On Wednesday, the Supreme Court issued noticein a plea seeking declaration of the notification as being ultra-vires and repugnant to the article 14, 19(1)(g) of the Constitution of India by the Centre on January 1st 2020 and its subsequent enforcement w.e.f. 01.04.2020.
The impugned MCA Notification
In the Ministry of Corporate Affairs impugned notification, the mandatory limit for CS appointment was enhanced from 5 Crore to 10 crores.
Contentions in the MCA Notification
The contention was raised that lack of a robust mechanism leads to a large number of companies being involved in financial shenanigans and misfeasance of the public.
Hence, there comes the request to seek 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
The plea was taken by a bench comprising of Chief Justice SA Bobde, Justices AS Bopanna & V. Ramasubramaniun which seek that in order to look into the lapses which led to the closure of more than six lakh companies across the country, formulation of a High Powered Committee has been requested.
Mr. Suman Kumar through Advocate ShreyasJain filed the petition and expressed 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.
Kumar expressed about CS appointment that,“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“.
Regulation 8A of the Companies Act States that the basic test of any law is sought to be achieved and contends that the exemption shall further encourage possible fraudsters to commit offences of syphoning off public money by way of taking advantage of legal lacuna and aggravate “corporate lawlessness”.
Thats is why, the petitioner is putting up the issue of regulation and enforcement of the corporate governance in all companies across the country by making CS Appointment as integral and inseparable constituent of every companies irrespective of the paid-up capital for the purpose of compliance and regulation.
The petitioner also express that he is aggrieved by the poor governance of Corporate Governance in the country which results in serious plummeting of the level of transparency and fairness in the functioning of companies for CS Appointment and hits at the “very foundation of financial sinews of our country’s economy”.
Submissions in the MCA Plea
The plea submits that by making the representation, the matter has been bought in the notice of the respondents 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 said representation and all the contentions are still un-responded in this CS appointment .