Non-Appointment of Resident Director
Facts of the Case:
M/s. Indo MIM Limited, having its registered office in Bengaluru, Karnataka, failed to comply with the
mandatory requirement under the Companies Act, 2013 to have at least one Resident Director on its
Board.
The company remained in default for the period from 15th December 2017 to 30th March 2024, i.e., for
almost six years. The default was rectified on 30th March 2024, when the Company appointed three
Resident Directors.
The Company itself admitted the default and filed a suo-moto application before the Registrar of
Companies/Adjudicating Officer for adjudication of the violation.
Legal Requirement:
The Companies Act, 2013 mandates every company to have at least one director who has stayed in India
for a total period of not less than 182 days during the financial year.
The requirement is intended to ensure that the company has at least one director who is ordinarily
available in India and can be held accountable for the affairs and regulatory compliance of the company.
Default / Non-Compliance:
The Company did not have a Resident Director for the period from 15th December 2017 to 30th March
2024. Thus, the Company remained non-compliant with the statutory requirement for almost six years.
The Company subsequently rectified the default by appointing three Resident Directors on 30th March
2024.
Adjudication Proceedings:
Upon receipt of the suo-moto application, the Registrar of Companies/Adjudicating Officer followed the prescribed procedure and issued a Show Cause Notice to the Company and the officers responsible for the default. The Company and the defaulting officers admitted the violation and opted not to seek a personal hearing in the matter. Accordingly, the Adjudicating Officer proceeded to determine the penalty for the period of default.
Penalty Imposed:
The Adjudicating Officer imposed a total penalty of ₹6 lakh, comprising:
Particulars Penalty
Company ₹3,00,000
Defaulting Officer
1 ₹1,00,000
Defaulting Officer
2 ₹1,00,000
Defaulting Officer
3 ₹1,00,000
Total ₹6,00,000
One of the officers upon whom the penalty was imposed was the Company Secretary who was serving
as KMP during the period of default.
Rationale Behind the Order:
The penalty was imposed because the Company had failed to comply with a mandatory statutory
requirement for a prolonged period. The fact that the default continued for almost six years
demonstrated that the non-compliance was not merely temporary.
However, the Company subsequently rectified the default voluntarily by appointing three Resident
Directors and also suo-moto approached the authorities and admitted the violation.
The adjudication therefore resulted in a monetary penalty for the period during which the statutory
requirement remained unfulfilled.
Key Takeaway:
The case highlights that the requirement relating to a Resident Director is a continuing statutory
compliance and the company must ensure that the requirement is satisfied throughout the relevant
period. Further, appointment of a Resident Director after the default does not automatically wipe out the earlier non-compliance. The company may still be liable to penalty for the period during which the default existed.
In short:
Failure to maintain the mandatory Resident Director requirement → continuing statutory default →
subsequent rectification does not erase past default → adjudication and penalty on the Company and
officers in default.