Introduction:

The Ministry of Corporate Affairs has undertaken various measures in order to facilitate transparency and the data quality which is uncompromised and free from flaws. With this ultimate goal in mind the Ministry has launched Artificial intelligence driven portal that would facilitate e-adjudication, e-scrutiny and other models. On the other hand, the Ministry has also undertaken steps to ensure that the downfall of the involvement of the Artificial intelligence is minimised.

Thus, the Ministry vide a notification constituted the Central Scrutiny Centre. The Central Scrutiny Cell (hereinafter referred to as CSC) shall function under the administrative control of the e-governance Cell of the Ministry of Corporate Affairs. The main idea behind formulation of such a cell is to scrutinize certain Straight Through Process (STP) Forms filed by the corporates on the registry and flag the companies for more in-depth scrutiny. The cell will scrutinise the filings made by the users under straight through process mode, identify the data quality issues and irregularities, communicate the same to the concerned Registrar of Companies so that corrective steps can be taken to restore authenticity and correctness of data and it can be seamless shared with other regulators, if required.

Reasons for introducing CSC:                                                            

Reasons for introducing CSC

Promote transparency                                                                                          

The very crux of establishment of such a cell is to ensure transparency. The company filing the documents become a public document and hence are subject to reliance placed upon by various stakeholders. When such a cell is established it would lead to much more seriousness as to the submissions made to the Ministry, thus ensuring transparency.

Professional scepticism 

Generally, it is the professional making the filings on behalf of the Company. The professionals like Chartered Accountant, Company Secretary, Cost and Management Accountant are placed upon the responsibility of filing various documents with the Ministry. There have been instances wherein the professionals tend to take the documentation on a lighter note used based on the fact that the incumbent form undergoes a Straight Through Process.

Raise red flags 

The cell would have the responsibility of not only running through the documents filed under Straight Through Process but also to raise red flags where ever the situation demands, and the same has to be reported to the concerned Regional Director for the relevant disciplinary actions. Initially there were no provisions pertaining to raising of such red flags.

Minimise instance of Frauds

There has been a steep increase in the instance of corporate frauds. The forms filed under the Straight Through Process were initially no subjected to any scrutiny, thus leading to a lenient attitude of the Corporates. They often see it as a chance to commit fraud and benefit themselves of this loophole. However, upon the constitution of this cell it would evidently awake the conscience of the professional as well as the Company.

Disciplinary Actions

The red flags so raised by the cell would be reported to the concerned Registrar of Companies. The latter can upon such raising of red flag can take up disciplinary actions as it may deem fit.

List of Forms which are processed, approved and taken on record using the STP mode:

Sr No e-forms Purpose of filing     
COMPANIES
1. AOC-4 Form for filing of Audited Financial Statements and other documents with ROC
2. AOC-4(XBRL) Filing of Documents and Forms in Extensible Business Reporting Language
3 AOC-4 CFS Form for filing of Audited Consolidated Financial Statements and other documents with ROC
4. MGT-7 Filing of Company Annual Returns
5. DIR-3 KYC KYC of Directors
6. MGT-14 Filing of Resolutions and agreements with ROC

All cases except for change of Name, change of object, resolution for further issue of capital and conversion of companies will be STP Mode.

7. DIR-12 Particulars of appointment of Director and Key Managerial personnel and changes among them
8. INC-20A Declaration for commencement of business
9. INC-22 Notice of situation or change in situation of Registered office
10. PAS-6 Reconciliation of share capital audit report
11. CHG-1 Charge creation/modification other than debentures
12. CHG-4 Satisfaction of Charge
13. PAS-3 Return of allotment
14. ADT-1 Information to the Registrar by Company for appointment of Auditors
15. ADT-3 Notice of Resignation by Auditor
16. CRA-2 Form of Intimation of appointment of cost auditor by the company to Central Government
17. CRA-4 filing the cost audit report
LLP’s
1. Form-11 Annual Return of Limited Liability Partnership
2. Form-8 Statement of Account and Solvency

Conclusion:

Prior to this Notification, the e-forms as under the Straight through process were taken on record by the Ministry without manual interruption. However, the Registrar may examine this e-Form any time after the same is processed by the system under Straight Through Process (STP). In case any defects or incompleteness in any respect is noticed by the Registrar, then this e-Form shall be treated and labelled as defective and the e-form shall have to be filed afresh with the fee and additional fee, as applicable. (Please refer sub-rule 6 of rule 10 of the Companies (Registration offices and Fees) Rules, 2014).

However, post this notification the establishment of Central Scrutiny Cell (CSC) to carry out the scrutiny of e-forms filed under Straight through Process Route. The CSC shall carry out the scrutiny of e-forms under STP and in the event of any discrepancy any findings as recorded by the CSC shall be forwarded to the concerned Registrar of that jurisdiction.

By virtue of establishment of the CSC, the professionals certifying the STP form shall be accountable in the event of any discrepancy which comes in the notice of CSC. Hence, the professionals certifying the form shall be vigilant that no misleading information or annexure is presented in the e-form.

Bibliography:

http://egazette.nic.in/WriteReadData/2021/225985.pdf

https://taxguru.in/company-law/mca-establishes-central-scrutiny-centre-carrying-out-scrutiny-stp-e-forms.html

Disclaimer:

The entire contents of this article have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, we assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. We assume no responsibility for the consequences of use of such information. In no event shall we shall be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information. This is only a knowledge sharing initiative and author does not intend to solicit any business or profession.

Author Name:-

Mehul Solanki, Devyani Bhati and Saurabh Vaze

Mehul Solanki
Research Associate and Start-up Consultant
Jaya Sharma & Associates
[email protected]
Devyani Bhati
Junior Associate
Jaya Sharma & Associates
[email protected]
Saurabh Vaze
Junior Associate
Jaya Sharma & Associates
[email protected]

Author Bio

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