Section 446B Relief in Penalties Applies to Companies, Not Auditors

This document details an appeal filed under Section 454(5) of the Companies Act, 2013, by C.A. Dayanidhi Das, an auditor for MPS Distributors Private Limited. The appeal challenged a penalty order dated June 27, 2024, issued by the Registrar of Companies (ROC), West Bengal. The penalty was imposed for violations of Section 143 of the Companies Act, 2013. The ROC had issued an adjudication notice on March 19, 2024, but received no response from the auditor. As a result, the Adjudicating Authority imposed a total penalty of ₹2,60,000 on C.A. Dayanidhi Das for non-compliance covering various financial years from 2015-16 to 2020-21.

During the appeal hearing on May 6, 2025, the appellant, C.A. Dayanidhi Das, submitted a written statement arguing that MPS Distributors Private Limited is a “small company” as per Section 2(85) of the Companies Act, 2013, implying that the provisions of Section 446B should apply. However, the Regional Director clarified that Section 446B, which offers relief to One Person Companies or Small Companies, is applicable to the company itself and not to its auditor. Therefore, the auditor could not use this defense to reduce the penalty.

Based on the facts and circumstances, the Regional Director decided not to interfere with the original adjudication order issued by the ROC. The order confirmed that the auditor must pay the penalty amount of ₹2,60,000 from their own funds within 90 days of receiving the order. It also cautioned that failure to comply would lead to action under Section 454(8)(ii) of the Companies Act, 2013. The appeal was consequently disposed of, confirming the penalty.

Application No. RD/ER/454/51/2024/Appeal/2246 to 2248

BEFORE THE REGIONAL DIRECTOR, EASTERN REGION
MINISTRY OF CORPORATE AFFAIRS KOLKATA.

IN THE MATTER OF
THE COMPANIES ACT, 2013
-AND-
IN THE MATTER OF

C.A. DAYANIDHI DAS (Memb No: 064313)
1, MAHATMA GANDHI ROAD, ROOM NO. 4C,
4TH FLOOR, HARIDEVPUR, KOLKATA — 700082, WEST BENGAL
FOR, MPS DISTRIBUTORS PRIVATE LIMITED
17/6/H/3 CANAL WEST ROAD, P.O. AMHERST STREET
KOLKATA, WEST BENGAL – 700009, INDIA

-AND-
IN THE MATTER OF

Appeal under section 454 of The Companies Act, 2013 against the penalty order dated 27.06.2024 of Registrar of Companies, West Bengal passed for violation of the provisions of section 143 of the Companies Act, 2013.

-AND-
IN THE MATTER OF

C.A. DAYANIDHI DAS (Memb No: 064313)
1, MAHATMA GANDHI ROAD, ROOM NO. 4C,
4TH FLOOR, HARIDEVPUR, KOLKATA — 700082, WEST BENGAL
FOR, MPS DISTRIBUTORS PRIVATE LIMITED
17/6/H/3 CANAL WEST ROAD, P.O. AMHERST STREET
KOLKATA, WEST BENGAL – 700009, INDIA

…………….. APPELLANTS

Date of Hearing : 06.05.2025

Present : MR. DAYANIDHI DAS, Appellant

ORDER

1. The present appeal has been preferred under section 454 (5) of the Companies Act, 2013 read with the provisions of the Companies (Adjudication of Penalties) Rules, 2014 vide Form ADJ bearing SRN ADJ no. F97776041 dated 27.08.2024 by the aforesaid appellant against the penalty order dated 27.06.2024 for the violation of section 143 of the Companies Act, 2013, passed by Adjudicating Authority i.e. Registrar of Companies, Kolkata, West Bengal communicated to the appellant vide letter no. RD/ER/Appeals/454/51/2024/5401 dated 20.09.2024.

2. The office of the Registrar of Companies, Kolkata, West Bengal had issued Adjudication notice vide letter no. ROC/ADJ/307/091147/2023/ 14306-14307 dated 19.03.2024 for the violation of section 143 of the Companies Act, 2013, to the Auditor. In this regard, no reply was received by the ROC, West Bengal from the Auditors for the aforesaid Adjudication notice.

3. Considering the facts and circumstances of the case, the Adjudicating Authority had imposed Penalty for violation of Section 143 of the Companies Act, 2013 stated above for the relevant periods liable for penalty under section 450 of the Companies Act, 2013, as per the following details: –

4. Having considered the facts and circumstances of the case and after taking into account the facts, Registrar of Companies, Kolkata, West Bengal imposed a penalty of Rs. 2,60,000/- (Rupee Two lakhs sixty thousand Only) on the concerned Auditor for contravention of the provisions of section 143 of the Companies Act, 2013.

5. The appeal was heard on 06/05/2025. The Appellant was asked to make a submission regarding infirmity if any in the order of Registrar of Companies. The Authorized Representative had made submission in this regard that at the time of hearing, he has submitted his written statement dated 13.11.2024 wherein it was stated the Company is a small company. As per the submissions, the Auditor has stated that the Company is a small company falling under the definition of Section 2(85) of the Companies Act, 2013 and submitted relevant documents in support of averments. The said contention, even if considered for the sake of arguments, cannot be applied upon the Auditor since Section 446B of the Companies Act, 2013 applies only on One Person Companies or Small Companies and the Auditor cannot take the defense of it as Section 446B of the Companies Act, 2013 cannot be applied upon the Auditor.

6. Having heard the matter and based on the facts and circumstances of the present matter, I consider it fit not to interfere in the impugned Adjudication order dated 27.06.2024.

7. The Auditor of the company shall pay the amount of penalty from out of his own pocket. The amount of penalty shall be paid within a period of 90 days from the date of receipt of the copy of the order.

8. Further, if the Auditor fail to deposit the penalty amount within the prescribed time limit, action under section 454(8) (ii) of the Companies Act, 2013 shall be initiated against the Auditor.

9. The instant Appeal stands disposed of accordingly.

(Rakesh Tiwari)
REGIONAL DIRECTOR (ER)

Signed this the 05th day of June, 2025.