Accounting Policies not attached with Financial Statement: MCA Imposes Penalty

The Ministry of Corporate Affairs (MCA), through the Registrar of Companies (ROC) in Uttar Pradesh, has issued an adjudication order against Dhansagar Nidhi Limited for violations under Section 137 of the Companies Act, 2013. This article delves into the details of the case, the implications of the violation, and the penalties imposed.

Dhansagar Nidhi Limited, a company registered under the Companies Act, 2013, was found in breach of Section 137(1) by failing to attach significant accounting policies with its financial statements for the fiscal year ending March 31, 2019. This omission was identified during a routine examination prompted by concerns over the operations of Nidhi companies in Kanpur and other regions.

According to the inquiry report dated April 29, 2023, and subsequent communications from the Directorate, the company was issued a Show Cause Notice (No. 07/01/Adjudication-137/DHANSAGAR NIDHI/6038-6043) on December 11, 2023. Despite receiving and responding to the notice, the company and its directors did not appear for the scheduled hearing on February 29, 2024.

The Registrar of Companies, Uttar Pradesh, acting as the Adjudicating Officer, established October 30, 2019, as the date of default, marking the beginning of the non-compliance period. As per Section 137(3) of the Companies Act, 2013, the company faced penalties escalating due to the continuing default.

The penalty was calculated based on the initial amount prescribed by law and additional penalties accrued for each day of non-compliance, up to a maximum limit. The total penalty imposed on Dhansagar Nidhi Limited and its directors was deliberated in accordance with Section 446B of the Companies Act, 2013, which outlines reduced penalties for certain categories of companies.

In conclusion, the adjudication order issued by the Registrar of Companies, Kanpur, underscores the importance of adhering to statutory financial reporting requirements. Dhansagar Nidhi Limited’s failure to attach significant accounting policies with its financial statements has resulted in significant penalties, highlighting the repercussions of non-compliance under Indian corporate law.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF
COMPANIES,
UTTAR PRADESH,
37/17, Westcott Building, The Mall,
Kanpur — 208001 (U.P.)
Phone : 0512 — 2310323/2310443

Order No.07/01/Adjudication-137/ DHANSAGAR /837 to 842 Dated 08/05/2024.

ORDER FOR VIOLATION OF SECTION 137 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014. & COMPANIES(AMENDMENT) Act 2020)

IN THE MATTER OF “DHANSAGAR NIDHI LIMITED”

1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-Ad.II dated 24.3.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules,2014 & Companies (Amendment Act 2020) for adjudging penalties under the provisions of this Act.

2. Whereas the Company “Dhansagar Nidhi Limited ‘has been registered under the provisions of Companies Act on 16/05/2017 with Roc, Kanpur, and Having Registered Office at C/o ABHIMANYU KR. PANDEY, PLOT NO.12, H-169, SEC 12, NOIDA, Gautam Buddha Nagar, Uttar Pradesh,201301 -. The authorized capital of the company is Rs. 10,00,000/-

3. Whereas one of the meetings where Regional Directors were directed to conduct an in-depth examination and submit a report on the surge of Nidhi Companies in Kanpur, Jaipur and Patna by the Secretary of Corporate Affairs vide minutes dated 10.04.2020. This being one of the Nidhi Company identified by ROC, Kanpur on suo-moto basis consequent upon the discussions in the ROC Review workshops with reference to Nidhi Companies. The Inquiry Officer (10) has observed that the Company has not attached the Significant Accounting Policies along with the financial statements for the financial year ended 31.03.2019. Accordingly, the Inquiry officer has reported the said violation in the Inquiry Report dated 29.04.2023. The Directorate vide its letter No. Inquiry/206(4)/Dhansagar Nidhi /RD(NR)/2022/3304 dated 10.06.2022 has accorded the penal action for non-compliance of said non-compliance. Thus, it is evident that the company and its Directors have failed to comply with the provisions of section 137 (1) of the Companies Act, 2013, in filing of the financial statement of the company for year ending 31.03.2019 thereby attracting the penal provisions mentioned under Section 137(3) of the Act. The Company and its Directors are officers in default, as per section 2(60), of the Companies Act, 2013. And are thus liable for penal provisions.

4. Accordingly, a Show Cause Notice No. 07/01/Adjudication-137/ DHANSAGAR NIDHI /6038-6043 dated 11.12.2023 was issued to the company and its officers in default under section under Section 137 of the Companies Act, 2013, read with Companies (Adjudication of Penalties) Rules, 2014 by this office. This office has not received the said letter undelivered also.

5. The Company furnished a reply received in this office on 11.01.2024 and 16.03.2024 to the said Show Cause Notice, hence a hearing was fixed in this matter on 29.02.2024. Further, neither any representative of the company nor its directors have appeared before the undersigned on the date of hearing, the reply furnished by company itself submitted that it has not attached the significant accounting policies with financial statements for the financial year ending on 31.03.2019 which has further strengthened the apprehension that the company and its Directors have failed to comply with the provisions of section137 of the Companies Act, 2013, thereby attracting the penal provisions mentioned under Section137(3) of the Act.

6. The date of default in the matter has been taken as 30.10.2019, i.e. the date upto which a copy of the financial statement, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed. The default has been continuing since then.

7. Section 137(1) of the Companies Act, 2013 provides that: –

“A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed.”

Section 137(3) of the Companies Act, 2013 provides that —

“If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified, the company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees., and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of fifty thousand rupees.”

8. As per provisions of section 446B of the Companies Act, 2013 provides that “Notwithstanding anything contained in this act, if penalty is payable for non-compliance of any of the provisions of this act by a One Person Company, Small Company, start-up company or producer company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other persons, as the case maybe be, shall be liable to a penalty which shall not be more than one half of the penalty specified in such provisions subject to a maximum of two lakh rupess in case of a company one lakh rupees in case of an officer who is in default or any other person, as the case may be”.

9. Order:

Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose penalty as prescribed under section 137(3) of the Act. The default of the penalty imposed on the company (Being Small Company as per section 2(85) of the Act) and officers in default are shown in the table below:

I am of this opinion that penalty is commensurate with the aforesaid failure committed by the notice(s).

10. The Noticee shall pay the amount of penalty so imposed through MCA21 portal only as per rule 3(14) of Companies (Adjudication of Penalties) 2014. within 90 days receipt of this order. The company needs to file InC-28 as per the provisions of the act, attaching the copy of adjudication order alongwith payment challans.

11. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, 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 a certified copy of this order. [Section 454(5) & 454(6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014].

12. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of non­compliance of this order. In Case appeal is made 0/o Registrar of Companies, U.P. maybe informed alongwith the penalty imposed & the payments made.

(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur

NO.07/01/ADJ-137/DHANSAGAR NIDHI/ 837 to 842

DATED 08/05/2023.