MCA Levies ₹3.75 Lakh Penalty for 2708-Day Delay in Internal Auditor Appointment

The Registrar of Companies (ROC), Hyderabad, has imposed a penalty of Rs. 3.75 lakhs on Thrissur Expressway Limited and its officers for violating Section 138(1) of the Companies Act, 2013. The company failed to appoint an internal auditor despite having loans exceeding Rs. 100 crores from 2014 to 2021, leading to a delay of 2708 days. The company filed a suo moto application admitting the lapse and seeking adjudication under Section 450 of the Act. The ROC found the company and its key managerial personnel (KMPs) liable for penal action and imposed varying penalties on current and former officers, including directors and company secretaries. The penalties must be paid within 60 days, failing which further legal consequences, including fines and imprisonment, may apply. The order also provides the right to appeal to the Regional Director within 60 days. This case highlights the importance of compliance with corporate governance norms under the Companies Act, 2013.

F.NO. ROCH/U74900TG2009PLC063297/TELANGANA/138 OF 2013/2023

BEFORE THE REGISTRAR OF COMPANIES, HYDERABAD
FOR THE STATE OF TELANGANA
2ND FLOOR, CORPORATE BHAWAN, THATTIANNARAM, G.S.I. POST, BANDLAGUDA,
NAGOLE, HYDERABAD-500 068

PETITION NO. ADJ. 138 OF 2023
IN THE MATTER OF SECTION — 138 OF COMPANIES ACT 2013
AND
IN THE MATTER OF
M/s. THRISSUR EXPRESSWAY LIMITED

A Company incorporated under the Companies Act, 2013, CIN: U74900TG2009PLC063297, having its Registered office situated at Door No. 1-80/40/SP/58-65, Shilpa Homes Layout, Gachibowli, Hyderabad – 500032, Telangana, India.

ORDER UNDER SECTION 454 READ WITH SECTION 450 OF COMPANIES ACT, 2013

FOR THE VIOLATION OF SECTION 138 OF COMPANIES ACT 2013

1. Whereas Mts. THRISSUR EXPRESSWAY LIMITED (hereinafter referred as ‘Company’) is registered in the State of Telangana vide CIN No: U74900TG2009PLC063297 on 08.04.2009, having its registered office address at Door No. 1-80/40/SP/58-65, Shilpa Homes Layout, Gachibowli, Hyderabad – 500032, Telangana, has filed an suo moto application along with its officers in default u/s 450 for adjudication of violation of section 138 (1) r/w section 454 of the Companies Act, 2013 (the Act) seeking necessary orders.

2. It is submitted by the applicants that the applicant company has availed outstanding loans and borrowings from the banks and public financial institutes was in excess of Rs. 100 Crores during the period from 01.04.2014 to 30.08.2021 and was required to appoint internal auditor on 01.04.2014 pursuant to section 138 (1) Companies Act, 2013 read with Rule 13 (1) (b) (iii) of Companies (Accounts), Rules, 2014. However, the company has not appointed an internal auditor during that period as it could not find a suitable candidate and resulted in violation of Section 138(1) of the Companies Act, 2013 and liable under Section 450 with a delay of 2708 days.

3. Further, the applicant company has submitted that after the said period the outstanding loans and borrowings did not exceed the limits prescribed under section 138 (1) of Companies Act, 2013, read with Rule 13 (1) (b) (iii) of Companies (Accounts), Rules, 2014 and prayed to pass an order for adjudicating the offence committed u/s 138 (1) of the Companies Act, 2013.

4. The authorized representative Mr. Mr. Mahadev Tirunagari, Practicing Company Secretary, has submitted that the company is a loss-making company and the officers who applied include its past directors and KMPs and therefore a lesser penalty may be imposed.

5. Since there is no penal provision provided u/s 138 of the Companies Act, 2013, the offence is punishable u/s 450 of the Act. Whereas Section 450 of the Companies Act, 2013 contemplates the following^.

‘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 ton thousand rupees, and in case of continuing contravention, with a further penalty of ono 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.”

6. After considering the submissions made In the application and the facts of the case it is proved beyond doubt that the company and the officers of the company have defaulted in complying the provisions under Section 138 (1) of the Act with a delay of 2708 days. Hence the company, its KMPs, directors and past directors during the period when no KMP was appointed are liable for penal action under section 450 of the Act.

7. Having considered the facts and circumstances of the case, submissions made by the company and its authorized representative and after taking into account the factors mentioned in the relevant Rules, I hereby impose a total penalty of Rs. 3,75,000/- on the company and its officers in default during the relevant period as per table below for the violation of provisions of Section 138 of the Companies Act, 2013 for the non-appointment of internal auditor during the period when they were officers. In this regard, the company, and its officers in default (within the meaning of section 2 (60) of the Companies Act, 2013) are hereby directed to pay the following penalty from their own sources.

The penalty as Indicated above, shall be paid within 60 days from the date of issue of this order by the defaulters (out of their own resources) and file o-Form INC-28, with the office of RoC, Hyderabad with copies of challan In proof of payment.

8. In this regard your attention is also drawn to the provisions of Section 454(5) and (6) which contemplates that:

“(5) Any person aggrieved by an order made by the adjudicating officer under sub-section (3) may prefer an appeal to the Regional Director having jurisdiction in the matter.

(6) Every appeal under sub-section (5) shall be filed within sixty days from the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form, manner and be accompanied by such fees as may be prescribed,”

9. In this regard your attention is drawn to the provisions of Section 454(8) (i) and (ii) of the Companies Act, 2013 which read as follows:

(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 thousand rupees but which may extend to one lakh rupees, or with both.

Issued under my hand and seal on this the 17th of May 2023.

(JOSEKUTTY V.E.)
REGISTRAR OF COMPANIES,
HYDERABAD