Indira IVF Hospital Private Limited, along with key officers, recently underwent an adjudication process for failing to appoint internal auditors as mandated by Section 138 of the Companies Act, 2013. This article provides a detailed analysis of the violation, the arguments presented, and the penalty imposed by the Registrar of Companies, Rajasthan, Jaipur.
The case at hand pertains to the alleged violation of Section 138 of the Companies Act, 2013, which requires companies to appoint internal auditors for their financial years. In this instance, Indira IVF Hospital Private Limited failed to appoint internal auditors for the financial years 2020-2021 and 2021-2022, thus breaching this statutory requirement.
The company took the initiative to self-report this violation through its Director & CEO, Shri Kshitiz Murdia. Subsequently, the Registrar of Companies, Rajasthan, Jaipur, issued a notice for adjudication on August 12, 2022, citing the violation of Section 138 of the Companies Act, 2013, punishable under Section 450 of the same Act.
On August 29, 2022, a hearing took place, during which Shri Bhanu Mishra, Advocate, and Sh. Akshit Kumar Jangid, PCS, represented the company and parties No. 02 to 05. They acknowledged the violation and argued that the company had indeed appointed internal auditors, namely Riskpro India Ventures (P) Limited and Grant Thornton Bharat LLP for the financial year 2020-2021, and KPMG Assurance and Consulting Services LLP for the financial year 2021-2022, effective from February 24, 2022. It was emphasized that the violation only pertained to the financial year 2020-2021, and there was no breach in the subsequent financial year.
Given these facts, the Registrar of Companies determined that the violation of Section 138 of the Companies Act, 2013, had occurred for the financial year 2020-2021. However, the company’s appointment of internal auditors for the financial year 2021-2022, effective February 24, 2022, was in compliance with the law. Additionally, it was noted that Sh. Manish Wahal, who assumed the position of CS on February 24, 2022, could not be held liable for the violation in the financial year 2020-2021. Consequently, adjudication proceedings against Sh. Manish Wahal were dropped.
Under the authority vested by Section 454 of the Companies Act, 2013, the Registrar of Companies issued an adjudication order imposing penalties as follows:
- Indira IVF Hospital Private Limited: Rs. 10,000/-
- Shri Kshitiz Murdia (CEO): Rs. 10,000/-
- Shiree Satish Kothari (CS): Rs. 10,000/-
- Sayan Bandyopadhyay (CFO): Rs. 10,000/-
The total penalty amounted to Rs. 40,000/-. It was specified that the company should pay Rs. 10,000/-, and each Officer in default/KMP, namely Shri Kshitiz Murdia (CEO), Shri Shiree Satish Kothari (CS), and Sayan Bandyopadhyay (CFO), should also pay Rs. 10,000/-. These payments were to be made within 90 days from the receipt of the order through an appropriate challan on the MCA Portal. Notably, the penalty imposed on the Directors was to be paid from their personal accounts.
The order also warned that failure to pay the penalty within the stipulated period would result in legal action under Section 454(8) of the Companies Act, 2013.
Conclusion:
The case involving Indira IVF Hospital Private Limited underscores the significance of complying with statutory requirements, such as the appointment of internal auditors as mandated by the Companies Act, 2013. While the company faced a penalty for its lapse in the financial year 2020-2021, it successfully rectified the situation for the subsequent year. This case serves as a reminder to all companies of the importance of adhering to regulatory obligations and promptly addressing any compliance issues to avoid potential legal consequences.
*****
Registrar of Companies, Rajasthan, Jaipur
Order No. ROC-JP/Adj./2022-23/Sec 138/CA 2013
In the matter of Companies Act 2013
In the matter of adjudication proceeding under section 454(3) read with section 138 of the Companies Act, 2013 punishable under section 450 of the Companies Act, 2013.
And
In the matter of
1. Indira IVF Hospital Private Limited
2. Shri Kshitiz Murdia
3. Manish Wahal
4. Shiree Satish Kothari
5. Sayan Bandyopadhyay
That the company through Sh. Kshitiz Murdia, Director & CEO has Suo-moto, made an application to adjudicate the violation committed by company by non-appointing the internal auditors of the company for F.Y. 2020-2021 and F.Y. 2021-2022 as required by the provisions of section 138 of the Companies Act, 2013.
That this office had issued notice for adjudication dated 12.08.2022 for violation 138 of the Companies Act, 2013 punishable under section 450 of the Companies Act 2013 to the Company and its Directors/ Officers in Default/ KMP. The opportunity of being heard was provided to the company and its directors / officers in default/KMP on 29.08.2022.
That on the date of hearing i.e. 29.08.2022 Shri Bhanu Mishra, Adv and Sh. Akshit Kumar Jangid, PCS appeared on behalf of the Company and Party No. 02 to 05. Shri Bhanu Mishra, Adv and Sh. Akshit Kumar Jangid, PCS submitted that the company has violated 138 of the Companies Act, 2013 punishable under section 450 of the Companies Act 2013 by non-appointing the internal auditors of the company for F.Y. 2020-2021. Further it was submitted that the company has appointed Riskpro India Ventures (P) Limited and Grant Thorton Bharat LLP as the internal auditors for F.Y. 2020-21 and KPMG Assurance and Consulting Services LLP as the internal auditors for F.Y. 2021-22 w.e.f. 24.02.2022. Further it was submitted that the company had violated the provision of section 138 of the Companies Act, 2013 for the F.Y. 2020-21 only and since, the Company has appointed the Internal Auditors on 24.02.2022 for F.Y. 2021-22 there is no violation in the Year 2021-22. Further it was prayed to adjudicate the offence for F.Y. 2020-21 by imposing minimum penalty. Appointment and cessation of Directors were taken as per MCA portal.
That in view of the above facts the undersigned has reasonable cause to believe that the provision of Section 138 of the Companies Act, 2013 had not complied with as required under law by the Company for the F.Y. 2020-21 and its directors/ officers in default/KMP and therefore liable for penal action under section 450 of the Companies Act, 2013 r/w sec 454 of the Companies Act, 2013.
That since the Company had appointed the Internal Auditors on 24.02.2022 for the F.Y. 2021-22 in my considered opinion there is no offence of section 138 of the Companies Act, 2013 for the F.Y. 2021-22.
That since Sh. Manish Wahal (CS) is appointed on the post of CS w.e.f. 24.02.2022 and the internal auditors of the company had also been appointed w.e.f. 24.02.2022 (For F.Y. 2020-21 & 2021-22); he cannot be held liable for offence committed for F.Y. 2020-21. Accordingly, adjudication proceedings against Sh. Manish Wahal is hereby dropped.
That in exercising of the power conferred U/s 454 of the Companies Act, 2013 undersigned has passed the adjudication order imposing penalty as under:
Penalty imposed on the Company Indira IVF Hospital Private Limited, Shri Kshitiz Murdia [CEO), Shiree Satish Kothari (CS), Sayan Bandyopadhyay (CFO) for violation of section 138 of the Companies Act, 2013 punishable under section 450 of the Companies Act:-
|
Accused |
Penalty imposed |
| Indira IVF Hospital Private Limited | 10,000/- |
| Shri Kshitiz Murdia (CEO) | 10,000/- |
| Shiree Satish Kothari (CS) | 10,000/- |
| Sayan Bandyopadhyay(CF0) | 10,000/- |
| Total | 40,000/- |
That taking in above facts total penalty of 10,000/- is imposed on the company and Rs 10,000/- on each Officer in default/KMP namely Shri Kshitiz Murdia (CEO), Shri Shiree Satish Kothari (CS) and Sayan Bandyopadhyay(CFO) to be paid as stated herein above within 90 days from the receipt of order vide appropriate challan on MCA Portal. The penalty imposed on the Directors should be paid from their personal account.
That failure to pay penalty within the stipulated period the company and its director / officers in default are liable for legal action U/s 454(8) of Companies Act 2013.
The matter stands disposed of in accordance with the order above.
Signed on 08.09.2022
(C. M. Karl Marx)
Registrar of Companies,
Rajasthan, Jaipur
Endt. No. ROC-JP/Adj./2022-23/Sec 138/2331 to 2337
