Inadequate disclosures of Regrouping of Accounts: Penalty of ₹4 Lakh by MCA

The Ministry of Corporate Affairs (MCA), through the Office of Registrar of Companies, Tamil Nadu, Andaman & Nicobar Islands, Chennai, has issued an adjudication order under Section 134 of the Companies Act, 2013, concerning M/s Hermes I Tickets Private Limited.

1. Background: M/s Hermes I Tickets Private Limited, a registered company, has been found in violation of Section 134(5)(b) of the Companies Act, 2013. The company, based in Chennai, engaged in regrouping accounts without providing adequate disclosures in the notes to accounts.

2. Inquiry and Adjudication: An inquiry conducted under Section 206(4) revealed the company’s non-compliance. The company altered financial figures without proper disclosure, which contradicted the principles of accounting transparency and accuracy.

3. Decision and Penalties: After a thorough examination of the case, it was concluded that the company and the directors mentioned in the report are liable for penalties as prescribed under Section 134(8) of the Companies Act, 2013, for the financial year 2013-14. The penalties imposed are as follows:

• For the financial year 2013-14, M/s Hermes I Tickets Private Limited faces a penalty of ₹3,00,000.
• Mr. Ramu Annamalai Ramsamy, Managing Director, and Mr. Palaniyapan Ramsamy, Whole-time Director, are each penalized ₹50,000 for the mentioned financial year.

Thus, a cumulative penalty of ₹4,00,000 is imposed on the company and the officers in default.

4. Compliance and Appeals: The company and the directors are directed to pay the penalties through the specified online platform within 90 days of receiving the order. Additionally, they have the option to appeal this decision within sixty days to the Regional Director (SR), Ministry of Corporate Affairs.

5. Consequences of Non-Compliance: Failure to comply with this order within the stipulated time may result in further penalties. Section 454(8) of the Companies Act, 2013, outlines fines and potential imprisonment for non-compliance.

In conclusion, M/s Hermes I Tickets Private Limited faces significant penalties for its failure to provide proper disclosures in the notes to accounts, highlighting the importance of adherence to accounting standards and transparency in financial reporting.

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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/HERMES I/ADJ/S.134 /P.26/2024 DATE: 12 APR 2024

ADJUDICATION ORDER UNDER SECTION 134 OF THE COMPANIES ACT, 2013
IN THE MATTER OF M/S HERMES I TICKETS PRIVATE 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. Hermes I Tickets Private Limited with CIN: U63040TN2006PTC082562 (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 Sai Krupa Plot No. 30A (south phase) First floor SIDCO THIRU-VI-KA Industrial Estate Guindy, Chennai, Tamil Nadu 600032.

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 134 of the Companies Act, 2013- Financial Statement, Board’s Report, etc.

(5) The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) shall state that—

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the Directors had selected such accounting policies and applied them consistently an made judgments and estimates that are reasonable and prudent so as to give a true and fair; view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(8) If a company is in default in complying with the provisions of this section,:r the company shall be liable to a penalty of three lakh rupees and every officer the company who is in default shall be liable to a penalty of fifi^–y thousand rupees.

5. Issue of Adjudication Notice:

An inquiry was conducted under Section 206(4) of the Companies Act, 2013 in the matter of Hermes I Tickets Private Limited by an Officer authorized by the Central Government wherein the observations of the Inquiry Officer are as follows:

5.1- It is observed in the Balance Sheet as at March 31, 2013 under Note 9, the amount shown under Trade Payables for Supplies is Rs.8,56,10,179 in the year ended at March 31, 2013, but in the Balance Sheet as at March 31, 2014, the amount of Trade Payables for Supplies is Rs. 10,17,17,274 for the previous reporting year, i.e., March 31, 2013. Also, the amount reflected under the head Other current Liabilities, in Note 10, in the year ended at March 31, 2013, is Rs.5,11,20,467 in the Balance Sheet as at March 31, 2013 but the amount reflected under the head Other current Liabilities, for the previous reporting year, i.e., March 31, 2013, is Rs.3,50,13,372 in the Balance Sheet as at March 31, 2014. It is noted that the Expenses Payable and Other Liabilities under Other Current Liabilities under Note 10 is entirely removed from the Balance Sheet as at March 31, 2014.

The Inquiry Officer has reported that, the subject company has done the Regrouping of accounts without giving proper disclosure in the notes to accounts. The figures shown in one Financial Year should exactly match when used as part of previous accounting period in the next Financial Year. However, the subject company has changed figures deliberately and has explained it as part of re-grouping, which is not acceptable.

According to section 134(5)(b) the directors responsibility statement shall state that the directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the Financial Year and of the Profit & Loss of the company for that period. As the Financial Statements do not give a true and fair view of the affairs of the company, as stated above, the company has contravened the provision of Section 134(5)(b) of the Companies Act, 2013 for the year 2013- 2014 and hence the company and its officers in default are liable for penalty under Section 134 (8) of the Companies Act, 2013.

Accordingly, on submission of the Inquiry Report by the officer, Regional Director, Ministry of Corporate^–Affairs, Chennai has directed this office to initiate necessary action against the defaulters of the provisions of the Companies Act, 2013.

After this office has issued Show Cause Notice for Adjudication under Section 134 of the Companies Act vide Notice No. ROC/CHN/082562/S.134/P.26/INQUIRY FOLLOW UP/2022 dated 15.09.2023.

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

No reply has been received from the company and its directors.

7. Adjudication Hearing:

Since no reply has been received from the company and its directors for the Adjudication notice, the Adjudicating Authroty had. issued Hearing Notice to the company and Officers in default by fixing the hearing date as on 24.01.2024 at 11:30 AM. Pursuant to the hearing notice Shri. Naresh G, PCS has appeared on behalf of the directors namely Shri. Ramu Annamalai Ramsamy and Shri.Palaniyapan Ramsamy before the Adjudicating Authority on 24.01.2024 made submission that the violation may be adjudicated. Further, no one appeared on behalf of the company.

8. 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 directors mentioned in Para 3 who have violated Section 134(5)(b) of the Companies Act, 2013are liable for penalty as prescribed under Section 134(8) of the Companies Act,2013 at the time of filing of balance sheet for the FY 2013-14.

Accordingly, I am inclined to impose a penalty as prescribed under Sub-section 8 of Section 134 of the Companies Act, 2013. The details of the penalty imposed on the company an Officer in default are given in the table given below:

I. FY 2013-14

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 each Officers in default. Totally Rs. 4,00,000/- (Rupees Three lakhs fifty thousand) as penalty amount for violation of Section 134 of the Companies Act, 2013 for the FY 2013-14.

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 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, 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-five tbousand rupees but which may extend to one lakh rupees, or with both.”

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