Many in India believe in the concept of ‘Saade-Sati’– a feared 7.5 year-long phase of the God Shani—when a person faces many challenges. The world of company secretaries (CS) seems to be facing a different, and more draconian, version of this when it comes to dealing with the MCA21 online corporate filing and compliance system. Instead of a challenging phase that ends after 7.5 years, they seem to go through a new cycle of pain and trauma, when MCA21 invites fresh bids, every once in seven years, for handling its much-touted system.
According to professionals, Infosys never got the system running as it should have; but, in 2019, the ministry of corporate affairs (MCA) announced an even more ambitious plan. Version 3 (V3) of MCA21, it said, would ease the “process of filing details as single source of truth will ensure that common information will automatically get updated over various forms.” It would also end visits to the registrar of companies (RoC) and take e-adjudication online, said the ministry. (Read: MCA-21 version 3 to offer ease of doing biz, online compliance monitoring)
The opposite seems to have happened. LTIMindtree Ltd bagged the contract for developing V3, which is being rolled out in phases from May 2021. The first two phases themselves have unleashed chaos. In March 2022, limited liability partnership (LLP)-related web filings were moved to V3. This itself had issues, but company secretary (CS) Jigar Shah, a partner in JMJA & Associates LLP, says the complaint fell on deaf ears because LLPs are usually owned and managed by small and medium enterprises (SMEs). In August 2022, nine more company law-related filings were moved to V3, without fixing issues, allege professionals.
The problems erupted into the public domain in January 2023 when more compliance-related filings were moved to V3, because they affected large, high-profile venture capital-funded start-ups and companies looking to raise capital. Utilisation of funds raised was delayed because forms could not be filled and uploaded. Large companies, who need quick decisions for raising and utilising funds, are finding that corporate actions (setting up, closing or converting companies or getting DINs) as well as investments are stuck due to technology issues and the pressure on professionals intensified enough to cause a furore.
In February, after many media reports and a Twitter trend with the hash-tag #V3errors, MCA minister Nirmala Sitharaman stepped in and asked for a special team to address public grievances on a priority basis. Multiple helpdesks were set up and a Twitter bot has turned active; but the problems are huge and far from fixed.
It is important to stress that failure to comply with filings leads to steep penalties and prosecution. However, MCA has been insisting that since some forms are being filed, there is no problem with the system and, hence, it is most reluctant to extend the filing deadline or waive penalties. Professionals counter this by saying that only a 24x7 effort by them leads to occasional success which gives MCA the impression that the system is working. The problems they have listed, emailed and enumerated on social media are serious enough to warrant major action.
Helpdesk Issues: MCA’s Twitter bot @HelpdeskMCA21V3 also insists that since forms are being filed regularly, things are working fine.
Dear Stakeholder, Filings are taking place across all forms launched on V3 Portal. Helpdesk, consisting of the representatives from NISG, EY, ICAI and ICSI, has been set up to address user specific issues.
According to Jigar Shah, @HelpdeskMCA21V3 responds to everyone by saying, "Dear Stakeholder, Your concern has been noted for resolution.” But nothing is done. Worse, once a user has struggled and filed a form successfully, it responds to say “we have observed filing is done.”
Implications of Dysfunctional MCA21
In desperation, Muthoot Finance Ltd has filed a writ petition in the Kerala High Court, since it could not file mandatory documents with the RoC due to website issues. The court permitted it to file physical documents with RoC, Kerala. Another company, Quest Softech (India) Limited, informed the Stock Exchange that it has dropped plans to change its name due to its inability to file the necessary forms with MCA.
Meanwhile, the Institute of Company Secretaries of India (ICSI) has been sending representations almost every month pleading for the relaxation of penalties or extending the timeline for migration to V3 and the penalties for failure to do so. ICSI and the Institute of Chartered Accountants of India (ICAI) are also working with MCA holding webinars, meetings, and setting up helpdesks to resolve problems. But it is clearly not enough.
To be fair, the ministry appears to have turned proactive and reached out to me. My source concedes, based on the complaints posted on social media, that the helpdesk hasn’t worked as expected. LTIMindtree remains silent, even after a public relations professional reached out to me and said they would respond, after being prodded by the ministry.
The long list of complaints that I have received is not only genuine but indicates serious issues with the software itself, which cannot be fobbed off on professionals and their malpractices. Here is a quick and very small list of issues emailed to me.
1.It requires as many as 10 tickets/complaints to be raised to file a single form. We continue to be charged penalties for no fault of ours.
2.When we field the DIR-12 (form for filing appointments/ cessations, etc) for a listed company, it is to be approved, based on the master data on the MCA website. We discovered that the master data contains the name of some other person who we don't know. Our complaint of 11th March, which is supposed to be resolved in 48 hours, is not resolved. We are calling, emailing and tweeting every day, to no avail.
3.A form was filled for appointment of an additional director in a private limited company on 9 February 2023. The master data on the website reflected this updation with a random appointment date of 18 July 2019. The professional is struggling to have it rectified, with no success.
4.The V3 system requires all company directors to create their own login ID first and then associate their DSC with it. Some directors who had created a login id on the previous V2 system face a total deadlock. They have to deactivate the old user ID, but this is easier said than done, because the deactivation can only be done by the MCA which does nothing!
5.The earlier version allowed a client/company to make a payment by letting the professional download a ‘Pay Later’ challan. That has been disallowed. The payment now has to happen from the same login that does the upload. So professionals have to pay from their pockets and get reimbursed by clients. This is for big and small amounts.
6.Gurleen Kaur, CS, has a bigger horror story. She filed form SH-7, made payment of Rs26,25,000 through corporate internet banking to MCA21 through Bharatkosh (the official intermediary). But, MCA21 could not link the SRN with the payment. After 17 days, the SRN itself got cancelled. She has lost a huge sum and is following up desperately with MCA without results, she says.
7.Worse, the payment often fails because of site issues—buffering, network issues, etc. At times, professionals have waited four hours to make a payment says V Ramchandran of VR Associates.
8.There was a time when MCA boasted that a company registration can actually be done in one working day. It put out a Press Release about this feat. It now takes three to four weeks after moving to V3 of its e-filing system. Nobody is held accountable.
9.Under the rules, no company can use the money raised through IPOs/FPOs/private placements unless it had filed Form PAS-3. Crores of rupees raised are lying unused since companies are struggling to file the form and it is leading to project delays and hardship.
10.In one case, information about incorporation was approved on 19 February, but MCA’s master data shows it is incorrect even on 11th March, with the result that the company has not been issued a certificate of incorporation, permanent account number (PAN) and other registration details.
11.One complaint says, “We have field form MGT-14 for allotment of securities, but all these are under process and, when we follow up with the RoC (Bengaluru), we are informed that they are unable to view the forms either. Same with Form INC-28 for change of name.
12.A professional from Nasik says he filed a form for incorporation of an LLP – the form has simply disappeared from his account, although he has paid the challan. He is chasing the MCA since February. He has now received a reply from the helpdesk that his form was shifted to another user due to the faulty system. He is still struggling to get it rectified and is now trying to drop the LLP and incorporate a partnership firm instead.
13.Another professional trying to submit Form 3 and Form 4 for appointment of designated partners to an LLP is told in response to complaints, to try and work around—upload in incognito mode, clear cookies, etc. Nothing has worked.
14.One company applied for a DIN (director information number) for their foreign director with a Chinese name. The MCA portal, on its own, dropped his middle name. This wrong name has had a cascading effect on a number of government portals leading to untold hassles.
15.One professional says “we are not even able to upgrade user login, forget about filings.”
16.Yet another bizarre case is about how all submitted forms got cancelled and they were told ‘not to worry’ it was due to a glitch in the portal. Later, a few got approved but the issue is being closed without full resolution.
That corporate professionals are able to file forms on V3 is, perhaps, a reflection of their perseverance and endurance. It is shocking that the government and LTIMindtree would turn this on its head to claim that the system is working well.
Accountability and punishment in India remains a one-way street. Non-government stakeholders are held to the highest standards or punished with steep penalties and even criminal litigation, while regulators and government departments get away, primarily because the judicial system is too slow to be of help.
Also read other articles by Moneylife on previous issues with MCA21...
another case.. filled up the incorporation forms and next day u find its all gone ..took up the efforts to fill it up again and again(never ending) now dsc are not able to get affixed , and yes after waiting for the whole one day for the miracle to happen only one person dsc is able to affix ....now waiting for another day to miracle....a slow clap to ministry.
CAs/CSs engaged in compliances under
@MCA21India
hv been reduced to mere clerks & living on the mercy of
@LTIMindtreeOFCL
. The system is miserably failed and no hope is left since LTI management do not want to resolve the glitches at all. Not a single sign of positivity left.
To start with, the word "Accountability" does not exist for Govt. Depts.
Soon this Govt. will have a new agency, "Fact Checking Unit", which will perhaps give its ruling:
"Since forms are being filled regularly, things are working fine" and/or "All concerns are noted for
resolution".
Result: Honest and deep researched articles, like this one, could be labelled "false or misinformation"
and removed. That day is not far ahead.
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According to professionals, Infosys never got the system running as it should have; but, in 2019, the ministry of corporate affairs (MCA) announced an even more ambitious plan. Version 3 (V3) of MCA21, it said, would ease the “process of filing details as single source of truth will ensure that common information will automatically get updated over various forms.” It would also end visits to the registrar of companies (RoC) and take e-adjudication online, said the ministry. (Read: MCA-21 version 3 to offer ease of doing biz, online compliance monitoring)
11. One complaint says, “We have field form MGT-14 for allotment of securities, but all these are under process and, when we follow up with the RoC (Bengaluru), we are informed that they are unable to view the forms either. Same with Form INC-28 for change of name.
@MCA21India
hv been reduced to mere clerks & living on the mercy of
@LTIMindtreeOFCL
. The system is miserably failed and no hope is left since LTI management do not want to resolve the glitches at all. Not a single sign of positivity left.
Soon this Govt. will have a new agency, "Fact Checking Unit", which will perhaps give its ruling:
"Since forms are being filled regularly, things are working fine" and/or "All concerns are noted for
resolution".
Result: Honest and deep researched articles, like this one, could be labelled "false or misinformation"
and removed. That day is not far ahead.