Ensuring Compliance: Is Your Organization Equipped with an Internal Complaints Committee (IC)?"

Background

In one of the recent orders, the Ministry of Corporate Affairs (MCA) has taken a significant step in reinforcing the importance of compliance with workplace safety and gender-specific regulations whereby penalty was levied for violating Section 134(3)(q) of the Companies Act, 2013.

The violation in question pertains to the failure of the company to include in its board reports for previous financial years that the company has complied with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013.

A Closer Look at the Case:

The MCA appointed an Adjudicating Officer under Section 454 of the Companies Act, 2013, for adjudging penalties for violations of the Act.

The Legal Requirement:

Section 134(3)(q) of the Companies Act, 2013, mandates that a company's board report must include a statement indicating the company's compliance with the provisions related to the constitution of an Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. Rule 8(5)(x) of the Companies (Accounts) Rules, 2014 specifies this requirement.

Violation Detected:

An inquiry revealed that the company’s board reports for the financial years under scrutiny did not disclose compliance with the Sexual Harassment of Women at Workplace Act. This failure to make the required disclosure constituted a violation of Section 134(3) of the Companies Act.

Penalties for Non-Compliance:

Section 134(8) of the Companies Act, 2013, prescribes penalties for non-compliance. In this case, the company is liable to a penalty of three lakh rupees for each financial year of violation, and every officer of the company in default is liable to a penalty of fifty thousand rupees.

Notices and Submissions:

The violation was brought to the company's attention through a Preliminary Findings Letter, followed by a show cause notice. The company submitted an adjudication application, which led to a physical hearing. It was argued that as the company had fewer than ten employees in each of its establishments, it was not required to constitute an Internal Complaints Committee (IC) under the Sexual Harassment of Women at Workplace Act, 2013.

Conclusion:

The imposition of penalties on the company serves as a reminder of the significance of compliance with legal provisions, especially those related to workplace safety and gender-specific regulations.

Companies must ensure they fulfill their obligations, as specified by the law, and make appropriate disclosures in their board reports.

Failure to do so can result in financial penalties and potential legal actions. It underscores the need for vigilance in ensuring workplace safety and adherence to the law.

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