Introduction: The Ministry of Corporate Affairs in Bihar has issued an order regarding penalties for violations of Section 143 of the Companies Act, 2013. This order concerns MITHLANCHAL PROFICIENT NIDHI LIMITED and their auditor, CA Nidhi Agrawal. Let’s delve into the details of the case and the penalties imposed.
Detailed Analysis:
1. Appointment of Adjudication Officer: The Ministry appointed an Adjudicating Officer to adjudicate penalties under Section 454 of the Companies Act, 2013.
2. Company Information: MITHLANCHAL PROFICIENT NIDHI LIMITED, CIN-U65991BR2013PLC019970, for the financial year ending on 31.03.2020, CA Nidhi Agrawal (Membership Number: 441950) is the Auditor.
3. Nature of Non-compliance: The company failed to report violations/non-compliance in the audit report as required by Section 143 of the Companies Act, 2013.
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- Contravention of Section 129 and Section 2(40): Financial statements did not attach Cash Flow Statement, violating Section 129 and Section 2(40) of the Companies Act, 2013.
- Contravention of Section 129 read with AS-18: Failure to disclose related party information, contravening AS-18.
- Contravention of Section 129 r/w Schedule III: Short-term borrowings were not sub-classified, affecting the true and fair view of the company’s state of affairs.
- Contravention of Section 129 r/w Schedule III: Failure to sub-classify short-term loans and advances, leading to a contravention of Section 129 read with Schedule III.
4. Penalty Imposition: Despite the show cause notice, no response was received from CA Nidhi Agrawal, leading to the conclusion of contravention of Section 143. A penalty of Rs. 10,000 was imposed on CA Nidhi Agrawal for the financial year 2019-2020.
Conclusion: In conclusion, the Registrar of Companies-Cum-Official Liquidator, Patna, has imposed a penalty on CA Nidhi Agrawal for violations of the Companies Act, 2013. This penalty serves as a reminder of the importance of compliance with statutory requirements in financial reporting. Appeals against this order can be made within 60 days, failing which further legal consequences may ensue.
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Government of India
Ministry of Corporate Affairs
Office of the Registrar of Companies, Bihar
4th Floor, ‘A’ Wing, Maurya Lok Complex
Dakbunglow Road, Patna-800001
No: ROC/PAT/Sec. 143/19970/1920
Date: 12.03.2024
Order for penalty for violation of section 143 of the Companies Act, 2013
In the matter of
MITHLANCHAL PROFICIENT NIDHI LIMITED
CIN- U65991BR2013PLC019970
Appointment of Adjudication Officer:-
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 (herein after known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
Company:-
2. As per the record of MCA Portal and AOC-4 filed by the company- Mithlanchal Proficient Nidhi Limited, CIN-U65991BR2013PLC019970, (hereinafter referred to as the company) for the financial year ending on 31.03.2020, CA Nidhi Agrawal (Membership Number: 441950) is the Auditor of the company.
Facts about the case:-
3. Nature of Non-compliance: Failure of reporting violations/non-compliance made by the company in audit report as required u/s. 143 of the Companies Act, 2013.
3.1 Contravention of section 129 and Section 2(40) of the Companies Act, 2013 read with Accounting Standard-3:
As per Section 129(1) of the Companies Act, 2013 the Financial Statements shall give true and fair view of the state of affairs of the Company, comply with the accounting standards notified under section 133 and be in form as provided in Schedule III.
Upon perusal of the Financial Statements for the financial year ended as on 31.03.2020, it is observed that the Company, has not attached Cash Flow Statement along with the Financial Statements as required by Companies Act, 2013, hence the financial statements is not reflecting the true and fair view of the state of affairs of the company, Therefore, the company has contravened the provisions of section 129 and Section 2(40) of the Companies Act, 2013 read with Accounting Standard-3.
The same has not been commented upon by auditor in audit reports, thereby leading to violation of Section 143 read with Section 129 and Section 2(40) of the Companies Act, 2013 read with Accounting Standard-3.
3.2 Contravention of section 129 of the Companies Act, 2013 read with AS-18:
As per Section 129(1) of the Companies Act, 2013, the Financial Statements shall give true and fair view of the state of affairs of the Company, comply with the accounting standards notified under section 133 and he in form as provided in Schedule III.
Upon observation of the filed financial statements for the financial year ended on 31.03.2020, it is found that the Company has not disclosed the name of the related party and nature of the related party relationship where control exists irrespective whether there have been transactions between the related parties. According to AS-18, nature of related party shall be disclosed irrespective of any transaction and if there have been transactions between related parties, during the existence of a related party relationship, the reporting enterprise should disclose the following: (1) the name of the transacting related party; (ii) a description of the relationship between the parties; (iii) a description of the nature of transactions; (iv) volume of the transactions either as an amount or as an appropriate proportion; (v) any other elements of the related party transactions necessary for an understanding of the financial statements; (vi) the amounts or appropriate proportions of outstanding items pertaining to related parties at the balance sheet date and provisions for doubtful debts due from such parties at that date; and (vii)amounts written off or written back in the period in respect of debts due from or to related parties.
Hence it is observed that the Company has contravened the AS-18 read with Section 129 read with Schedule III of the Companies Act, 2013 thereby affecting the true and fair view of the state of affairs of the Company in the aforesaid financial year.
The same has not been commented upon by auditor in audit reports, thereby leading to violation of Section 143 read with Section 129 read with AS-18.
3.3 Contravention of section 129 r/ w Schedule III of the Companies Act, 2013:
As per Section 129(1) of the Companies Act, 2013 the Financial Statements shall give true and fair view of the state of affairs of the Company, comply with the accounting standards notified under section 133 and he in form as provided in Schedule III.
On examination of the financial statement filed from the F.Y 31.03.2020, it is observed that the Company has shown short-term borrowings amounting to Rs. 1,90,32,901 respectively, however failed to sub-classify such short-term borrowings as Secured/Unsecured as per Schedule III of the Companies Act, 2013.
Thereby the true and fair view of the state of affairs of the Company has been affected and contravention of section 129 read with Schedule III of the Companies Act, 2013.
The same has not been commented upon by auditor in audit reports, thereby leading to violation of Section 143 read with Section 129 r/w Schedule III of the Companies Act, 2013.
3.4 Contravention of section 129 r/w Schedule III of the Companies Act, 2013:
As per Section 129(1) of the Companies Act, 2013 the Financial Statements shall give true and fair view of the state of affairs of the Company, comply with the accounting standards notified under section 133 and he in form as provided in Schedule III.
Upon perusal of the financial statements filed for the financial year ended on 31.03.2020, it is found that the Company has shown loan to members under the head of short-term loans and advances amounting to Rs. 1,32,97,268.26 however failed to sub-classify such short-term loans advances as Secured/ Unsecured as per Schedule III of the Companies Act, 2013 leading to contravention of section 129 read with Schedule III of the Companies Act, 2013.
The same has not been commented upon by auditor in audit reports, thereby leading to violation of Section 143 read with Section 129 r/w Schedule III of the Companies Act, 2013.
Hence, the auditor viz., CA Nidhi Agrawal (Membership Number: 441950) has violated the provisions of section 143(3)(e) and 143(3)(j) of the Companies Act, 2013.
5. Whereas, this office has issued show cause notice for default under section 143 of the Companies Act, 2013 vide this office letter no. ROC/ PAT/SCN/sec.143/19970/1431 dated 02.02.2024.
6. However, this office has not received any reply from the abovesaid auditor. Hence, it is concluded that the provisions of Section 143 of the Companies Act, 2013 have been contravened by the auditor and therefore she is liable for penalty u/s. 450 of the Companies Act, 2013 for the Financial Year 20192020.
Section 450 states 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 penalhj 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”.
ORDER
6. Having considered the facts and circumstances of the case and after taking into account the provisions of Rule-11 of Companies (Adjudication of Penalties) Rules, 2014 (as amended), I hereby impose a penalty of Rs. 10,000 (Ten Thousand) on CA Nidhi Agrawal, Chartered Accountants- Membership no. 441950 as per Table Below for violation of Section 143 of the Companies Act, 2013 for the financial year 2019-2020:
| Nature of default | Violation of Section of the Companies Act, 2013 | Company/ Officers to whom penalty imposed | No. of days in default | Penalty for defaults (Rs.) as per Section 450 of the Act | Total Penalty (Rs.) |
| Non-reporting of violations/ non- compliance made by the company in audit report | Section 143 | CA Nidhi Agrawal, Chartered Accountants-Membership no. 441950 | FY 2019-2020 | Rs. 10000 | Rs. 10000 |
The noticee shall pay the amount of penalty individually 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 (ninety) days of this order. The Challan/SRN generated after payment of penalty through online mode shall be forwarded to this office.
8. Appeal against this order may be filled in writing with the Regional Director (ER), Ministry of Corporate Affairs, Kolkata, within a period of 60 (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) and 454(6) of the Act read with Companies (Adjudication of Penalties) Rules, 2014).
9. Please note that if the noticee does not pay the penalty amount imposed herein within a period of ninety days from the date of receipt of the copy of the order, he 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 in terms of section 454(8)(ii) of the Companies Act, 2013; apart from the liability to pay the penalty amount in compliance to this order, and for which prosecution will be filed without further notice in this regard.
(Aparajit Barua)
Adjudicating Officer &
Registrar of Companies-Cum-
Official Liquidator, Patna
