MCA Imposes Penalty for Non-Inclusion of explanation on Auditor’s Qualifications in Directors’ Report

Registrar of Companies (RoC), Uttar Pradesh, issued a penalty order under Section 454 of the Companies Act, 2013, against Triveni Nidhi Limited for non-compliance with Section 134(3)(f). This section mandates the inclusion of explanations for qualifications or adverse remarks by auditors in the directors’ report. The company failed to comply for the financial year ending March 31, 2020. Despite a show cause notice, neither the company nor its directors responded. Consequently, penalties of ₹3,00,000 were imposed on the company and ₹50,000 each on its directors, totaling ₹4,50,000. As the company is not classified as a small company, reduced penalties under Section 446(b) do not apply. Payment must be made via the Ministry of Corporate Affairs website within 90 days of the order. Appeals may be filed within 60 days with the Regional Director (Northern Region). Non-compliance with the order may invite further legal action under Section 454(8).

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF
COMPANIES, Uttar Pradesh
37/17, Westcott Building, The Mall,
Kanpur —208001 (U.P.)
Phone : 0512 – 2310443/2310227

ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 FOR VIOLATION OF PROVISIONS OF SECTION 134(3)(f) OF THE COMPANIES, ACT, 2013 READ WITH  COMPANIES (ADJUDICATION OF PENALTIES) RULES 2014.

IN THE MATTER OF TRIVENI NIDHI LIMITED
(CIN -U65999UP2017PLC089064)

Appointment of Adjudicating Officer:-

1. The Ministry of Corporate Affairs vide its Gazette notification no. S.O. 831(E) dated 24.3.2015,has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 & Companies (Amendment) Act, 2020 for adjudging penalties under the provisions of this Act.

Company: –

2. Whereas the Company TRIVENI NIDHI LIMITED has been registered under the provisions of the Companies Act, on 11.01.2017 and is having its registered office situated at 11B/1A/2 Lala Ram Narain Lal Road (Bank Road),Allahabad,Uttar Pradesh,211002,India.The authorized capital of the Company is Rs. 10,000,000.00/-

3. During the course of Inquiry it was observed that the directors have not given proper explanations in the Directors Report for the financial year ended 31.03.2020 regarding the non-compliances pointed out by the auditor . Hence it is non-compliance of section 134(3)(f) of the Companies Act, 2013 and so the company and its directors are thus liable for penal action.

4. Provisions of the Act:-

Section 134(3) (f) of the Act reads as under: –

“There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include. explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made—

(i) by the auditor in his report; and

(ii) by the company secretary in practice in his secretarial audit report.”

Section 134(8) of the Act reads as under: –

“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. Accordingly, a Show Cause Notice No.07/19/Adj/2024/Triveni/1378 to 1381 Dated 31.5.2024 was issued to officer in default under section 134(3)(D of the Companies Act, 2013.

6. The company and its directors have not furnished any reply to the said show cause notice; hence no hearing was fixed for this matter.

7. The company and its directors have failed to comply with the provisions of section 134(3)(f) of the Companies Act, 2013 thereby attracting the penal provisions mentioned under Section 134(8) of the Act.

7. Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose a penalty of Rs. 3,00,000/- on the company and Rs.50,000/- on the defaulting Directors i.e. under section 134(8) of the Companies Act, 2013 and Companies (Amendment) Act, 2020 for failure to make compliance of the section 134(3)(f) of the Companies Act,2013 . It is of this opinion that penalty is commensurate with the aforesaid failure committed by the Noticee.

The company being a Nidhi company does not fall under the definition of small company as per provision of section 2(85) of the companies Act, 2013. Therefore, of imposing the provision lesser penalty as per section 446(b) shall not be applicable in this case.

9. The Noticee shall pay the amount of penalty 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 and intimate this office with proof of penalty paid .

10. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form AD.1 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 (Adjudication of Penalties) Rules, 20141

11. In Case appeal is made 0/o Registrar of Companies, U.P. maybe informed alongwith the penalty imposed & the payments made. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of non-compliance of this order.

Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur.

Order No. 07/19/Adj/2024/Triveni/41 to 44 Dated: 04/09/2024