The Inspection That Was Refused
Nirmal Industries Limited is a public company with 300 members and paid-up capital of ₹6 crore. Its register of members has not been updated for two transmissions and one name change since 2022. The register of directors and key managerial personnel is maintained only as a spreadsheet on the accountant's laptop. The annual return for 2022-23 was not filed; the company says it was waiting for a director's signature. A member, Asha, sent a written request to inspect the register of members and the minutes book. The company secretary replied that inspection requires board approval and a fee of ₹500. Asha has now threatened to complain to the Registrar. The board asks the secretary for a note on the company's legal position, the consequences of the defaults, and a remedial plan that can be completed before the next board meeting.
1. Was the refusal of inspection justified? State the members' inspection rights and the permissible restrictions.
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The refusal was not justified. Under Section 88(4), the register of members is open for inspection during business hours by any member without payment of fee, and by any other person on payment of the prescribed fee. The minutes book is similarly open to members under Section 118. The company may impose reasonable restrictions so that not less than two hours in each business day are allowed for inspection, but it cannot require board approval as a precondition or charge a member ₹500. A member's right is statutory; the secretary's reply converts a routine inspection into a continuing default. The correct response is to fix an inspection slot within business hours, allow Asha to inspect the register of members and minutes book without fee, and permit extracts or copies on payment of the company's copying charges. If the register is incomplete because transmissions and the name change were not entered, the secretary should say so in writing and give a date by which the register will be updated, rather than refusing inspection.
2. What are the consequences of not maintaining the registers and not filing the annual return? Identify who is exposed.
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Failure to maintain the register of members and the register of directors and key managerial personnel attracts penalty under Section 88(5) on the company and every officer in default. Keeping the register of directors only as a spreadsheet on an accountant's laptop does not satisfy the requirement of maintaining it at the registered office, or at another place after a board resolution and notice to the Registrar under Section 94. Non-filing of the annual return for 2022-23 attracts penalty under Section 92(5) on the company and every officer in default; the excuse that a director's signature was awaited does not cure the default because the company secretary, where appointed, must sign the annual return along with a director under Section 92(1). The company secretary is an officer in default and cannot treat this as a clerical matter. Continued default also affects the company's ability to obtain certificates, raises questions at the next audit, and may lead to prosecution or adjudication proceedings. The board should be told in writing that personal exposure arises, not merely a company-level fine.
3. Prepare a remedial plan that can be completed before the next board meeting, including the inspection request and the annual return.
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The plan should be concrete and time-bound. First, reconstruct the register of members from the old register, transfer deeds, death certificates or probate papers for the transmissions, and the board resolution for the name change; enter the three missing events and have the corrected register signed and dated. Second, open a proper register of directors and key managerial personnel at the registered office, or pass a board resolution under Section 94 if it is to be kept elsewhere and give notice to the Registrar. Third, verify whether the register of contracts under Section 189 exists and reconstruct it if not. Fourth, allow Asha's inspection within two business days, without fee, and give copies on payment of copying charges; record the inspection in the register. Fifth, file the overdue annual return in Form MGT-7 immediately with the additional fee, signed by a director and the company secretary. Sixth, place the defaults, reasons, corrective entries and filing acknowledgements before the next board meeting and record them in the minutes; designate the company secretary as custodian of all statutory registers.