The Statutory Hook
Section 118(11) prescribes the penalty for contravention of any provision of Section 118, including the obligation to observe SS-1 and SS-2. The company is liable to ₹25,000, and every officer in default is liable to ₹5,000. The penalty is adjudicated under Section 454. The amounts are small relative to the governance signal, which is why ROC orders in this area are often treated as a precursor to a broader inquiry.
The Typical Adjudication Triggers
ROC adjudication for SS-1 and SS-2 violations is typically triggered by: an annual filing that discloses non-maintenance of minutes; an auditor’s qualification on secretarial records; a shareholder complaint; or a scrutiny of the company’s filings under the e-adjudication system. The order usually records the specific meeting for which the notice, agenda, minutes, or voting record is missing, and imposes the penalty per officer.
The “Officer in Default” Question
The managing director, whole-time director, CFO, company secretary, and any other officer specifically charged with the responsibility are treated as officers in default. A company secretary who can demonstrate that the board refused to follow the standard, or that the notice was dispatched but the proof of dispatch was not preserved, may have a defence on quantum, but the company’s liability remains. The adjudicating officer typically does not accept “the company secretary was on leave” as a defence.
Collateral Consequences
An SS-1 or SS-2 adjudication order becomes part of the company’s regulatory record. It may be cited in a subsequent Section 188 or Section 184 inquiry as evidence of a weak governance culture. In a due-diligence exercise, a clean secretarial record is a positive signal; an SS-1/SS-2 penalty order is a red flag that requires explanation. In oppression and mismanagement proceedings, a pattern of secretarial non-compliance can be used to support an argument that the board did not follow due process.
Remediation and Compounding
The company should file a suo motu application for compounding or adjudication as soon as the gap is identified. The application should include the missing records, an affidavit explaining the lapse, and the corrective steps taken. A company that waits for the ROC to issue a show-cause notice loses the benefit of proactive cooperation. The compounding order should be placed before the board and recorded in the minutes.
Call to Action: For SS-1/SS-2 penalty defence or secretarial records remediation, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.