Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad, addressed an appeal filed by M. Harish Babu, a Chartered Accountant and the Statutory Auditor of Preethi Villas Private Limited. The appeal contested an adjudication order issued by the Registrar of Companies (ROC), Hyderabad, which levied a penalty of ₹30,000 on Mr. Babu. The penalty was imposed for alleged non-compliance with Section 143(2) and 143(11) of the Companies Act, 2013, related to the auditor’s failure to report a practice of refunding a significant portion of advance payments with interest and its potential violation of Section 73 of the Act and related Deposit Rules in his audit reports for the financial years ending March 31, 2015, 2016, and 2017. The ROC’s initial action stemmed from observations made during an inspection under Section 206(5) of the Companies Act, 2013.
During the hearing before the Regional Director, Mr. Babu argued that there was no violation of Section 73 based on an order from the High Court in a related matter involving the company’s directors. He contended that since there was no violation of Section 73, he was not obligated to qualify his audit report, and consequently, there was no breach of Section 143. However, the Office of the ROC informed the Regional Director that a Special Leave Petition (SLP) had been filed before the Supreme Court against the High Court’s order. Considering the pending litigation before the apex court, the Regional Director directed Mr. Babu to submit an undertaking to comply with the Adjudicating Officer’s order based on the Supreme Court’s eventual decision. Mr. Babu provided this undertaking. Ultimately, the Regional Director rejected Mr. Babu’s appeal, granting him the liberty to refile it based on the outcome of the proceedings before the Supreme Court of India, as the matter remains sub-judice.
F. No:9/09/ADJ/SEC.143 of 2013/ROC(TG)/RD(SER)/2022
BEFORE THE REGIONAL DIRECTOR, SOUTH EAST REGION
MINISTRY OF CORPORATE AFFAIRS, HYDERABAD
IN THE MATTER OF COMPANIES ACT, 2013/357
IN THE MATTER OF PREETHI VILLAS PRIVATE LIMITED
Mr. Mr. M. Harish Babu, Partner,
M/s. M. Harish & Associates
Chartered Accountants
Statutory Auditor of Preethi Villas Private Limited
Residing at – 3-1-330, Adithya,
1st Floor, Behind Civil Hospital,
Karimnagar – 505 001, Telangana.
……………. Appellant
Date of hearing: 18.03.2025
Present: CA M. Harish Babu
ORDER
1. M. Harish Babu, Chartered Accountant, is the Statutory Auditor of the company PREETHI VILLAS PRIVATE LIMITED has filed an appeal under section 454(5) of the Companies Act, 2013 in e-form ADJ vide SRN T74282682 dated 26.01.2022 against the adjudication order issued in Ref No. 4 of 2021 vide letter No.2592 dated 24.11.2021 under section 454 read with section 143 of the Companies Act, 2013 passed by the Registrar of Companies, Hyderabad for default in compliance with the requirements of Section 143 (2) & 143 (11) of Companies Act 2013.
2. Registrar of Companies in his Adjudication order dt.. 24.11.2021 has stated that “the subject company viz. Preethi Villas Private Limited was inspected u/s. 206(5) of the Companies Act, 2013 and it is observed that the auditor of the company, has violated the provisions of Section 143(3) of the Companies Act, 2013 by not reporting the practice of refund with interest of major portion of the advance so received and its possible violation of Section 73 of the companies Act, and Deposit Rules in his report attached to the Balance Sheet as at 31.03.2015, 31.03.2016 and 31.03.2017 and hence liable for penal action for the aforesaid non-reporting u/s. 143(11) of the Act read with Clause 3(v) of the Companies (Auditor’s Report) Order 2016. On the basis of the instructions from the competent authority, show cause notice for adjudication was issued vide letter no ROCH/008544 (PVPL-143)/TBR/2020/SCN/2336 dated 13.03.2020.
3. ROC has further stated that CA Mr. M. Harish Babu, Chartered Accountant of the Company attended the proceedings in person and after considering his submission, ROC has observed that the auditor has been found to have defaulted in complying with the above said provision resulting in non-compliance during the financial years 2015-16, 2016-17 and 20172018. Further, Registrar of Companies, Hyderabad passed an order dated 24.11.2021 by fixing a penalty of Rs. 30,000/- on the Auditor, i.e., Harish Babu (applicant).
4. In appeal, a hearing was fixed on 18.03.2025 before the Regional Director (SER), Hyderabad and Mr. Manjeet Bucha, PCS & CA M. Harish Babu, Chartered Accountant of the Company attended the hearing. The matter was heard. The applicant while stating that there is no violation of section 73 in the facts of the case, also relied on the order of the Hon’ble High Court in the Criminal Petition No. 3720 of 2021 filed by the Directors holding that there is no violation of Section 73 of the Act. The Auditor contended that as there was no violation of section 73, he was not required to qualify his report and accordingly there is no violation of Section 143 of the Act.
5. The Office of ROC has informed the undersigned that SLP has been filed before the Hon’ble Supreme Court against the order of the Hon’ble High Court. In view of the same the Applicant was directed to submit an undertaking that he will comply with the order of Adjudicating Officer as and when the SLP is decided depending on the outcome of the SLP.
6. Further, M. Harish Babu, Chartered Accountant Statutory Auditor of the Company has submitted undertaking vide his letter dated 07.04.2025 to comply with the orders of the Hon’ble Supreme Court of India and the orders passed by the Regional Director.
7. Since, the matter involved in the present application is Sub-Judice before the Hon’ble Supreme Court of India, the present appeal made in ADJ vide SRN T74282682 dated 26.01.2022 is hereby rejected with liberty to refile the appeal based upon the decision of the Hon’ble Supreme Court of India.
Issued under my hand and seal on this the 16th day of April, 2025.
RICHA KUKREJA
REGIONAL DIRECTOR(S.E.R.)
HYDERABAD
