Summary: The Registrar of Companies (ROC) Guwahati has issued a penalty order against M/s SDS Properties Ltd. for non-compliance with Section 143(3)(h) of the Companies Act, 2013. The adjudication, held on 12 June 2024, found that the company’s statutory auditor, CA Ajay Agarwal of M/s Khaitan Agarwal & Co., failed to address inaccuracies in financial statements for FY 2020-21 and 2021-22. Specifically, the audit report did not highlight non-compliance with Section 129(1) and showed discrepancies in the cash flow statement and balance sheet. Consequently, a penalty of ₹40,000 was imposed, with ₹20,000 for each fiscal year. The penalty must be paid within 60 days through the MCA portal, and an appeal can be filed with the Regional Director within the same timeframe. Failure to comply with the penalty may lead to additional fines or imprisonment as outlined in the Companies Act, 2013.
GOVERNMENT OF INDIA’
Ministry Of Corporate Affairs
Office of the Registrar of Companies, North Eastern Region
1st Floor, BSNL Bhawan, Pan Bazar
Guwahati- 781001
Order No. ROC-Guwahati/ADJ-Order/Sec 454/2024-25/ Dated: 06/08/2024
BEFORE THE ADUDICATING OFFICER
REGISTRAR OF COMPANIES, GUWAHATI
ORDER IN THE MATTER OF ADJUDICATION OF PENALTY UNDER SECTION 454(3) OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 FOR VIOLATION OF SECTION 143 OF THE COMPANIES ACT, 2013.
IN THE MATTER OF M/S SDS PROPERTIES LIMITED
(CIN — U70101AS1997PTC005091)
DATE OF HEARING —12-06-2024
PRESENT:
1. Shri Dip Narayan Chowdhury (ROC), Adjudicating Officer
2. Shri PFokriu (STA), Presenting Officer
Authorized representative of Statutory Auditor i.e ., M/s Khaitan Agarwal & Co partner
CA Ajay Agarwal of the Company: CA Damani Jain, Chartered Accountant in Practice Authorized representative of the Company: Arun Kumar Khandelia
Further, in Financial Year 2021-22 the figures shown fol. the year 2020-21 is incorrect in the Cash Flow Statement for the year ended 31:03.2022.
Therefore, the Financial Statement of the company is not showing true and fair view of the state of affairs of the company.
The Statutory Auditor M/s Khaitan Agarwal & Co. has failed to qualify the noncompliance of sec.129(1) of Companies Act,2013 in his Audit Report for FY 202021 and 2021-22 as per Section 143(3)(h) of the Companies Act,2013.
4. The Registrar of companies, Guwahati, Adjudicating officer vide letter ROC/GHY/U/S 454/232 dated 08.05.2024 issued notice in respect of hearing at 1st floor, BSNL Bhawan, Pan Bazar, Guwahati-781001, Assam on 23.05.2024 at 11:30 AM.
Relevant Provisions of the Companies Act, 2013
Section 143(1) of the Companies Act, 2013
Every auditor of a company shall have a right of access at all times to the books of account and vouchers of the company, whether kept at the registered office of the company or at any other place and shall be entitled to require from the officers of the company such information and explanation as he may consider necessary for the performance of his duties as auditor and amongst other matters inquire into the following matters, namely:—
(a) whether loans and advances made by the company on the basis of security have been properly secured and whether the terms on which they have been made are prejudicial to the interests of the company or its members;
(b) whether transactions of the company which are represented merely by book entries are prejudicial to the interests of the company;
(c) where the company not being an investment company or a banking company, whether so much of the assets of the company as consist of shares, debentures and other securities have been sold at a price less than that at which they were purchased by the company;
(d) whether loans and advances made by the company have been shown as deposits;
(e) whether personal expenses have been charged to revenue account;
(f) where it is stated in the books and documents of the company that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance sheet is correct, regular and not misleading:
Provided that the auditor of a company which is a holding company shall also have the right of access to the records of all [its subsidiaries and associate companies] in so far as it relates to the consolidation of its financial statements Withthat of [its subsidiaries and associate companies]
Section 143(3) of the Companies Act, 2013
The auditor’s report shall also state—
(a) whether he has sought and obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit and if not, the details thereof and the effect of such information on the .1Inancial statements;
(b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books and proper returns adequate for the purposes of his audit have been received from branches not visited by him;
(c) whether the report on the accounts of any branch office of the company audited under sub-section (8) by a person other than the company’s auditor has been sent to him under the proviso to that sub-section and the manner in which he has dealt with it in preparing his report,–
(d) whether the company’s balance sheet and profit and kiss account dealt with in the report are in agreement with the books of account and returns,-
(e) whether, in his opinion, the financial statements comply with the accounting standards;
(f) the observations or comments of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company;
(g) whether any director is disqualified from being appointed as a director under subsection (2) of section 164:
(h) any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith;
[(i) whether the company has adequate [internal financial controls with reference to financial statements] in place and the operating effectiveness of such controls;]
(j) such other matters as may he prescribed.
Section 129 (1) of the Companies Act, 2013
The financial statements shall give a true and fair view of the state of affairs qf the company or companies, comply with the accounting standards notified under section133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III:
Provided that the items contained in such financial statements shall be in accordance with the accounting standards:
Provided .further that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company:
Provided also that the financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose–
(a) in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938, or the Insurance Regulatory and Development Authority Act, 1999;
(b) in the case of a banking company, any matters which are not required to be disclosed by the Banking Regulation Act, 1949;
(c) in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by the Electricity Act, 2003;
(d) in the case of a company governed by any other law for the time being in force, any matters which are not required to be disclosed by that law.
Section 450 of the Companies Act, 2013
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 provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, 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]
Section 454(3) of the Companies Act, 2013
The adjudicating officer may, by an order-
(a) impose the penalty on the company, the officer who is in default, or any other person, as the case may be, stating therein any non-compliance or default under the relevant provisions of this Act; and
(b) direct such company, or officer who is in default, or any other person, as the case may be, to rectify thethe default, wherever he considers fit.
Provided that in case the default relates to non-compliance of sub-section (4) of section 92 or sub-section (1) or sub-section (2) of section 137 and such default has been rectified either prior to, or within thirty days of the issue of the notice by the adjudicating officer, no penalty shall be imposed in this ‘regard and all proceedings under this section in respect of such default shall be deemed to be concluded.
Adjudication
5. During the course of inquiry, it was observed that the statutory Auditor i.e., CA Ajay Agarwal partner of M/s Khaitan Agarwal & Co. has violated the provision of section 143(3)(h) of the companies Act, 2013, for not qualifying his audit report for violation made by the company under section 129(1) read with Schedule III of the companies Act, 2013 for non disclosure of nature of other pz7,.ables under the head other current liabilities as per schedule III of the companies Act 2013 in the FY 202021 and 2021-22 and for showing mismatch of opening and closing balance of Cash and cash equivalent with balance sheet in FY 2020-21 and in the Cash Flow statement for the year ended 31.03.2022 the figure shown for the year 2020-21.
The Statutory Auditor i.e., CA Ajay Agarwal partner of M/s Khaitan Agarwal & Co. of the company further authorized CA. Rajani Damani Jain, Practicing, Chartered Accountant to appear before the adjudicating authority and submit further information, papers and made statements as may be deemed appropriate in the matter.
Show Cause Notice reply and Personal Hearing
6. The provisions of section 454(3) of the Act and rules made thereunder inter alia stipulate the manner for adjudging penalties for non-compliance of the relevant provisions of this Act. Accordingly, in the interest of natural justice, before imposing the penalty on the company, the officer who is in default, or any other person, as the case may be, a reasonable opportunity of being heard was given to them by issuing a Notice dated 08.05.2024 for hearing under sub-section 4 of Section 454 the Act on 23.05.2024. Further, the matter was adjourned and the final date of hearing was fixed on 12.06.2024.
7. CA. Rajani Damani Jain, Practicing Chartered Accountant appeared and attended the hearing on behalf of the Statutory Auditor of the company on 12-06-2024 and submitted the information paper and made statement as may be deemed appropriate in the matter. Ld. Practicing Chartered Accountant for the Statutory Auditor of the company prayed for adjudicating the penalty for such violation of section 143(3Xh) of the Companies Act, 2013.
8. Under the above-mentioned circumstances, Presenting Officer submitted that for not qualifying his audit report for violation made by the company under section 129(1) read with Schedule III of the companies Act, 2013 for non disclosure of nature of other payables under the head other current liabilities as per schedule III of the companies Act 2013 in the FY 2020-21 and 2021-22 and for showing mismatch of opening and closing balance of Cash and cash equivalent with balance sheet in FY 2020-21 and in the Cash Flow statement for the year ended 31.03.2022 the figure shown for the year 2020-21 is ad judicable under the provisions of the companies Act under the provision of section 450 of the companies Act, 2013.
8. Under the above circumstances it is admittedly clear that the statutory Auditor of the company has made default under section 143(3)(h) of the Companies Act, 2013 in the FY 2020-21 and 2021-22.
9. While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely: –
(a) The amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default.
(b) The amount of loss caused to an investor or group of investors or creditors as a result of the default.
(c) The repetition of the default.
10. The Presenting Officer regarding para 9 above, has further submitted that the disproportionate gain or unfair advantage made by the noticee or loss caused to the investor as a result of the delay on the part of the noticee to redress the investor grievance are not available on the record.
ORDER
1. Having considered the facts and circumstances of the case and submissions made by the Presenting Officer and submission made by Ld. Practicing Chartered Accountant, the authorized representative of the Statutory Auditor of the company and after taking into accounts the factors above, I hereby imposed following penalty on Statutory Auditor of the company as prescribed under Section 450 of the Companies Act, 2013 for violation of Section 143(3)(h) of the Companies Act, 2013, which is commensurate with the aforesaid failure committed by the Noticee
A:-
| Nature of default | Violation of Section of the Companies Act 2013 | Company/ Officers to whom penalty imposed |
No. of delays in default |
Total Penalty (Maximum) | Penalty imposed |
| 1 | 2 | 3 | 4 | 5 | 7 |
| Default in compliance of provision of section 143(3)(h) of the Companies Act,2013. | Section 143(3)(h) of the Companies Act, 2013 | Statutory Auditor i.e CA Ajay Agarwal, partner of Khaitan Agarwal& Co. | NA Rs.10,000 x | For FY 2020-21
2(Violation) Rs20,000/- For FY 2021-22 Rs.10,000 X 2(Violation) Rs. 20,000/- |
Rs. 20,000/-
Rs. 20,000/- |
| Total | Rs. 40,000/- | ||||
- Default made under section 143(3)(h) of the companies Act, 2013 for the financial year 2020-21 and 2021-22.
2. The noticee shall pay the amount of penalty individually for the company and its officers from their personal sources/income by way of e-payment available on Ministry website www.mca.gov.in under “Pay Miscellaneous Fees” category in MCA fees and Payment Services under Rule 3(14) of Company(Adjudication of Penalties) (Amendment) Rules, 2019 within 60 days from the date of receipt of this order and copy of this Adjudication order and Challan/SRN generated after payment of penalty through online mode shall be filed in INC-28 under the MCA portal without further reference.
3. On deposit of penalty through online and filing of INC-28 under MCA21 Portal, all proceedings under this section in respect of such default shall be deemed to be concluded in terms of first proviso of Sub-section 3 of Section 454 of the Companies Act, 2013 as the case may be.
4. However, Appeal against this order may be filed in writing with the Regional Director, North Eastern Region, Ministry of Corporate Affairs, l’ Floor, BSNL Bhawan, Pan Bazar, Guwahati-781001, Assam, within a period of sixty days from the date of receipt of this order in Form ADJ setting forth the grounds of appeal and shall be accompanied by the certified copy of this order. [Section 454(5) & 454(6) of the Companies Act, 2013 read with the Companies (Adjudicating of Penalties) Rules, 2014 as amended by Companies (Adjudicating of Penalties) Amendment Rules, 2019].
5. Your attention is also invited to Section 454(8) (i) and 454(8) (ii) of the Companies Act, 2013, which state that in case of non-payment of penalt31, 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, and officer in default 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.
The adjudication proceeding stands disposed of with this order.
(DIP NARAYAN CHOWDHURY)
REGISTRAR OF COMPANIES &
ADJUDICATING OFFICER
MINISTRY OF CORPORATE
AFFAIRS GUWAHATI
