Antique Exim Pvt. Ltd. has been penalized by the Ministry of Corporate Affairs (MCA) for failing to comply with Section 138 of the Companies Act, 2013. The company incurred severe consequences due to its negligence in appointing an internal auditor, resulting in a substantial fine of Rs. 3 lakh.
Analysis: The MCA, through its Gazette Notification, appointed an Adjudicating Officer to determine penalties under the Companies Act. In this case, Antique Exim Pvt. Ltd., a registered company in Gujarat, was found in violation of Section 138. The violation was related to the company’s failure to appoint an internal auditor despite its turnover exceeding Rs. 200 crore. The inquiry officer discovered the breach during the examination of financial statements. The company’s authorized representative claimed that an internal audit department was established, but external professionals were not appointed as auditors. The officer, however, found this explanation unsatisfactory, as the company was required to appoint an internal auditor since 2014-15.
Conclusion: As a consequence of the violation, the Adjudicating Officer imposed a penalty of Rs. 3 lakh on Antique Exim Pvt. Ltd. Additionally, the company and the directors in default were directed to individually remit the penalty amount within 90 days of the order. Failure to pay the penalty may result in further legal consequences, including fines and imprisonment. The company and directors have the option to file an appeal against the order within 60 days. It is essential for companies to comply with the regulations to avoid penalties and ensure good corporate governance.
BEFOR THE ADJUDICATING OFFICER
REGISTRAR OF COMPANIES, GUJARAT, DADRA & NAGAR HAVEL
Order No. ROC-Guj/Adj. Order/Sec. 138/2023/1676 to 80 Dated: 4 JUL 2023
ORDER FOR PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014 FOR VIOLATION OF SECTION 138 OF THE COMPANIES ACT, 2013.
IN THE MATTER OF M/s. ANTIQUE EXIM PRIVATE LIMITED
Date of hearing- 21.06.2023.
1. Shri R. C. Mishra (ROC), Adjudicating Officer
2. Indrajit Vania (DROC), Presenting Officer.
Company/Officers/Directors/KMP/ Authorised Representative:
Mr. Bhargav Vyas (PCS), the Authorised Representative of the Company/Directors.
Appointment of Adjudication Authority: –
1. The Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad. II dated 24.03.2015 has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred under section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 (Notification No. GSR 254(E) dated 31.03.2014) for adjudging penalties under the provisions of Act.
2. M/s. ANTIQUE EXIM PRIVATE LIMITED (herein after referred to as “the Company”) is a Company registered under the provisions of the Companies Act, 1956/2013 in the State of Gujarat, having CIN (U52393GJ2011PTC067924) and presently having its registered office situated at A-104, Shilalekh Commercial Co.Op. Society, Ltd., Bhoja Bhai Ni Sheri, Mahidharpura, Surat-395003,
Fact of the case:
3. The Ministry of Corporate Affairs vide letter 3/82/2020/CL-II (DGCoA), dated 17.03.2020 has ordered Inquiry of the Company under section 206(4) of the Companies Act, 2013. Accordingly, inquiry under section 206(4) of the Companies Act, 2013 has been carried-out by this office. During the course of inquiry, the inquiry officer has pointed out the violation of section 138 of the Companies Act, 2013 as under:
“During the course of examination of financial statements for the financial years 2018-19 and 2019-20 the Inquiry officer has pointed out that being a Private Limited Company, the turnover of the Company was exceeded Rs. 200 Cr. There is required to appoint an Internal Auditor as required under the provisions of section 138 of the Companies Act, 2013 r.w. Rule 13 of the Companies (Accounts) Rules, 2014. However, in view of the same, the company has not appointed Internal Auditor in the company. Therefore, the company and its officers in default have violated the provisions of section 138 of the Companies Act, 2013 r.w. Rule 13 of the Companies (Accounts) Rules, 2014.
4. The office of the undersigned issued adjudication notice under section 454 of the Companies Act, 2013 for violation of section 138 of the Companies Act, 2013 to the Company and its officers in default on 06.10.2022 with request to remit the penalty as prescribed under the provisions of the Act.
5. Thereafter, this office vide letter dated 20.10.2022 has given an opportunity of being heard on 02nd November, 2022 in the matter wherein the authorized representative had requested for further adjournment so as he may produce necessary documents related to the matter. Accordingly, the undersigned had fixed the hearing on 21.06.2023 at 2.30pm in the 0/o ROC, Ahmedabad.
Reply / submission made by Authorized Representatives.
6. Bhargav Vyas (PCS), the Authorized Representative of the Company/directors present in the hearing proceeding on 21.06.2023 at 2.30pm. He stated that the replies of the Company were already submitted on two occasions on 07.03.2022 and 20.10.2022 which were taken on record. He further stated that the Company had constituted inhouse Internal Audit Department commensurate with the size of the company and not appointed external professional as internal auditor of the company. Further, the Board of Director’s Reports for the FY 2014-15, 2015-16, 2016-17, 2017-18, 1018-19 and 2019-20 have reported regarding adequacy of Internal control with reference to Financial Statement. Hence, there was no violation of Section 138 of the Companies Act, 2013 with respect to appointment of Internal Auditor by the Company. In view of the above the representative of the company/directors has requested to take lenient view in the matter.
7. Submission of the Presenting Officer:
The presenting officer submitted that as per requirement of section 138 of the Companies Act, 2013 r.w. Rule 13 of the Companies (Accounts) Rules, 2014 the company has failed to appoint Internal auditor in the company. The reply of the company is unsatisfactory since the company is liable to appoint internal Auditor from 2014-15.
In views of the above, it is submitted that the company and its directors in default should be liable for the penalty under the provisions of section 450 of the Companies Act, 2013.The adjudicating authority has power under section 454 of the Act r.w. section 138 of the Companies Act, 2013 to impbse penalty under section 450 of the Companies Act, 213.
8. While adjudging quantum of penalty under section 450 of the Companies Act, 2013, the Adjudication Officer shall have due regard to the following factors, namely:
(a) The amount of disproportionate gain or unfair advantage, whenever quantifiable, made as a result of default.
(b) The amount of loss caused to an investor or group of investors as a result of the default.
(c) The repetitive nature of default.
9. With regard to the above factors to be considered while determining the quantum of penalty, it is noted that the disproportionate gain or unfair advantage made by the noticee or loss caused to the investor as a result of the delay on the part of the noticee to redress the investor grievance are not available on the record. Further, it may also be added that it is difficult to quantify the unfair advantage made by the noticee or the loss caused to the investors in a default of this nature.
10. The undersigned considered the submission of the authorized representatives of the company/ Directors and Presenting Officer. Having considering the facts and circumstances of the case and after taking into account the above factors, the undersigned has reasonable cause to believe that the company and its officers have violated the provision of section 138 of the Companies Act, 2013. I hereby imposed penalty on the company and Directors of the Company in default for violation of section 138 of the Companies Act, 2013 as per Table below:-
|Sr. No.||Name of the Company /Director||Maximum Penalty||Penalty imposed|
|1.||M/s. Antique Exim Private Limited||Rs. 2,00,000/-||Rs. 2,00,000/-|
|2.||Pankaj Kumar Babel||Rs. 50,000/-||Rs. 50,000/-|
|3.||Shantilal Paldecha||Rs. 50,000/-||Rs. 50,000/-|
11. The noticee shall pay the amount of penalty individually for the company and its directors (out of own pocked) by way of form No. INC-28 of e-payment (available on Ministry Website mac.gov.in) under “Pay miscellaneous fees” category in MCA fee and payment Service within 90 (ninety) days of this order and the Challan/SRN generated after payment of penalty through online mode shall be forwarded to this office along with the copy of form No. INC- 28.
12. Appeal if any, against this order may be filed in writing with the Regional Director, North Western Regional, Ministry of Corporate Affairs, ROC Bhavan, Opp. Rupal Park, Ankur Bus stand, Naranpura, Ahmedabad (Gujarat) 380 013 within a period of sixty days from the date of receipt of this order, in e-Form ADJ setting forth the grounds of ap eal and shall be accompanied by the certified copy of this order. (Section 454 of the Companies Act, 2013 read with the Companies (Adjudicating of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019).
13. Please note that as per the provisions of section 454(8)(i) of the Companies Act, 2013, where company does not pay the penalty imposed by the Adjudication officer or the Regional Director within a period of Ninety days (90 days) from the date of the receipt of the copy or order, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakhs rupees. Further as per section 454(8)(ii) of the Companies Act, 2013, where an officer of a company who is in default does not pay the penalty within a period of Ninety days (90 days) from the date of receipt of the copy of the order, such officers shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.
14. Your attention is also invited to section 454(8) of the Companies Act, 2013 in the event of non-compliance of this order which provides that in case of default in payment of penalty, prosecution will be filed u/s. 454(8)(ii) of the Companies Act, 2013 at your own risk, costs and responsibility without any further notice.
The adjudication notice stands disposed of with this order.
(R. C. MISHRA) ICLS
Registrar of Companies,
Gujarat, Dadra and Nagar Haveli. Copy to:
Signed this day of June, 2023.