Tuesday, November 29, 2022

SC notice in plea against enhanced limit for employing company secretaries

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New Delhi: The Supreme Court has issued notice in a plea challenging a Ministry of Corporate Affairs notification in which the mandatory limit for engaging a company secretary was raised from Rs 5 crore to Rs 10 crore. The petition challenges this January 3 notification as being ultra-vires and repugnant to Article 14, 19(1)(g) of the Constitution of India.

A bench comprising Chief Justice S. A. Bobde and Justices A. S. Bopanna and V. Ramasubramanian was hearing a petition filed by Suman Kumar who has submitted that “the said notification dated 03.01.2020 is constitutionally impermissible in as much as there is no rational basis for the categorization and classification for the purpose of requirement of regulatory professionals i.e. company secretaries, as the necessity of compliance of Companies Act is sacrosanct and absolute and any compromise by way of classification on a ground of paid-up capital cannot be treated as a reasonable classification and exempting the companies from the regulatory compliances on the basis of irrational and unreasonable classification under the garb of paid up capital is discriminatory in as much as it infringes Article 14 of the Constitution of India.”

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The petitioner has further contented that the notification fails to stand the test of “Reasonable Restriction” and “Intelligible Differentia” as the intention of classification on the basis of paid-up capital is to exempt the group of the companies from the mandatory compliances of laws cannot be said to be reasonable classification in the light of the fact that the compliance of the law shall have to be uniform irrespective of the size or turnover or any other criteria of the companies.

The petitioner has also submitted that the un-reasonability of this exemption shall further aggravate the corporate lawlessness and shall encourage possible fraudster to commit offenses of syphoning of public money by way of taking advantage of legal lacuna in form of irrational exemption on the basis of paid-up capital.

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Hence, the petitioner is seeking comprehensive guidelines for evolving of the robust mechanism for regulating the proper operations and effective enforcement of corporate governance in all companies irrespective of their paid up capital in order to minimize the incidences of financial and administrative irregularities.

– India Legal Bureau

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