An adjudication order has been issued by the Ministry of Corporate Affairs against CA Niranjan Behera, the auditor of Century Global Logistics Pvt. Ltd., for non-compliance with Section 143 of the Companies Act, 2013, concerning audit reports for FY 2014-15 and FY 2015-16. The auditor failed to disclose related party transactions in the financial statements, violating Accounting Standard-18, as M/s Careway Supply Chain Solutions held a substantial interest in the company. Despite multiple opportunities, no satisfactory reply was provided by the auditor regarding this omission. As a result, the adjudicating officer imposed a penalty of INR 20,000 under Section 450 of the Companies Act. The penalty must be paid within 90 days, and the auditor retains the right to appeal within 60 days. Non-compliance may lead to further consequences under Section 454(8) of the Act. This decision highlights the importance of adhering to statutory audit requirements and the potential penalties for failure to comply with financial disclosure standards.
Government of India
Ministry of Corporate Affairs
Office of the Registrar of Companies, West Bengal
“Nizam Palace”,
2nd M. S. 0. Building, 2nd Floor
4, Acharya J. C. Bose Road
Kolkata — 700 020
Order No : ROC/ADJ/438/161440/2024/4911 Date : 10.09.2024
Adjudication Order for Penalty under Section 454(3) of the Companies Act, 2013, Read with Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, as Amended by the Companies (Adjudication of Penalties) Rules, 2019, in the Matter of Non-Compliance with the Provisions of Section 143 of the Companies Act, 2013
1. In respect of: AUDITOR: CA NIRANJAN BEHERA (MEMB. NO.: 069888) of company namely. CENTURY GLOBAL LOGISTICS PRIVATE LIMITED
(CIN: U60231WB2011PTC161440)
1. Appointment of Adjudicating Officer :-
Ministry of Corporate Affairs vide its Gazette Notification No A-42011/112/2014-Ad.II dated 24.03.2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 [herein after known as Act] read with Companies (Adjudication of Penalties) Rules, 2014 for adjudicating penalties under the provisions of this Act. The undersigned is entrusted to adjudicate penalties under section 143 of the Companies Act, 2013.
2. Company: –
WHEREAS Company CENTURY GLOBAL LOGISTICS PRIVATE LIMITED [herein after known as Company] is a registered company with this office incorporated on 01/04/2011 under the provisions of Companies Act, 1956 having its registered address at 9 Lal Bazar Street, Mercantile Building, 3rd Floor, Block A, Room No 3014A, Kolkata, West Bengal, India, 700001 as per MCA website.
3. Facts about the Case: –
1) On the basis of Inquiry Report carried out under Section 206(4) of the Companies Act, 2013 the following instances or violations as pointed out in the Inquiry Report:
I. CONTRAVENTION OF SECTION 143 READ WITH SECTIQN 129 OF THE COMPANIES ACT, 2013 READ WITH ACCOUNTING STANDARD-18:
L.0 Observation:
Upon perusal of the financial statements for the financial years ended as on 31.03.2015 and 31.03.2016 as available on MCA Portal, it is observed that that the shareholder of the subject company M/s. Careway Supply Chain Solutions Private Ltd (previously known as Careway Supply Chain Consultants Private Ltd) have the ability to control the Company (since they are holding 48.79% of the voting powers of the Company) for the respective financial years. It is evident that for the financial years ended as on 31.03.2015 and 31.03.2016, that M/s. Careway Supply Chain Solutions (P) Ltd is the associate of M/s. Century Global Logistics Private Limited as it is holding more than 20% shares of the subject company and thus having substantial interest in the voting power of the subject company.
However, the company has failed to disclose name of M/s. Careway Supply Chain Solutions (P) Ltd as its related party in their financial statements for the financial years ended as on 31.03.2015 and 31.03.2016, as required as per provision of Accounting Standard-18. The same has not been commented upon by the Auditor in his Audit Report. Therefore, violation of Section 143 read with Section 129 of the Companies Act, 2013 read with Accounting Standard-18 is attracted for the financial years ended as on 31.03.2015 and 31.03.2016.
Reply of Auditor:
No reply has been received from the auditor.
L.0 Conclusion:
No reply has been received by the auditor till date hence it seems that he has nothing to state in this matter. Hence, this office is of the view that contravention of Section 143 read with Section 129 read with Schedule III of the Companies Act, 2013 exists.
2) The provisions of Section 143(3) of the Companies Act, 2013 requires that the auditor’s report shall also state —
(a) whether he has sought and obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit and if not, the details thereof and the effect of such information on the financial statements;
(b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books and proper returns adequate for the purposes of his audit have been received from branches not visited by him;
(c) whether the report on the accounts of any branch office of the company audited under sub-section (8) by a person other than the company’s auditor has been sent to him under the proviso to that subsection and the manner in which he has dealt with it in preparing his report;
(d) whether the company’s balance sheet and profit and loss account dealt with in the report are in agreement with the books of account and returns;
(e) whether, in his opinion, the financial statements comply with the accounting standards;
(f) the observations or comments of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company.
(g) whether any director is disqualified from being appointed as a director under sub-section (2) of section 164;
(h) any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith.
(i) whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
(j) such other matters as may be prescribed.
Section 450 of the Act provides inter alia that: if a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person. Thus, the Auditor has violated Section 143 of the Companies Act, 2013. Accordingly, the penalty under Section 450 will be applicable on the Auditor.
3) Accordingly, the adjudication officer has issued adjudication notice vide No. ROC/ ADJ/438/161440/2024/ 653 dated 29.04.2024 (herein after referred as Adjudication Notice) under Section 454(4) read with Section 143 of the Companies Act, 2013 read with Rule 3(2) of Companies (Adjudication of Penalties), 2014 as amended in Amendment Rules, 2019, to the auditors in default for the violation of the provisions of the Act as mentioned above giving an opportunity to submit a reply as to why the penalty should not be imposed under the provisions of 450 of the Act against the auditors in default for the above stated violations, followed by a notice of hearing scheduling a hearing on 26.06.2024 vide letter no. ROC/ADJ/438/161440/2024 dated 18.06.2024.
4) On the day of hearing held on 26th June 2024, PCS Rudra Narayan Paul, being the authorized Representative appeared and submitted that the auditor has submitted his reply vide letter dated 14/05/2024, stating the fact that as per AS-18 reporting authority is required to disclose the details regarding related party transaction made during the period under report . In the present case M/s. Careway Supply Chain Solutions (P) Ltd is the reporting entity and is the associate having shareholding of more than 20% of the Century Global Logistics Pvt Ltd company under inquiry proceedings. The reporting entity is required to comply AS-18 but not the associate company. Therefore, the auditor is not supposed to qualify in the auditing report of the company. However, in the Balance sheet, the auditor has disclosed the entries who hold more than 57% in Note 2(b) of the Balance sheet of the company, which is suffice for detail disclosure of equity position/ share capital. Therefore, it is submitted that the auditor has taken due diligence in his audit report disclosing details of shareholding Sr related party disclosure for the relevant period under inquiry proceedings.
Accordingly, in view of the above submission, the matter was heard, and the order is passed as under:
ORDER
1. The auditor who has defaulted in the provisions of section 143 of the Companies Act, 2013 stated above for the relevant periods are liable for penalties under section 450 of the Companies Act, 2013.
2. In exercise of the powers conferred, the undersigned is entrusted to adjudicate penalties under section 450 of the Companies Act, 2013. Therefore, I do hereby impose the penalty of Total Rs. 20,000/- (Rupees Twenty Thousand only) on the concerned auditor-in-default i.e., on CA NIRANAJN BEHARA for the instance in the table below pursuant to Rule 3(12) of Companies (Adjudication of Penalties) Rules, 2014 and the proviso of the said Rule and Rule 3(13) of Companies (Adjudication of Penalties) Rules, 2014 for the violation of section 143.
| Name of the Auditor | Nature of violations / instances of Para 3 | Total maximum Penalty calculated(In Rs.) |
Total maximum Penalty payable under section 450 (In Rs.) |
| CA NIRANJAN BEHARA (MEMB. NO.: 069888) | I) Contravention of section 143 read with section 129 of, the companies act, 2013read with accounting standard-18(For FY 2014-15 to 2015-16) | 10,000*2 year= 20,000 |
20,000 |
| Total Penalty Payable | 20,000 | ||
3. The concerned noticee shall pay the said amount of penalty (out of own pocket) by way of e-payment [available on Ministry website mca.gov.in] under “Pay miscellaneous fees” category in MCA fee and payment Services within 90 days of receipt of this order. The Challan/SRN generated after payment of penalty through online mode shall be forwarded to this Office Address.
4. Appeal against this order may be filed in writing with the Regional Director (ER), Ministry of Corporate Affairs, Kolkata located at Nizam Palace, 2nd M. S. Building, 3rd Floor, 234/4, A.J.C. Bose Road, Kolkata-700020, West Bengal within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website www.mca.gov.in] setting forth the grounds of appeal and shall be accompanied by a certified copy of the this order. [Section 454(5) & 454(6) of the Act read with Companies (Adjudicating of Penalties) Rules, 2014].
5. Your attention is also invited to section 454(8) of the Act regarding consequences of nonpayment of penalty within the prescribed time limit of 90 days from the date of the receipt of copy of this order.
6. In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to one CA, NIRANJAN BEHARA auditor in default mentioned herein above and also to Office of the Regional Director (Eastern Region) and Ministry of Corporate Affairs at New Delhi.
Date: 10th September 2024
[A. K. Sethi, ICLS)
Adjudicating Officer & Registrar of Companies,
West Bengal
