[Company Secretary] SC Issues Notice On Plea Against MCA Increasing Mandatory Limit For CS Appointment As Rs 10 Crores Paid Up Capital

The Supreme Court on Wednesday issued notice in a plea seeking declaration of the notification dated January 1 by the Centre and its subsequent enforcement w.e.f. 01.04.2020 as being ultra-vires and repugnant to the article 14, 19(1)(g) of the Constitution of India. 

The impugned notification issued by the Ministry of Corporate Affairs has enhanced the mandatory limit for engaging Company Secretary from 5 Crore to 10 crores. The plea contends that lack of a robust mechanism leads to a large number of companies being involved in financial shenanigans and misfeasance of the public.

The plea also seeks for directions to issue comprehensive guidelines in respect of a robust mechanism for enforcement of Corporate Governance.

"In this respect it is pertinently 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 paidup 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"- Excerpt of Plea

A bench comprising Chief Justice SA Bobde, Justices AS Bopanna & V. Ramasubramaniun took up the plea which also seeks directions to formulate a High Powered Committee in order to look into the lapses which led to the closure of more than six lakh companies across the country. 

The plea has been filed by Mr. Suman Kumar through Advocate Shreyas Jain contends that the Ministry of Corporate Affairs' Notification does not stand the scrutiny of tests of "Reasonable Classification" & "Intelligible Differentia" as the intention of classification, on the basis of paid-up capital is to exempt a group of  companies from mandatory compliances of law.

This, Kumar has averred, "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".

Stating that the basic test of any law is sought to be achieved by regulation 8A of the Companies Act, the plea contends that the exemption shall further aggravate "corporate lawlessness" and encourage possible fraudsters to commit offences of syphoning off public money by way of taking advantage of legal lacuna.

Hence, the petitioner is bringing the issue of regulation and enforcement of the corporate governance in all companies across the country. by making Company Secretary as integral and inseparable constituent of every companies irrespective of the paid-up capital for the purpose of compliance and regulation.

The petitioner states that he is also aggrieved by the poor governance of Corporate Governance in the country which is resulting in serious plummeting of the level of transparency and fairness in the functioning of companies and hits at the "very foundation of financial sinews of our country's economy".

The plea also submits that he has already approached the respondents by making the representation requesting immediate roll-back of the said notification dated 03.01.2020 as the classification carving out exemption is affront and antithetical to the constitutional scheme of right to equality and equal protection under the Constitution of India. However, the contention raised in the said representation remained un-responded as yet.