Dear Prime Minister,
This letter, which I am addressing in 2014, may be a fiction, but in 2015 it is fact. I am aware that Companies Act 2013 may not be your creation, but my end as a SME entrepreneur is most likely to happen in your regime on account of non-compliance of some simple provisions in the Act. Please act fast and rectify the mistakes in this draconian Act before it becomes a little too late.
On April 15, 2015, I received a notice from the Ministry of Corporate Affairs directing my company to pay a fine of upto Rs. 25 lakhs and in my personal capacity as a director of my company an additional fine of upto Rs.5 lakhs. The contents of the notice read you have to pay this penalty for not filing FORM MGT 14 that was required to be filed by your Company under Companies Act 2013.
I am a small entrepreneur, owning a shed in an industrial area and I employ around 20 employees in my factory. I have done no wrong or crime in the last 20 years, I have paid all taxes and statutory dues on time, I have filed all statutory returns on the due date and there are no pending litigations against me. I have been doing business for the last 10 years and I have ensured that I also contribute to the GDP of the country in my own small way. I am a SME entrepreneur.
I understand that last year form MGT 14 was required to be filed by the Company for taking note of the disclosure of my directorship in other companies, whereas I do not have interest or directorship in any other company. I am informed that even if I had nothing to disclose on my directorship I still had to disclose the same in a board meeting, which I did, and thereafter should have filed this form MGT 14 within 9 months from the date of the event.
I am also given to understand that if this form MGT 14 was not filed within 9 months of the due date, the government can levy a penalty of upto 25 lakhs on the Company and upto Rs.5 lakhs on me as a director of the company as per the provisions of section 117(2). But this penalty is almost the cost of my entire capital that I had invested to build this business. I cannot pay such a huge penalty for a violation that was not intentional and for a form that was not filed on account of oversight. If I have to pay this huge penalty I have no other alternative but to sell my business. Looking at my concern and despair, my son asked me are you a good man or a bad man, with a heavy heart I responded I dont know.
I leave this question for you to answer. Is there any justification on why the Act is prescribing a penalty of upto Rs.25 lakhs on the Company or Rs.5 lakhs on a director for not filing form MGT 14 under this Act.
Please do not punish small entrepreneurs like me with exorbitant penal provisions.
PS. This is an article written by j sundharesan to create awareness on the impact of non-compliance in filing form MGT-14 during the year 2014 under section 117. Views expressed in the article are personal.