Delayed Secretarial Audit Report Submission: MCA Imposes ₹16 Lakh Penalty

The Ministry of Corporate Affairs (MCA) has imposed a penalty of Rs. 16 lakh on M/s Best & Crompton Engineering Projects Limited for delays in submitting their Secretarial Audit Reports for the financial years 2015-16, 2016-17, and 2017-18. This action underscores the importance of timely compliance with the provisions of the Companies Act, 2013, specifically under Section 204, which mandates the submission of Secretarial Audit Reports by specified classes of companies.

Background and Legal Framework

The Ministry of Corporate Affairs appointed the Registrar of Companies, Chennai, as the Adjudicating Officer to oversee this case under Section 454(1) of the Companies Act, 2013. M/s Best & Crompton Engineering Projects Limited, a public company with significant financial metrics, fell under the purview of the secretarial audit requirement as outlined in Section 204 of the Companies Act, 2013, and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Inspection and Findings

An inspection of the company’s books and accounts revealed that Secretarial Audits for the financial years 2015-16 to 2017-18 were conducted only in August 2019, contrary to the requirement of conducting the audit after the end of each financial year and before the subsequent Annual General Meeting. This delay triggered the issuance of an Adjudication Notice to the company and its officers on December 22, 2022.

Company’s Response

The company’s director, Mr. Seshagiri Rao Ippagunta, acknowledged the delay in filing the Secretarial Audit Reports but contended that the audits were conducted within the due dates, and the delay was not intentional. Despite this, the explanation was deemed unsatisfactory by the adjudicating authority.

Adjudication Hearing

A hearing was conducted on September 20, 2023, where the company’s representative, Mr. Rohan Rajasekaran, presented the case. The adjudicating authority, however, determined that the company did not qualify for a lesser penalty under Section 446(b) of the Companies Act, 2013, and upheld the imposition of penalties for each year of delay.

Penalty Imposition

After careful consideration, the adjudicating authority imposed a penalty of Rs. 2 lakh per year for the financial years 2015-16, 2016-17, and 2017-18, totaling Rs. 16 lakh. The breakdown of penalties is as follows:

• Best & Crompton Engineering Projects Limited: Rs. 2 lakh per year
• Mr. Ravi Narayanasamy Balachandran (Wholetime Director): Rs. 2 lakh per year
• Mr. Kakulamaari Srinivas Kalyan Rao (Managing Director): Rs. 2 lakh per year

Compliance and Appeal

The company and its officers were directed to pay the penalty online within 90 days. They also have the right to appeal the order within 60 days of receipt by filing Form ADJ with the Regional Director, Ministry of Corporate Affairs, Chennai. Non-compliance with the order can lead to additional fines or imprisonment as per Section 454(8) of the Companies Act, 2013.

*****

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES, TAMIL NADU, ANDAMAN & NICOBAR ISLANDS, CHENNAI
II FLOOR, C- WING, SHASTRI BHAVAN, 26, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI- 6

F.NO.ROC/CHN/BEST & CROMPTON/ADJ/S.204/2024 DATE : 22 MAY 2024

ADJUDICATION ORDER UNDER SECTION 204 OF THE COMPANIES ACT, 2013 READ WITH RULE 9 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF DIRECTORS), RULES 2014 IN THE MATTER OF WS BEST & CROMPTON ENGINEERING PROJECTS LIMITED

1. Appointment of Adjudicating Officer:-

The Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 has appointed Registrar of Companies, Chennai as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter referred as Act or Companies Act, 2013) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.

2. Company: –

Whereas the company viz M/s. Best & Crompton Engineering Projects Limited with CIN 1J28920TN1999PLC043385 (herein after referred as company’ or subject company’) is a registered Company with this office under the companies Act, 2013 having its registered office as per MCA21 Registry at No. 19A, Emerald Apartments, Flat No. 4, First Floor, Wheatcrofts Road, Nungambakkam, Chennai, Tamil Nadu 600034. The financial & other details of the subject company as available on MCA-21 portal is stated as under:

3. Directors during the period of violation

4. Section and Penal Provision as per Companies Act, 2013

Section 204. Secretarial Audit for Bigger Companies.

(1) Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed

(4) If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be liable to a penalty of two lakh rupees.

Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 provides: Secretarial Audit Report.

(1) For the purposes of sub-section (1) of section 204, the other class of companies shall be as under-

(a) Every public company having a paid-up share capital of fifty crore rupees or more; or

(b) Every public company having a turnover of two hundred fifty crore rupees or more; 1 for]

(c) every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.]

(2) The format of the Secretarial Audit Report shall be in Form No. MR.3.

5. Issue of Adjudication Notice:

An Inspection of Books and Accounts of the company M/s. Best & Crompton Engineering Projects Limited was carried out U/s 206(5) of the Companies Act, 2013 by an Officer authorized by the Central Government wherein the observations of the inspecting Officer are as follows:

It is observed from the Annual Returns filed by the Company, the Secretarial Audi for the financial years from 2015-16 to 2017-18 were conducted only in August 2019 instead of conducting the same after end of every financial year and before the next Annual General Meeting. Hence, the company or any Officers of the company or the Company Secretary in practice are liable for penal action under Section 204(4) of the Companies Act, 2013.

After that the Adjudicating Authtoity has issued Adjudication Notice to the company and its directors vide Notice No. 53/Roc/Chn/43385/BEST & CROMPTON/S.204/P.29/Inspn fol.up/2022 dated 22.12.2022.

6. Reply of Company and Directors for Adjudication Notice issued:

The Director of the company Mr. Seshagiri Rao Ippagunta vide letter dated 08.02.2023 informed that the Secretarial Audits for the financial years from 2015-16 to 2017-18 were conducted within the due dates. However, there is delay in filing all the reports with ROC. The said delay is not intentional.

7. Adjudication Hearing:

i) Since the reply of the company was not satisfactory the Adjudicating Authority
had issued notice of Hearing dated 15.09.2023 by fixing the hearing on 20.09.2023 at 02:30 PM. Pursuant to the said notice, Mr. Rohan Rajasekaran, Advocate has appeared on behalf of the company and its director/ Officers in default before the Adjudicating Authority on 20.09.2023 and made submissions that the violation may be adjudicated.

(ii) The company beieg a subsidiary with paid up capital of Rs.55 Crores does not fall under the definition of small co4ank as per provision of section 2(85) of the corapanieg Act, 2013. Therefore, of imposing the provision lesser penalty as per section 446(b) shall not be applicable in this case.

8. Decision

Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that even though the Secretarial Audit was conducted within due time, there is a delay in filing the report with the ROC for the FYs 2015-16 to 2017-18. Therefore, the company, every officer of the company or the company secretary in practice, who is in default, shall be liable to a penalty U/s. 204(4) of the Companies Act, 2013.

Accordingly, I am inclined to impose a penalty as prescribed under Sub-section 4 of Section 204 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:

Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.2,00,000/-(Rupees Two lakhs) is imposed on the Company and Rs.2,00,000/-(Rupees Two lakhs) is imposed on Officers in default for a financial year as mentioned above. Totally Rs. 16,00,000/- (Rupees Sixteen lakhs) as penalty amount for violation of Section 204 of the Companies Act, 2013.

9. The said amount of penalty shall be paid through online by using the website mca.gov.in(Misc. head) within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

10. Whereas Appeal against this order may be filed with the Regional Director (SR), Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26 Haddows Road, Chennai-600006, Tamil Nadu within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website mca.gov.in] 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 (Adjudicating of Penalties) Rules, 2014].

11. Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order, “(8)(i) Where company fails to comply with the order made under sub­section (3) or sub-section (7), as the case may be within a period of ninety days from the date of the receipt of the copy of the order, the company shall be punishable with fine which shall not be less than twenty Eve thousand rupees but which may extend to five lakh rupees.

(ii) Where an officer of a company or any other person who is in default fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be within a period of ninety days from the date of the receipt of the copy of the order, such officer 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”.

(B. SRIKUMAR, ICLS)
REGISTRAR OF COMPANIES
TAMILNADU, CHENNAI.
ADJUDICATING OFFICER