Recently, SMP Constructions Private Limited fell afoul of the Ministry of Corporate Affairs (MCA) for failing to adhere to an essential financial reporting guideline. Specifically, the company did not include a Cash Flow Statement in their AOC-4 form for three consecutive years. This violation has resulted in a financial penalty.
This incident revolves around the procedural scrutiny of the AOC-4 e-Forms filed by SMP Constructions. While inspecting the Balance Sheets as at the end of three financial years – 2019, 2020, and 2021 – it was discovered that the turnover of the company exceeded the prescribed limit for filing a Cash Flow Statement. However, SMP Constructions failed to attach said Cash Flow Statement to their e-Forms/AOC-4, thus violating the provisions of Sections 2(40) and 129 of the Companies Act, 2013.
The MCA took appropriate action, leading to the imposition of a penalty on SMP Constructions. The company attempted to explain the oversight as an “accidental omission and unintentional”, arguing that the required Cash Flow Statements were prepared, but not attached to the AOC-4 form. Despite the company later submitting the missing Cash Flow Statements, the Presenting Officer maintained that the company’s failure to comply with statutory requirements warranted penalization.
Conclusion : This case serves as a reminder to all companies to ensure they meet their legal obligations under the Companies Act, 2013. Regardless of intent or explanation, failing to adhere to these requirements can lead to penalties, as seen in the case of SMP Constructions. It also underlines the importance of a Cash Flow Statement in ensuring financial transparency and investor trust. To avoid similar repercussions, companies should prioritize diligent financial reporting and timely regulatory compliance.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES.
GUJARAT, DADRA & NAGAR HAVELI
ROC Bhavan, Opp. Rupal Park,
Nr. Ankur Bus Stand, Na-anpura, Ahmedabad (Gujarat) – 380013.
Tel. No.: 079-27438531, Fax : 079-27438371
Website : www.mca.gov in E-mail : [email protected]
Order No. ROC-GJ/ADJ-Order/Sec. 454/ SMP CONSTRUCTIONS /2023-24/1873 To 75 Dated: 10th July 2023
BEFORE THE ADJUDICATING OFFICER
REGISTRAR OF COMPANIES, GUJARAT, DADRA & NAGAR HAVELI
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 137 READ WITH SECTION 2(40) OF THE COMPANIES ACT, 2013 READ WITH RULES MADE THEREUNDER
IN THE MATTER OF SMP CONSTRUCTIONS PRIVATE LIMITED
(U45201GJ2002PTC041739)
Date of hearing- 04.07.2023
PRESENT :
1. Shri R. C. Mishra (ROC), Adjudicating Officer
2. Indrajit Vania, Presenting Officer
Company/ Officers/Directors/KMP/Authorized Representative : Mr. Umesh Parikh, PCS Authorized company representative
Appointment of Adjudication Authority:-
1. The Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II dated 24.03.2015 has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred under section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 (Notification No. GSR 254(E) dated 31.03.2014) for adjudging penalties under the provisions of Act.
Company:
2. SMP CONSTRUCTIONS PRIVATE LIMITED (herein after referred to as “company”) is a company was registered under the provisions of the Companies Act, 1956/2013 in the State of Gujarat, having CIN: U45201GJ2002PTC041739 and presently having its registered office situated at “P-156, PHASE II, GIDC INDUSTRIAL ESTATE, BEHIND MIPCO, BHOLAV, BHARUCH, GUJARAT-392015, INDIA”.
Fact about of the case:
3. During the procedural Scrutiny of the e-Forms AOC-4 filed by the Company under the MCA21 portal, it is observed from the Balance Sheet as at 31.03.2019, 31.03.2020 and 31.03.2021 filed vide SRN R16008534, R88507603 and T75991539 on 25.11.2019 25.01.2021 and 03.02.2022 respectively in AOC-4 that the turnover of the company is exceeding the prescribed limit for filing Cash Flow Statement. However, the company has failed to attach Cash Flow Statement with the aforesaid e-Forms /AOC-4 which was required to be attached. Thus the company/Officers have violated the provisions of Section 2(40) read with Section 129 of the Companies Act, 2013 read with Rules made thereunder. The matter has been reported to the Directorate vide this office report dated 04.07.2022. The Directorate vide letter dated 09.09.2022 directed ROC, Ahmedabad to take appropriate action as per the provisions of Companies Act, 2013 and Rules made thereunder against the defaulting company and submit report. Accordingly, the matter has been taken with the company vide this office letter dated 21.09.2022 regarding non-compliance of provisions of the Companies Act, 2013. The company vide its reply dated 04.11.2022 replied that the company has regularly filed its financial statements including Balance Sheet and Statement of Profit and Loss for the FY 2018-19, 2019-20 and 2020-21. The company has duly prepared Cash Flow Statements for all the years under consideration, however inadvertently the cash flow statements were not attached in Form AOC-4 along with other attachments for the said financial years. Non attachment of Cash Flow statement is accidental omission and unintentional.
Show Cause Notice and reply of the Company:-
4. Adjudication Notices vide ROC-GJ/ADJ-10/Section 454/ SMP Constructions/2023-24/862 to 868 dated 12.05.2023 were issued to the company and its officers in default under Section 454(3) of the Companies Act, 2013 for violation of Section 137 read with Section 2(40) of the Companies Act, 2013 r.w. Rules made thereunder. However, no reply from the company/Directors have been received in this office in response to the Notice dated 12.05.2023.
5. Thereafter, a “written Notice” has been issued to mailing address of the company and its Directors in pursuant to sub-section 4 of Section 454 of the Companies Act, 2013 read with Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 and a hearing was fixed for 26.06.2023. Due to the visit of Officers of the MCA on 26.06.2023 at Ahmedabad, the hearing has been rescheduled to 27.06.2023 and further reschedule to 04.07.2023 as mutually consented by Mr. Umesh Parikh, PCS, Authorized representative of the Company.
6. On the scheduled date of hearing Mr. Umesh Parikh, PCS, Authorized representative of the Company appeared before the Adjudicating Officer on 04.07.2023 and submitted that the alleged default regarding non-submission of Cash Flow Statement was accidental omission and unintentional. The company has filed a Cash Flow Statement for the period from 01.04.2018 to 31.03.2021 relevant to Balance Sheet as at 31.03.2019, 31.03.2020 and 31.03.2021 on 28.06.2023 under the MCA21 portal in compliance to the Notice dated 12.05.2023 issued by the Office of the ROC, Ahmedabad. Now, the default has been made good by the company/ Directors. Ld. PCS requested to take sympathetic view and please consider that the said lapse be not treated as non-compliance under the provisions of the Companies Act, 2013 on the part of the Company. We assure that the company will be more cautions and particular in future compliances.
Submission of Presenting Officer:
7. The Presenting Officer submits that onus on company to file copy of financial statements, including consolidated financial statement, if any along with all the documents which are required to be of attached to such financial statements under the Act. However, company has failed to attach/file cash flow statement as per provisions of Section 2(40) read with Section 137 of the Act and Rules made with the Balance Sheet /AOC-4 filed under the MCA21 portal for the FY 2018-19, 2019-20 and 2020-21. It revealed that the company/Officers have not performed their duly as prescribed under the Companies Act and such ignorance of Law should not be excused. Therefore, the company and its officers are liable to penalize under Section 137(3) of the Companies Act, 2013 for the period from after 30 days from the date of issue Notice to the date of filing Cash Flow Statement under MCA21 portal in light of Ministry’s General Circular No. 01/2020 dated 02.03.2020.
ORDER
1. While adjudging quantum of penalty under section 137(3) of the Act, the Adjudicating Officer shall have due regard to the following factors, namely;
a. The amount of disproportionate gain or unfair advantage, whenever quantifiable, made as a result of default.
b. The amount of loss caused to an investor or group of investors as a result of the default.
c. The repetitive nature of default.
2. With regard to the above factors to be considered while determining the quantum of penalty, it is noted 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 notice to redress the investor grievance are not available on the record. Further, it may also be added that it is difficult to quantify the unfair advantage made by the noticee or the loss caused to the investors in a default of this nature.
3. Having considered the facts and circumstances of the case and submissions made by the Presenting Officer and Ld. PCS and after taking into accounts the factors above, the undersigned has reasonable cause to believe that the company and its officers have failed to comply with the provisions of Section 137(3) of the Companies Act, 2013. I hereby imposed penalty as under:
Penalty on company and Officer in default for the aforesaid default are as under:
|
Name of Company/ Director |
Penalty (in Rs.) as per Section 137(3) of the Act | Penalty Continuing failure ( in Rs.) | Penalty for 03 Financial Year 2018-19. 2019- 20 and 2020-21 (in Rs. ) | Maximum Penalty (in Rs.) | Total Penalty imposed (in Rs.) |
| SMP CONSTRUCTIONS PRIVATE LIMITED | 10,000 | 10,000+17 days*100=1 1,700 | 3*11700=35,100 | 2,00,000 | 35,100 |
| Amitbhai Rameshbhai Patel | 10,000 | 10,000+17 days*100=1 1,700 | 3*11700=35,100 | 2,00,000 | 35,100 |
(Default counted from the period from 11.06.2023 to 27.06.2023)
AO is of the opinion that penalty is commensurate with the aforesaid default committed by the Noticees:
4. 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 mca.gov.in under “Pay miscellaneous fees” category in MCA fee and payment Services under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 within 90 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.
5. Appeal against this order may be filed in writing with the Regional Director, North Western Region, Ministry of Corporate Affairs, Roc Bhavan, opp. Rupal park, Nr. ANKUR BUS STAND, NARANAPURA, AHMEDABAD (GUJARAT)-380013 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 (Adjudication of Penalties) Amendment Rules, 2019]
6. 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 penalty amount, the company shall be punishable with fine which shall not less than Twenty Five Thousand Rupees but which may extend to Five Lakhs 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 by which may extend to one Lakhs Rupees or with both.
The adjudication notice stands disposed of with this order.
(R.C. MISHRA, ICLS)
REGISTER OF COMPANIES &
ADJUDICATION OFFICER
MINISTERY OF CORPORATION AFFAIRS,
GUJARAT, DADRA & NAGAR HAVELI
(R. C. MISHRA, ICLS)
REGISTRAR OF COMPANIES &
ADJUDICATING OFFICER
MINISTRY OF CORPORATE AFFAIRS,
GUJARAT, DADRA & NAGAR HAVELI
