ROC Delhi II penal action for prolonged non‑appointment of Independent Directors under Section 149(4)

Background of the adjudication proceedings

The Registrar of Companies, Delhi II, acting as Adjudicating Officer under Section 454 of the Companies Act, 2013, has passed an order imposing monetary penalties for violation of Section 172 on account of non-compliance with Section 149(4) relating to appointment of Independent Directors. The order arises in the matter of SHARP AGRICOM LIMITED and certain individuals associated with the company.

The core issue examined was the prolonged failure of the company to induct the mandated number of Independent Directors on its Board once it crossed the statutory thresholds prescribed for such appointment.

Statutory framework involved

Appointment of Independent Directors – Section 149(4)

Under Section 149(4) read with Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014, certain classes of companies, upon breaching the prescribed thresholds of turnover, paid-up share capital or borrowings, are mandatorily required to appoint at least two Independent Directors on their Board.

In this case:

• SHARP AGRICOM LIMITED crossed the relevant threshold during the Financial Year 2016‑17.
• Consequently, the obligation to have at least two Independent Directors was triggered with effect from 01.04.2017.

General penalty mechanism – Section 172

Section 172 provides for penalty where a company defaults in complying with any provision in the relevant Chapter and no specific penalty is provided elsewhere. In such circumstances:

• The company is liable to a penalty of ₹50,000; and
• In case of a continuing failure, an additional penalty of ₹500 per day for the period of continuing default,
• Subject to a maximum of ₹3,00,000 for the company; and
• A maximum of ₹1,00,000 for each officer in default.

Definition of “officer who is in default” – Section 2(60)

Liability of individuals hinges on whether they fall within the ambit of Section 2(60) as an “officer who is in default”. This provision typically covers:

• Whole-time directors and Key Managerial Personnel
• Company Secretaries
• Persons in accordance with whose directions the Board is accustomed to act
• Any person charged with responsibility for a specific statutory compliance
• Individuals whose consent, connivance or negligence resulted in the default

The Ministry of Corporate Affairs General Circular No. 01/2020 dated 02.03.2020 further clarifies that mere designation as a director is not enough to fasten liability unless the person is actually responsible for the default.

Facts of the case and timeline of non-compliance

Trigger for obligation and period of default

1. SHARP AGRICOM LIMITED, having CIN U01400DL2010PLC210589, is registered under the Companies Act with its registered office at PLOT NO.9, LSC, GUJRANWALA TOWN, PART‑I, NA DELHI DELHI INDIA 110009.

2. During FY 2016‑17, the company exceeded the turnover threshold specified in Section 149(4) read with the applicable Rules. Accordingly, it became obligated from 01.04.2017 to have at least two Independent Directors on its Board.

3. The company, however, did not comply with this requirement within the prescribed time. It continued without the mandated Independent Directors until 06.06.2024, when it finally appointed:

   • Mr. Hargovind Sachdev, and
   • Ms. Mita Namonath Jha

   as Independent Directors and filed e‑Form DIR‑12 on 06.06.2024 vide SRN AA8385955.

4. This resulted in a prolonged non-compliance spanning 2,623 days, i.e. from 01.04.2017 till 06.06.2024.

Suo motu disclosure by the company

• On 12.01.2026, the company voluntarily filed e‑Form GNL‑1 (SRN AC1167352) seeking adjudication for default under Section 149 of the Act.
• This suo motu filing amounted to an admission that the statutory requirement had not been adhered to and that there had been a long‑standing default.

Parties involved

The adjudication considered the liability of the company and various individuals, including (among others):