Can One Person Hold Two KMP Positions in the Same Company?

The Registrar of Companies having jurisdiction at Gwalior, in his order under Section 454 dated 29 ^th June .2026, in the matter of Eki Energy Services Limited (order no.ID:PO/ADJ/06-2026 /GL/02450 under Section 454 of the Companies Act, 2013 (hereinafter referred to as "The Act") has stirred the hornet’s nest and triggered off an animated debate in the fraternity of company Secretaries.

The facts in the above case are briefly enumerated as under:

"Eki Energy Services Limited had appointed the same individual as both Chief Financial Officer and Whole-time Director through a Board Resolution filed in Form MGT-14 without appointing another person as Chief Financial Officer. The inspection concluded that the company had failed to comply with Section 203(1), and a show cause notice was issued. The company contended that the Companies Act, 2013 does not expressly prohibit the same individual from simultaneously holding the offices of Whole-time Director and Chief Financial Officer, but this contention was rejected. The Adjudicating Officer held that Section 203(1) contemplates distinct categories of whole-time Key Managerial Personnel with separate statutory responsibilities and that appointing the same individual to both positions without another Chief Financial Officer defeated the purpose of the provision. The company was held liable under Section 203(5). A penalty of ₹5,00,000 was imposed on the company and ₹50,000 on the Managing Director identified as the officer in default, while the remaining individuals were shown with zero penalty. The notified noticees were directed to rectify the default and pay the applicable penalty within 90 days.

In his order the Adjudication officer noted, inter alia, as under:

"The principal contention advanced is that there is no express prohibition under the Companies Act, 2013 against the same individual holding the offices of Whole-time Director and Chief Financial Officer simultaneously.

This contention does not merit acceptance.

Section 203(1) contemplates appointment of distinct categories of whole-time Key Managerial Personnel entrusted with separate statutory responsibilities in relation to the governance and management of the affairs of the company. The legislative intent underlying the provision is to ensure an appropriate segregation of key managerial functions and accountability within the corporate governance framework.

The appointment of the same individual as Whole-time Director and Chief Financial Officer without appointing another person to discharge the functions of Chief Financial Officer defeats the purpose underlying Section 203(1) and results in non-compliance with the statutory requirement relating to appointment of whole-time Key Managerial Personnel.

The contention that similar practice may be followed by other companies cannot confer legality upon a practice which is otherwise inconsistent with the statutory framework. Every company is independently required to ensure compliance with the provisions of the Companies Act, 2013.

In the light of the above averments made by the Adjudication Officer, it would be meaningful for us to go into the entire gamut of provisions in the law on the subject.

Legislative intent should be given effect to regardless of the consequences

A statute is an edict of the legislature (Vishnu Pratap Sugar Works (Private) Ltd v Chief Inspector of stamps ,UP(AIR 1968 SC 102). Hence, the conventional way of interpreting or construing a Statute is to seek the intention of the maker.

A statute is to be construed according "to the intent of those that make it "(RMD Chamarbaugwala v Union of India (AIR 1957 SC 628 at P.631).

The duty of the Judiciary is to act upon the true intention of the legislature .It is only whenthe statutory provision is open to more than one interpretation that the Court has to choose that interpretation which represents the true intent of the Legislature.( Venkataswami Naidu R.v Narasram Naraindas(AIR 1966 SC 361 at P,363).

The legislative intent is often manifested by the Statement of objects/Notes on clauses which are inserted preparatory to the introduction of the proposed legislation.

It is well settled that in cases of doubt or difficulties in ascribing meaning to a provision or word in a provision, the statement of objects and reasons or the explanatory notes on Clauses relating to the amendment or the Report of the joint parliamentary committee which preceded the legislation concerned will be useful to ascertain the intent of the legislature in enacting a particular provision.( Girdharilal&sons v Balbir Nath Mathur (AIR 1986SC 1499).

In Gujarat University and another v Shri Krishna Ranganath Mudholkar (AIR 1963 SC 703), the Apex Court observed that "Statement of objects and reasons of a Statute may and do oftenprovide valuable historical material in ascertaining the reasons which induced the legislature to enact a Statute but in interpreting the statute they must be ignored"

Although the Act was approved for implementation only from April,1, 2014, the notes on clauses to the Companies Bill 2011 do help in discerning the legislative intent and clause 203 corresponding to Section 203 is reproduced below for clarity:

" Notes on clauses :Companies Bill 2011

Clause 203-This is a new clause and seeks to provide that every company belonging to such class or description of companies as prescribed by the Central Govt., shall have Managing Director or Chief Executive Officer or manager or in their absence , a whole time director and a company Secretary as a whole time key managerial personnel. It also seeks to provide that a whole time key managerial personnel shall not hold office in more than one company (except in a subsidiary at the same time except that of a director if company permits him in this regard). This clause further provides for punishment in case of contravention".

It is pertinent to note from the above that the clause does not stipulate expressly that the same individual cannot occupy two positions as Key Managerial Personnel (KMP).If anything it is lenient enough to permit the KMP to occupy a similar position in the Subsidiary company. It only recommends that every company belonging to a certain genre has whole-time KMPs answering to the nomenclature stated.

Excerpt from the Dr.J.J.Irani Committee Report

The J.J.Irani Committee is responsible for drawing up the framework leading to culmination of the Act.

It would be therefore meaningful to reproduce the relevant portion of the Report in regard to Section 203.

" Para 34.1-Corporate Structure

Stakeholders/Board look towards certain KMPs for formulation and execution of policies and to outside professionals for independent assurances on various compliances. The Committee feels it desirable to dwell on such managerial personnel who have a significant role to play in the conduct of affairs of the company and determine the quality of Governance .The Committee is of the view that such KMPs may be recognised by the along with their liability in appropriate aspects of company operation.

34.2 Key Managerial Personnel

The Committee identifies the following KMPs for all companies:

Chief Executive officer(CEO)/Managing Director

Company Secretary (CS)

Chief financial Officer (CFO)

Recommendations

The appointment and removal of the KMPs shall be by the Board of directors

The KMPs including Managing/(whole-time Directors)should be in whole time employment of only one company at any given time

Both the Managing Director as also the Whole-time directors should not be appointed for more than five years at a time.

As provided currently, the option to a company to appoint director or by proportional representation may be retained.

The present requirement of having Managing director/Whole-time Director in a public company with a paid up share capital of rupees five crores may be revised to rupees ten crores by appropriate amendment of the Rules. The said limit could be renewed from time to time.

Special exemptions may be provided for small companies from appointing such personnel on whole time basis. Such companies may obtain services that may be considered mandatory under law from qualified professionals in practice.

Report of the Company Law Committee-February 2016

In Para 13.11 of the Report issued in February 2016, the Committee also recommended enabling a whole time key managerial personnel holding necessary qualifications to hold more than one position in the same company at the same time so as to reduce the cost of compliance for such companies and also to utilise the capacities of these officers to the optimum level" .

From the above excerpt from the Committee’s report as also from the Notes on clauses it can be deciphered that neitherhas contemplated the appointment of a single individual to each of the KMP positions referred to above. On the contrary, the Committee has recommended that persons holding requisite qualifications could hold more than one position at the same time so as to reduce the costs of companies as also to harness to the optimum level, their skill sets.

Section 203(1) is the operating provision which stipulates the appointment of KMPs

Section 203(1) states as under:

"Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time KMPs-

(i)managing director or Chief Executive officer or manager and in their absence, a whole-time director

ii)company Secretary and

iii)Chief Financial officer"

The provisos under the sub-section are not very relevant for the purpose of our discussion and we shall restrict their analysis to the extent required.

A plain reading of the above sub-section makes it clear that it is a mandatory provision for the class of companies which come within its purview.

The use of the expression "shall" in the sub-section takes away any ambiguity as far as the mandatory force of the provision is concerned.

The standard rule of interpretation is that the provision containing "shall" is mandatory and the provision containing "may" is either permissive or discretionary.

The Apex Court has articulatedcopiously on the significance of the expression "shall" in the Statute in its Ruling in SainikMotors v State of Rajasthan (AIR 1961 1480).

It is pertinent to note that the above standard rule as regards application of the expression "shall " is to mean that the provision is imperative is not universally applicable.

However, considering that the objective behind the insert of Section 203(1) is to ensure that companies belonging to a certain category have the requisite personnel to man key positions which are crucial for the organisation so that they also have the responsibility and the accountability for the functions assigned to them, the sub-section has imperative force.

Notwithstanding,it is clear from a plain reading of the sub-section that it does not expressly provide that each of the KMP positions be manned by separate individuals and such a construct is consistent with the recommendations made by the Company Law Committee in February 2016 in Para 13.11 of the Report as quoted above.

The law does not expressly prohibit the appointment of the same individuals to more than one KMP position in the same company

There is nothing in the sub-section read with the relevant rules which specifically prohibits the appointment of the same person as say the CFO and Company Secretary in the same company at the same time.

Assuming but not admitting that the intent of the sub-section is to provide for the appointment of separate individuals to man the above KMP positions, that intent does not get manifested at least on the basis of a plainreading of the sub-section.

There are two contradictions in Section 203 which belie the logic that the intent of the law is to provide for a separate individual for each KMP position.

Section 203(3) stipulates that a whole-time KMP of a company shall not hold office in more than one company except in its subsidiary company at the same time.

The above sub-section has led to situations where two large listed companies of which the second company is a listed subsidiary of the first company has appointed the same individual to serve as the Managing Director and CEO of both the companies.Further, the company secretary for both the companies was the same individual. When the statute itself allows the same KMP to wear the hat of the KMP in the subsidiary, the same cannot be considered to be ostensibly consistent with the avowedintention of the law that the each KMP position should be occupied by a separate individual.

Further the wording inthe sub-section has a reference to a "subsidiary company". We are aware that as per Section 13 of the General Clauses Act, 1897 the words in the singular in all central legislations shall include the plural and vice versa unless there is anything repugnant in the subject or context.

The above Section could have led to an absurd inference that the same individual could occupy KMP positions in more than one subsidiary company.Such an inference may defeat the very purpose of Section 203 and hence may be considered as repugnant to the context.

Therefore, the correct view would be to restrict the involvement of the person as a KMP in only one subsidiary company and not beyond.

Managing Director or Manager of one company could be appointed in the same capacity in any other unrelated company

The last proviso under Section 203(3) contemplates that the wholetime KMP occupying the position of Managing director or Manager in one company could be appointed as Managing director or manager of one other company whether related to the first company or not, subject to the condition that his appointment in the second company is approved by the Board at a duly convened meeting of which specific notice has been given for the appointment and the resolution is carried by the consent of all the directors present in India.

It is ironic when the statute itself allows the appointment of the same person as managing director in two unrelated companies which by itself is a humungous responsibility , an interpretation that the same individual cannot hold more than one KMP position in the same company at the same time cannot hold water and would give rise to a paradox.

The same conclusion would remain valid, given that the law allows the KMP of the holding company to hold the position of the KMP in its subsidiary.

Financial threshold provided for appointment of KMPs as per Rule 8 is low and it would be counter-productive for the marginal unlisted public companies to have a separate individual for each KMP position

Section 203 of the Act has to be readconjointly with Rule 8 of the Companies(Appointment and Remuneration)Rules, 2014.The above Rule stipulates that every listed company and every other public company having a paid up share capital of Rupees ten crore or more shall have whole time KMPs.

For listed companies, given the entire gamut of compliances called for under the SEBI(Listing Obligations and Disclosure Requirements )(LODR) Regulations , 2015 it may be absolutely necessary to appoint a separate individual for each KMP position.

However, an unlisted public company does not have any requirements of compliance under LODR and it may not be economically viable for such companies to afford the luxury of having one person for each of the KMP positions. It is exactly for this reason thatthe Company Law Committee in Para 13.11 of its Report has contemplated that the same person could hold more than one KMP position in the same company which would result in cost saving and at the same time the company could use the resources of the KMP in more than one position particularly if he is multi-qualified professionally.

At the end of the day, law is only a facilitator for rational human action and the requirements of law should not be such that it imposes an unconscionable burden on marginal companies.

Should the Company Secretary appointed in a private company under Rule 8A be considered as a KMP

Rule 8A was introduced with effect from 9.6.2014 to provide for the appointment of a company secretary in the case of a private company which has a paid -up share capital of Rs.10 Crores or more. In as much as Section 203 calls for appointment to all positions of KMPs in case of companies covered by Rule 8 above, it can be concluded that the company Secretary appointed in a private company having the above threshold capital shall not be considered as a KMP for the purposes of the Act since appointment to other KMP positions is not mandated by Rule 8A which again cannot be inconsistent with Section 203(1)..

Conclusion

We have in the above discussion shown that the legislative intent is not that a company covered under Section 203 should appoint a separate individual for each KMP position in the same company. Were it so, so many large and reputed companies would not have appointed KMPs who don the mantle of two positions. It could not be mere economic logic that may have led to such a decision as these companies could easily affordfinancially to appoint persons for separate positions. Obviously. the balance of convenience and the need to harness human resources optimally would have led to such decisions, however contentious the decision may be as observed by the Adjudicating officer in his order dated 29.6. 2026 which has triggered this discussion since he has stated in his order that " similar practice may be followed by other companies cannot confer legality upon a practice which is otherwise inconsistent with the statutory framework".

It is respectfully submitted that the strength of plain wordsas appearing in a Statute should not be negated. The golden rule of interpretation is the "literal interpretation Rule" which does not provide any place for interpretation where the language in the Act is clear and explicit. There is no express provision in Section 203 which prohibits the same person from holding more than one KMP position in the same company simultaneously. Accountability would not be lost sight of in such a situation as apprehended, given that the same person shall continue to be accountable for the positions held by him.

We have not come across any similar order from any other Adjudication Authority , to the best of our knowledge and it is humbly submitted that the impugned order dated June , 29, 2026 should be subjected to a judicial review.