On July 25, 2024, the Ministry of Corporate Affairs (MCA) issued a penalty against Ws. Abu Estate Private Limited and its directors for failing to maintain adequate accounting records as required by Section 134(5)(c) of the Companies Act, 2013. The Registrar of Companies in Chennai, acting as the adjudicating officer, found the company in violation due to discrepancies in financial statements, improper handling of sales transactions, and inadequate disclosures. The violations spanned financial years 2015-16, 2016-17, and 2019-20, leading to a total penalty of Rs. 10.5 lakhs, including fines for both the company and its directors. The company has been ordered to pay Rs. 3 lakh per financial year for three years, totaling Rs. 9 lakhs, and Rs. 50,000 each for the directors, amounting to Rs. 2 lakhs. Non-compliance with this order may result in further legal consequences, including additional fines and imprisonment for defaulting officers.
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/ABU ESTATE /ADJ/S.134(5)(c)/2024 Dated: 25 JUL 2024
ADJUDICATION ORDER UNDER SECTION 134(5)(c) OF THE COMPANIES ACT, 2013
IN THE MATTER OF WS.ABU ESTATE PRIVATE LIMITED
1. Appointment of Adjudicating Officer:-
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 Ws. Abu Estate Private Limited with CIN: U85110TN1985PTC030138 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the Companies Act, 1956 having its registered office as per MCA21 Registry at 926, EVR Periyar High Road, Tamil Nadu 60084. The financial & other details of the subject company as available on MCA-21 portal is stated as under:
S.No. | Particulars | Details |
1. | Company’s Status | Active |
2. | Filing Position | Financial Statement: up to 31.03.2022
Annual Return: up to |
3. | Paid up Capital | Rs. 7,50,00,000/- |
a. Revenue from Operation | Rs.8,24,13,929/- | |
b. Other Income | Rs.6,74,536/- | |
c. Profit/Loss for the Period | (Rs.3,19,85,128/-) | |
4. | Whether it is a Holding Company | No |
5. | Whether it is a Subsidiary Company | No |
6. | Whether company registered under Section 8 of the Act? | No |
7. | Whether company registered under any other special Act? | No |
3. Directors during the period of violation:
S.No. | Name of Director | Designation | Date of Appointment | Date of Cessation |
1. | Nilagiri Abuthahir Azeez | Director | 14.03.1988 | 15.05.2016 |
Managing Director | 16.05.2016 | |||
2. | Naina Mohammed Neelagiri Abdul Azeez | Managing Director | 23.03.1985 | 16.05.2016 |
Managing Director | 11.06.2018 | ……. . |
4. Section and Penal Provision as per Companies Act, 2013
Section 134. Financial Statement, Board’s Report, etc.
(3) There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include—
(c) Directors’ Responsibility Statement;
(5) The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) shall state that—
(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(8) If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees
5. Issue of Adjudication Notice:
An Inquiry was conducted on the affairs of the company M/s. Abu Estate Private Limited U/s 206(4) of the Companies Act, 2013 by an Officer authorized by the Central Government wherein the observations of the Inspecting Officer are as follows:
5.1(a) The company that in the Cash flow Statement fir the financial year 2016-17 the proceeds from the sale of tangible assets is shown as Rs.2.18 Crores, however, profit on sale of windmill is Note No.14/schedule 14 is shown as Rs.2.58 Crores. Further, the cost of land and wind mill equipment’s from RRB and Universal systems amounts to Rs.2,68,37,439/-. The Windmill sale consideration is shown as Rs.7,51,000/- whereas in the books the profit on sale of windmill appears as Rs.2.58 crores. The directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the aforementioned transactions with respect to sale of windmill.
5.1(b) The company has not furnished the details of Specified Bank Notes held and transacted during the demonetization period from 08.11.2016 to December 2016 in the financial statements in notes accounts as per the notification of Government of India in the Ministry of Finance, Department of Economic Affairs, S.0.3407 (E) dated 08.11.2016. The directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the aforementioned transactions with respect to Specified Bank Notes Disclosures.
5.1(c) As per the Audited Balance sheet for the financial years 2015-16 and 2016-17, the total balance of liabilities of Rs.289,151,398/- fcr FY 2015-16 is not matching with total balance of liabilities Rs.1,155,027,160 shown for 2015-16 in the balance sheet of FY 2016-17. The directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the financial tear 2016-17.
5.2 In the financial year 2016-17 as per Schedule VI the rate of depreciation of windmill is shown as 12.73 % and the opening balance of windmill amounts to Rs.3.37 Crores. However, the closing balance in the net block is Rs.28,186/- for the financial year 201617. There is not rationale behind in the calculation. The directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the transactions with respect to depreciation.
5.3 The Federal Bank loan of Rs.14,20,57,000/- is shown as charge amount for the Charge Id: 10025100 from 07.03.2016 to 14.08.2018. An amount of Rs.12.38 Crores shown as longterm liabilities under Federal Bank in Note 13 for the FY 2015-16. However, this amount is not shown in Cash flow statement for the financial year 2015-16. The directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the transactions with respect to loans.
5.4 It is observed form the Audited Balance sheet for the financial years 2015-16 and 2016-17 that the Revaluation reserve has been increased from (Rs.8,48,723) to Rs.8,57,847,020, due to revaluation of land. The revalued amount was not shown in the financial statement for FY 2015-16. However, in the financial statements submitted for the financial year 2016-17 the revalued amount is shown under previous year accounting period. The directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the transactions with respect to revaluations.
5.5 It is observed that the Cash flow statement for the year ended in 31.03.2020 amounts in various heads shown under previous accounting doesn’t match with the Cash flow Statement submitted for the year ended 31.03.2019. The directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the transactions With respect to cash flow Statement for the FY 2019-20.
Hence, the company and directors have violated Section 134(5)(c) of the Companies Act, 2013. Therefore, the company and every Officer who is default liable for penal action under Section 134(8) of the Companies Act, 2013.
Accordingly, on submission of the Inquiry report, the 0/o the Regional Director, Ministry of Corporate Affairs, Chennai has directed to initiate necessary action against the defaulters under the provisions of the Companies Act, 2013.
After that the Adjudicating Authority had issued Adjudication Notices No.
(i) ROC/CHN/030138/S.134(5)c)/P.2,3,7,12/INQUIRY FOLLOW UP/2022 dt 27.01.2023
(ii) ROC/CHN/030138/S.134(5)c)/P.4/INQUIRY FOLLOW UP/2022 dt 27.01.2023
(iii) ROC/CHN/030138/S.134(5)c)/P.5/INQUIRY FOLLOW UP/2022 dt 27.01.2023
(iv) ROC/CHN/030138/S.134(5)c)/P.6/INQUIRY FOLLOW UP/2022 dt 27.01.2023
(v) ROC/CHN/030138/S.134(5)c)/P.11/INQUIRY FOLLOW UP/2022 dt 27.01.2023 to the company and its directors
6. Reply of Company and Directors for Adjudication Notice issued:
The Managing Director of the company vide letter dated 07.02.2023 requested 15 days’ time to submit reply. But no reply has been received from the company and its directors till date.
7. Adjudication Hearing:
Since no reply has been received from the company and its directors for the Adjudication notice, the Adjudicating Authority had issued Notice to the subject company and directors on 01.04.2024 fixing the hearing date as on 08.04.2024 at 11:30 AM. Pursuant to the notice dated 01.04.2024, Shri. A.Rengarajan,PCS appeared on behalf of the company before the Adjudicating Authority and made submissions that the violation may be adjudicated.
8. Analysis of Non-compliance of Section 134(5)(c) of the Companies Act,2013
It is observed that the directors had not taken proper and sufficient care for the maintenance of adequate accounting records for the transactions with respect to Sale of Windmill, Specified Bank Notes, depreciation, loans, revaluations & cash flow statements in respect of FYs 2015-16,2016-17 & 2019-20. Hence, the company and its directors have violated Section 134(5)(c) of the Companies Act,2013 and liable for penalty under Section 134(8) of the Companies Act, 2013.
The company paid up capital of the company is Rs. 7.5 Crores, so it does not fall under the definition of small company as per provision of section 2(85) of the companies Act, 2013. Therefore, imposing the provision lesser penalty as per section 446(b) shall not be applicable in this case.
9. Decision
Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that the company and its directors have violated Section 134(5)(c) of the Companies Act,2013 for the FYs 2015-16,2016-17 & 2019-20. Accordingly, I am inclined to impose a penalty as prescribed under Sub- Section 8 of Section134 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:
I. FY 2015-16
S.No | Company and Officers in default | Penalty for‘ default (Rs.) | Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.) – |
1. | Ws. Abu Estate Private Limited | Rs.3,00,000/- | Rs.3,00,000/- | Rs.3,00,000/- |
2. | Nilagiri Abuthahir Azeez | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
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.3,00,000/- (Rupees Three lakhs) is imposed on the company and Rs.50,000/- (Rupees fifty thousand) is imposed on the Officer in default. Totally Rs.3,50,000/- (Rupees Three lakhs fifty thousand) is imposed as penalty for violation of Section 134(5)(c) of the Companies Act, 2013 for the FY 2015-16.
II. FY 2016-17
S.No | Company and Officers in default | Penalty for default (Rs.) |
Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.) – |
1. | Ws. Abu Estate Private Limited | Rs.3,00,000/- | Rs.3,00,000/- | Rs.3,00,000/- |
2. | Nilagiri Abuthahir Azeez | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
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.3,00,000/- (Rupees Three lakhs) is imposed on the company and Rs.50,000/- (Rupees Fifty thousand) is imposed on the Officers in default. Totally Rs.3,50,000/- (Rupees Three lakhs fifty thousand) is imposed as penalty for violation of Section 134(5)(c) of the Companies Act, 2013 for the FY 2016-17.
III. FY 2019-20
S. No | Company and Officers in default | Penalty for default (Rs.) |
Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.) – |
1. | M/s. Abu Estate Private Limited | Rs.3,00,000/- | Rs.3,00,000/- | Rs.3,00,000/- |
2. | Nilagiri Abuthahir Azeez | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
3. | Naina Mohammed Neelagiri Abdul Azeez | Rs.50,000/- | Rs.50,000/- | Rs.50,000/- |
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.3,00,000/- (Rupees Three lakhs) is imposed on the company and Rs.50,000/- (Rupees Fifty thousand) is imposed on the Officers in default. Totally Rs.4,00,000/- (Rupees four lakhs) is imposed as penalty for violation of Section 134(5)(c) of the Companies Act, 2013 for the FY 2019-20.
10. 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.
11. 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].
12. 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 five 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-live thousand rupees but which may extend to one lakh rupees.
(B. SRIKUMAR, ICLS)
REGISTRAR OF COMPANIES
TAMILNADU, CHENNAI.
ADJUDICATING OFFICER