what he cannot possibly perform.
·
If
directors are imprisoned and:
·
Office is
sealed
·
Records are
inaccessible
Then non-compliance (e.g., not holding Board Meetings)
may be excused, depending on facts.
Hence, it is suggested that Yalsco Real Estate &
Agro Farming Limited should appeal to RD and then to NCLT to condone such
non-compliance.
KEY
TAKEAWAY
·
Compliance
must continue even during adverse situations
·
Proper
documentation & proactive steps are crucial
·
Statutory
compliance is mandatory—operational challenges don’t excuse governance
failures.
# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047
19295,
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