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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Empowerment of the Company Secretary Profession

Gramin Dairy Producer Company Limited exceeded the turnover threshold but did not appoint a whole-time secretary. In proceedings, its officers show that they advertised repeatedly and approached ICSI for suitable candidates without success. What is the legal consequence under Section 378X?

No penalty is imposed. The proviso to Section 378X(3) protects the company and its officers if they show that all reasonable efforts to appoint a whole-time secretary were taken, or that its finances made engagement beyond its capacity. Repeated advertising and approaching ICSI supports that defence.

  1. ANo penalty is imposed if it is shown that all reasonable efforts to comply were takenCorrect
  2. BThe penalty is reduced to half but still imposed
  3. CThe company is automatically converted into a public company
  4. DThe penalty applies in full because reasonable efforts are not a defence

Explanation

The proviso to Section 378X(3) says no penalty shall be imposed if it is shown that all reasonable efforts to comply with sub-section (1) were taken, or that the company's financial position made it beyond its capacity to engage a whole-time secretary. The facts show reasonable efforts, so the penalty is not imposed. The default in appointing is not cured, but the penalty is excused.

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