Ministry of Corporate Affairs in India, through the Registrar of Companies (West Bengal), has issued an adjudication order imposing penalties on the auditors of Strong Infracon Private Limited. The penalties are related to the auditors’ failure to disclose key financial information in the company’s audit reports for multiple financial years.
Analysis: The adjudication order states that the auditors, Mr. Ashish Kumar Upadhyay of M/s Ashish Upadhyay & Co. Chartered Accountants and Mr. Anikt Kumar of Ankit Krishna & Co. Chartered Accountants, did not perform their duties as auditors in accordance with the requirements of Section 143 of the Companies Act, 2013. The violations mentioned in the order include non-disclosure of key management personnel, related party transactions, investments, short-term loans and advances, and details of shareholders holding more than 5% shares in the financial statements.
The auditors’ failure to comment on these matters in their audit reports and certify compliance with accounting standards led to their non-compliance with Section 143(3) of the Companies Act, 2013. As a result, the auditors are liable for penalties under Section 450 of the Companies Act, 2013.
The penalties imposed on the auditors amount to a total of Rs. 90,000, with each violation attracting a penalty of Rs. 10,000. The penalties are calculated based on the first instance of non-compliance and continuing instances of non-compliance, with a daily penalty of Rs. 1,000 for each continuing instance, subject to a maximum penalty of Rs. 2,00,000 for the company and Rs. 50,000 for the officer(s) in default.
Conclusion: The Ministry of Corporate Affairs, through the Registrar of Companies (West Bengal), has imposed penalties on the auditors of Strong Infracon Private Limited for their failure to disclose key financial information in the company’s audit reports. The penalties serve as a reminder of the importance of auditors’ compliance with the provisions of the Companies Act, 2013 and their responsibilities in ensuring accurate and transparent financial reporting
GOVERNMENT OF INDIA
Ministry of Corporate Affairs
Office of the Registrar of Companies (West Bengal)
Nizam Palace, 2nd M. S. 0. Building, 2nd Floor
234/4, Acharya Jagadish Chandra Bose Road
KOLKATA – 700 020
Notification No. ROC/LEGAL/ADJ/2023/138312/penalty order/ 2191- 2195 | Dated: 29-05-2023
ADJUDICATION ORDER FOR PENALTY U/S 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 MATTER OF NON COMPLIANCE OF THE PROVISIONS OF SECTION 143 OF THE COMPANIES ACT, 2013
In respect of: STRONG INFRACON PRIVATE LIMITED (CIN: U45400WB2009PTC138312)
AMALGAMATED WITH
ELITE REALCON PRIVATE LIMITED (CIN: U45400WB2010PTC142960)
1. Appointment of Adjudicating Officer:-
1. Ministry of Corporate Affairs vide its Gazette Notification No A‑ 42011/112/2014-Ad.11 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 450 of the Companies Act, 2013.
2. Company:-
STRONG INFRACON PRIVATE LIMITED [herein after known as the company] was a registered company incorporated on 09.09.2009 under the provisions of the Companies Act, 1956 having its registered office as per MCA21 Registry at address 6 & 6/3 SHASHI SEKHAR BOSE ROAD KOLKATA WB 700025 INDIA.
3. Facts about the Case:-
1) On the basis of Inspection carried out under Section 206(5) of the Companies Act, 2013 the following 5 instances or violations as pointed out in the Inspection report:
a. CONTRAVENTION OF SECTION 143(2) & 143(31(e) RELATING TO SECTION 129 OF THE COMPANIES ACT, 2013 READ WITH ACCOUNTING STANDARD-18 (CORRESPONDING TO SECTION 227(3)(d) RELATING TO SECTION 211 OF THE COMPANIES ACT, 1956)
For Non-disclosure of Key Management Personnel, Related Parties and related party transactions in the financial statements for the years ended 2010-11 to 2015-16
“As pointed out in point No.5 the Auditors have not commented upon the same in their audit reports and has certified that the company has complied with all the Accounting Standards. PFL has been sent to the auditors for the years 2014-15 and 2015-16 both dated 14/10/2019 but no reply has been received. Therefore Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants, and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors for the year 2014-15 and 2015-16 respectively, have not performed the duties of auditors and auditing standards as contemplated under Section 143(3).”
The auditors of the company Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors of the company for the financial year 2014- 15 and 2015-16 respectively, have not performed the duties of auditors and hence are liable to Penalty under Section 450 of the Companies Act, 2013.
b. CONTRAVENTION OF SECTION 143(2) RELATING TO SECTION 129 OF THE COMPANIES ACT, 2013 (CORRESPONDING TO SECTION 227(3) RELATING TO SECTION 211 OF THE COMPANIES ACT 1956
For non-Disclosure of details of Investments in the financial statements for the years 2010-11 to 2015-16
“As pointed out in point No.15 the Auditors have not commented upon the same in their audit reports and has certified that the company has complied with all the Accounting Standards. PFL has been sent to the auditors for the years 2014-15 and 2015-16 both dated 14/10/2019 but no reply has been received. Therefore Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants, and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors for the year 2014-15 and 2015-16, have not performed the duties of auditors and auditing standards as contemplated under Section 143(3).”
The auditors of the company Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors of the company for the financial year 2014- 15 and 2015-16 respectively, have not performed the duties of auditors and hence are liable to Penalty under Section 450 of the Companies Act, 2013.
c. CONTRAVENTION OF SECTION 143(2) RELATING TO SECTION 129 OF THE COMPANIES ACT, 2013 (CORRESPONDING TO SECTION 227(2) RELATING TO SECTION 211 OF THE COMPANIES ACT, 1956)
For Non-Disclosure of details of Short term loans & advances in the Financial Statements for the years 2011-12 to 2015-16
“As pointed out in point No.17 the Auditors have not commented upon the same in their audit reports and has certified that the company has complied with all the Accounting Standards. PFL has been sent to the auditors for the years 2014-15 and 2015-16 both dated 14/10/2019 but no reply has been received. Therefore Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants, and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors for the year 201415 and 2015-16, have not performed the duties of auditors and auditing standards as contemplated under Section 143(3).”
The auditors of the company Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors of the company for the financial year 2014- 15 and 2015-16 respectively, have not performed the duties of auditors and hence are liable to Penalty under Section 450 of the Companies Act, 2013.
d. CONTRAVENTION OF SECTION 143(2) RELATING TO SECTION 129 OF THE COMPANIES ACT, 2013 (CORRESPONDING TO SECTION 227(2) RELATING TO SECTION 211 OF THE COMPANIES ACT, 19561
For non-Disclosure of details of Non-Disclosure of details of shareholders holding more than 5% shares in the financial statements for the years 200910 to 2015-16
“As pointed out in point No.22 the Auditors have not commented upon the same in their audit reports and has certified that the company has complied with all the Accounting Standards. PFL has been sent to the auditors for the years 2014-15 and 2015-16 both dated 14/10/2019 but no reply has been received. Therefore Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants, and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors for the year 201415 and 2015-16, have not performed the duties of auditors and auditing standards as contemplated under Section 143 (3) and hence are liable to be penalty under section 450 of the Companies Act, 2013.”
The auditor of the company Mr. Ashish Kumar Upadhyay, CA, M/s Ashish Upadhyay & Co. Chartered Accountants and Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who were the auditors of the company for the financial year 2014- 15 and 2015-16 respectively, have not performed the duties of auditors and hence are liable to Penalty under Section 450 of the Companies Act, 2013.
e. CONTRAVENTION OF SECTION 143(2) RELATING TO SECTION 129 READ WITH SCHEDULE III OF COMPANIES ACT, 2013
For Non-Disclosure of details of Sundry Creditors in the financial statement for the years 2015-16
“The company has shown Sundry Creditors in the financial statement for the Financial Year ended 2015-16 to the tune of Rs.12,001,300/- but no further disclosure as required by Schedule 111 of the Companies Act, 2013 has been given.
Section 143(2) of the Companies Act, 2013 states that the auditor shall make report to the members of the company that the Financial Statement gives true and fair view of the state of affairs of the company. Therefore, by non-disclosing the details of Sundry Creditors, you, being the auditor of the company for the financial year 2015-16 have not performed the duties of auditors.”
The auditor of the company Mr. Anikt Kumar, Ankit Krishna & Co. Chartered Accounts who was the auditor for the year 2015-16, have not performed the duties of auditors and hence are liable to Penalty under Section 450 of the Companies Act, 2013.
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 sub-section 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; e observations or comments of the auditors on financial transactions or matters
(f) the observations or comments of the auditors on financial transactions or matters 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, Penalty under Section 450 will be applicable on the Auditor.
3) Accordingly, the adjudication officer has issued adjudication notice vide No. LEGAL/ADJ/2022/138312 dated 13.09.2022 (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 in para “1 & T 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 physical hearing on 07.02.2023 vide letter no. ADJ/2023/138312 dated 01.02.2023.
4) Reply to the Adjudication notice, as mentioned above in para 2, have been received from the amalgamated company vide letter dated 29.09.2022 as to why penalty shall not be imposed and whereas it was submitted that:
a) The company is non-existent as the same had been merged with Elite Realcon Private Limited being a transferee company w.e.f 01.04.2015 by the order of the Hon’ble High Court, Calcutta dated 06.01.2017 [CP No. 768 of 2016].
b) Oral representation is sought before the good self for the ends of justice.
5) Chanchal Kumar Jain, Advocate, being the Authorized Representative of the noticee(s) attended the hearing physically on 07.02.2023.
AND WHEREAS, the authorized representative submitted that Section 134 of the enactment shall have prospective effect from the date of notification relying upon the judgment of the apex court [SLP 459/2004] and not the retrospective effect. Further it is stated that the Ld. CJM, Special Court had also disposed of the cases directing the accused to take plea before the appropriate forum as the offence has been decriminalized.
6) Furthermore, the Authorized Representative requested to drop the adjudication proceedings on the ground that the company is already amalgamated by virtue of the Hon’ble High Court, Calcutta in the year 2017 w.e.f. 01.04.2015.
ORDER
1. The Auditor(s) who have defaulted the provisions of section 143 of the Companies Act, 2013 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. 90,000/- (Rupees Ninety Thousands only) -in-default 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 of the Act.
| Penalty imposed U/S 450 of the Companies Act, 2013 against the defaulters (First Default= Rs. 10,000. Continuing Default= Rs. 1,000/day. Subject to maximum Rs. 2,00,000 in case of Company and Rs. 50,000 in case of Officer- in- default and any other person) | Total (Rs.) | |
| ASISH KUMAR UPADHYAY (FOR THE F.Y. 2014-15)
M/S. ASISH UPADHYAY & CO., CHARTERED ACCOUNTANTS, |
ANKIT KUMAR (FOR THE F.Y. 2015-16)
M/S. ANKIT KRISHNA & CO., CHARTERED ACCOUNTANTS, |
|
| 1st Instance= Rs. 10,000 | 1st Instance= Rs. 10,000 | 90,000/‑ |
| 2nd Instance= Rs. 10,000 | 2nd Instance= Rs. 10,000 | |
| 3rd Instance= Rs. 10,000 | 3rd Instance= Rs. 10,000 | |
| 4th Instance= Rs. 10,000 | 4th Instance= Rs. 10,000 | |
| 5th Instance = Rs. 10,000 | ||
| Total= Rs 40,000/- | Total= Rs 50,000/- | |
3. The 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 non-payment 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 the auditors in default mentioned herein above and also to Office of the Regional Director (Eastern Region) and Ministry of Corporate Affairs at New Delhi.
7. Date of hearing: 07th February, 2023 Date of Pronouncement: 29th May, 2023
[A. K. Set i, ICLS)
Adjudicating Officer & Registrar of Companies,
Copy for information and records to:-
- The Regional Director (ER), Ministry of Corporate Affairs, 234/4, A.J.0 Bose Road, 2nd M.S.O. Building, 2nd Floor, Kolkata-700020.
- Director, Legal, Ministry of Corporate Affairs, in compliance to Rule 3(9) of Companies (Adjudication of Penalties) Rules, 2014.
- Office copy.
- E-mail to content Manager for publication on Ministry’s website.
- Inspection follow up section of the Registrar of Companies, West Bengal.
