In a recent adjudication order under Section 143(2) of the Companies Act, 2013, the Ministry of Corporate Affairs (MCA) imposed penalties on auditor of M/s Shinago International (India) Private Limited, for discrepancies in financial statements.
During an inspection of the company’s books and accounts, it was observed that there were discrepancies in the figures for the financial years 2016-17 and 2017-18. The financial statements failed to provide a true and fair view of the company’s affairs, a violation of Section 143(2) of the Companies Act, 2013. Despite receiving an adjudication notice, the auditor of M/s Shinago International (India) Private Limited failed to provide a satisfactory reply.
At the adjudication hearing, Auditor admitted to the violation and expressed willingness to accept the prescribed penalty under Section 450 of the Companies Act, 2013. Consequently, the adjudicating authority imposed penalties totaling Rs. 20,000 for the financial years 2016-17 and 2017-18.
This case underscores the crucial role of auditors in ensuring the accuracy and integrity of financial reporting. Failure to uphold auditing standards and detect discrepancies can lead to severe consequences, including financial penalties and reputational damage. It serves as a reminder to auditors to exercise due diligence and adhere to regulatory requirements diligently.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES, TAMIL NADU, ANDAMAN & NICOBAR ISLANDS, CHENNAI
II FLOOR, C- WING, SHASTRI BHAVAN, 26, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI-6
F.NO.ROC/CHN/SHINAGO /ADJ/S.143(2)/2024 DATE: 15 APR 2024
ADJUDICATION ORDER UNDER SECTION 143(210F THE COMPANIES ACT, 2013 IN THE MATTER OF WS SHINAGO INTERNATIONAL (INDIA) PRIVATE LIMITED
1. Appointment of Adjudicating Officer:-
The Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 has appointed Registrar of Companies, Chennai as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter referred as Act or Companies Act, 2013) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Company:
Whereas the company viz M/s. Shinago International (India) Private Limited with CIN U51900TN2011PTC081421 (herein after referred as company’ or ‘ subject company’) is a'” registered company with this office under the Companies Act, 2013 having its registered office as per MCA21 Registry at Raheja Towers, Unit No.407, 4th Floor, 177,Anna Salai, Chennai, Tamil Nadu 600002. The financial & other details of the subject company ag: available on MCA-21 portal is stated as under:
| S. No. | Particulars | Details as on F.Y. 2019-20 |
| 1. | Paid up Capital | Rs. 33,11,0000/- |
| 2. | a. Revenue from Operation | NIL |
| b. Other Income | Rs.41,270 | |
| c. Profit for the Period | (31,03,861/-)
The company has not filed Financial statements and Annual Returns since 31.03.2021. |
|
| 3. | Whether it is a Holding Company | Yes |
| 4. | Whether it is a Subsidiary Company | No |
| 5. | Whether company registered under Section 8 of the Act? | No |
| 6. | Whether company is a small company? | No |
| 7. | Whether company registered under any other special Act? | No |
3. Auditor during the period of violation
- ______ & Associates, Chennai
4. Section and Penal Provision as per Companies Act, 2013
Section 143. Powers and duties of auditors and auditing standards :
(2) The auditor shall make a report to the members of the company on the accounts examined by him and on every financial statements which are required by or under this Act to be laid before the company in general meeting and the report shall after taking into account the provisions of this Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of this Act or any rules made thereunder or under any order made under sub-section (11) and to the best of his information and knowledge, the said accounts, financial statements give a true and fair view of the state of the company’s affairs as at the end of its financial year and profit or loss and cash flow for the year and such other matters as may be prescribed
Section 450. Punishment where no specific penalty or punishment is provided.
If a company or any officer of a company or any other person contravenes any of the ‘w. provisions of this Act or the rules made thereunder, or any condition, limitation io restriction subject to which any approval, sanction, consent, confirmation, recognizing direction or exemption in relation to any matter has been accorded, given or granted ,.and” for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be ‘[liable to a. penalty of ten thousand rupees, and in case of continuing contravention, with a further, penalty of one thousand rupees for each day after the first during which the contravention! continues, subject to a maximum of two lakh rupees in case of a company and fifty’ thousand rupees in case of an officer who is in default or any other person.
5. Issue of Adjudication Notice:
An Inspection of Books and Accounts of the company M/s. Shinago Internation4 (India) Private Limited was carried out U/s 206(5) of the Companies Act, 2013 by an Officer authorized by the Central Government wherein the observations of the Inspecting Officer are as follows:
During the course of Inspection, it is observed that there is a mismatch in the Figures for the Financial Year 2016-17 and 2017-18. It is observed that the financial statements do not provide a true and fair view of the state of the company’s affairs for the Financial. Year 2016-17 and 2017-18. Hence, the Auditor has not complied with Section 143(2) o the Companies Act, 2013.
After that the Adjudicating Authority has issued Adjudication Notice to the company and its directors vide Notice No. ROC/CHN/INSPN.FOLL/081421/P.24/S.143(2) /2023 dated 07.07.2023:
6. Reply of Auditor for Adjudication Notice issued:
Mr. ________, Partner of _______ vide!, letter dated 26.07.2023 requested to grant additional time till 16.08.2023 to give proper reply to the Adjudication Notice. After that no reply has been received from Auditor.
7. Adjudication Hearing:
i) Since no proper reply has been received from Auditor for the notice dated 07.2023, the Adjudicating Authority had issued Adjudication Hearing Notice to Auditor on 13.10.2023 fixing the hearing date as on 19.10.2023 at 12:30 PM. Pursuant to hearing notice issued on 13.10.2023, Shri. ______, Partner of ______ & Associates, has appeared before the Adjudication Authority on 19.10.2023 and made submissions that, “the said violation may be adjudicated and accepted to pay the penalty as prescribed under section 450 of the Companies Act, 2013”
8. Decision
Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that Auditor is liable for penalty as prescribed under Section 450 of the Act for violation of Section 143(2) of the Companies Act, 2013 for the FYs 2016-17 & 2017-18.
(i) Accordingly, I am inclined to impose a penalty as prescribed under Section 450 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:
| S. No | Auditor in default |
Penalty for default (Rs.) | Maximum Penalty
(Rs.) |
Period of Default | Final Penalty Imposed (Rs.) |
| 1. | ______ & Associates, Chennai | Rs.10,000/- + Rs.1000/- per day for continuing contravention |
Rs.50,000/- | 2016-17 | Rs.10,000/- |
| 2017-18 | Rs.10,000/- |
Therefore, in view of the above said violation, in exercise of the powers vested to, t undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty Rs.20,000/- (Rupees Twenty thousand) is imposed on Auditor ______ & Associates as penalty amount for violation of Section 143(2) of the Companies Act, 2013 for the FYs 2016-17 & 2017-18.
9. The said amount of penalty shall be paid through online by using the website www.mca.gov.in(Misc. head) within 90 days of receipt of this order, and intimate this:. office with proof of penalty paid.
10. Whereas Appeal against this order may be filed with the Regional Director (SR); Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26 Haddows Road, Chennai 600006, Tamil Nadu within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website www.mca.gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454(5), &,. 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].
11. Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order, “(8)(i) Where company fails to comply with the order made under subsection (3) or sub-section (7), as the case may be within a period of ninety days from the:. date of the receipt of the copy of the order, the company shall be punishable with fine.; which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees.
(ii) Where an officer of a company or any other person who is in default fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.”
(B. SRIKUMAR, ICLS)
REGISTRAR OF COMPANIES
TAMILNADU, CHENNAI.
ADJUDICATING OFFICER
