In the matter of Systematix Securities Ltd and its Whole Time Director, Rajesh Kumar Inani, the Office of the Registrar of Companies, Rajasthan, Jaipur, imposed a penalty under Section 454 of the Companies Act, 2013, for violations related to the non-appointment of an internal auditor during the financial year 2022-23.
The adjudication order begins by establishing the appointment of the Adjudicating Officer, as per the Ministry of Corporate Affairs’ notification, to handle penalties under the Companies Act, 2013. The respondents, Systematix Securities Ltd and Rajesh Kumar Inani, the Whole Time Director, were cited for their non-compliance with Section 138(1) of the Companies Act, 2013, and Rule 13 of the Companies (Accounts) Rules, 2014, which mandate the appointment of an internal auditor for certain classes of companies.
The facts of the case reveal that during the scrutiny of the e-Form MGT-7 filed by Systematix Securities Ltd, it was noted that the company had not appointed an internal auditor for the financial year 2022-23. Despite receiving a Show Cause Notice and an Adjudication Notice, the respondents failed to respond adequately. Subsequently, during the hearing, no representation was made on behalf of the respondents. However, the company later claimed to have appointed an internal auditor after the issuance of the notices.
Based on these findings, the Adjudicating Officer concluded that the respondents had violated the provisions of Section 138 of the Companies Act, 2013, and Rule 13 of the Companies (Accounts) Rules, 2014. As a result, a penalty was imposed on both Systematix Securities Ltd and its Whole Time Director, Rajesh Kumar Inani.
The penalty was calculated based on the number of days of non-compliance during the financial year 2022-23, resulting in a total penalty of ₹2,50,000. The order emphasizes that the penalty amount must be paid through the Ministry of Corporate Affairs portal and warns of further consequences for non-payment.
Furthermore, the order specifies the appeal process, allowing the respondents to file an appeal within sixty days from the receipt of the order. It also highlights the consequences of non-payment, including fines and potential imprisonment for non-compliance with the penalty.
Lastly, copies of the order were sent to Systematix Securities Ltd, Rajesh Kumar Inani, and the Regional Director, Ministry of Corporate Affairs, Ahmedabad.
In conclusion, the adjudication order underscores the importance of compliance with the Companies Act, 2013, regarding the appointment of internal auditors and the potential penalties for non-compliance. It serves as a reminder to companies and their officers of the legal obligations they must fulfill to avoid penalties and legal repercussions.
*****
Government of India
Ministry of Corporate Affairs
Office of Registrar of Companies cum Official Liquidator,
Attached to Rajasthan High Court, Jaipur Bench at Jaipur
Corporate Bhawan, G/6-7, Residency Area, Civil Lines, Jaipur- 302001
Order for Penalty under Section 454 of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014 and Companies (Adjudication of Penalties Amendment) Rules, 2015 for the violation of Section 138 of Companies Act, 2013 read with Rule 13 of Companies (Accounts) Rules, 2014 in the matter of: –
01.Systematix Securities Ltd, Company, Plot No. 35, Old Industrial RIICO Area, Chittorgarh, Rajasthan, 312001.
02.Rajesh Kumar Inani, Whole Time Director
….. Respondents
Date of hearing — 28.02.2024
Present: –
01. Shri Ruvit Kumar, ROC-Cum-OL, Rajasthan, Jaipur
0.2 Shri Raunak Agrawal, AROC-cum-AOL, Rajasthan, Jaipur
ADJUDICATION ORDER
1. Appointment of Adjudicating Officer: –
WHEREAS the Ministry of Corporate Affairs vide its Gazette Notification No. SO 831 (E) dated 24.03.2015 appointed the Registrar of Companies/undersigned as Adjudicating Officer in exercise of the Power conferred by Section 454 of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules, 2014. The Registrar of Companies vide the Companies (Amendment) Act, 2019 is entrusted with power to adjudicate penalty as provided under section 450 of the Companies Act, 2013.
2. Respondent Company:
WHEREAS Systematix Securities Ltd (CIN L65999RJ1986PLC070811) is registered with this office under the provisions of Companies Act, 1956 and having its registered office at Plot No. 35, Old Industrial RIICO Area, Chittorgarh, Rajasthan- 312001.
Relevant provisions of the Companies Act, 2013: –
WHEREAS as per the provision of section 138 (1) of the Companies Act, 2013 “Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.”
WHEREAS as per provision of Rule 13 of the Companies (Accounts) Rule, 2014 “every listed company shall be required to appoint an internal auditor which may be either an individual or a partnership firm or a body corporate.”
WHEREAS as per provision of section 450 of the Companies Act, 2013 “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 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.”
3. Facts of the Case:
> That it has been observed during the procedural scrutiny of the e-Form MGT-7 filed by the respondent company wherein authorized person/signatory for filing of above e-Form has stated/mentioned that the respondent company has not appointed Internal Auditor during the Financial Year 2022-23 pursuant to section 138 of the Companies Act, 2013 read with Rule 13 of the Companies (Accounts) Rules, 2014.
> In this regard, this office has issued Show Cause Notice vide letter No. ROCJP/SCN/Sec 138/2023-24/1418-21 dated 08.12.2023 to the respondents. However, no reply in the matter has been received so far.
> Further, this office has issued an Adjudication Notice dated 05.02.2024 to the respondents and also fixed a date of hearing in the matter on 28.02.2024.
> Further, at the time of the hearing on 28.02.2024, none appeared on behalf of the respondents. However, this office has received a letter dated 07.03.2024 from the respondent company stating that the respondent company has dully appointed Gaurav Jagetiya on 12.02.2024 as an Internal Auditor pursuant to section 138 of the Companies Act, 2013 read with Rule 13 of the Companies (Accounts) Rule, 2014.
4. In view of the above facts, the undersigned has reasonable cause to believe that the provision of section 138 of the Companies Act, 2013 read with Rule 13 of Companies (Accounts) Rules, 2014 have not been complied with by respondents and therefore liable for penal action under section 450 of the Companies Act, 2013. Accordingly, in exercise the power of 454 (3) of the Companies Act, 2013, I inclined to impose a penalty on the company and its directors, as under-.
| Nature of default | Violations under companies Act, 2013 | Name of persons on whom penalty imposed | Number of days | Per day penalty for default (In Rs.) | Total default amount (In Rs.) |
Maximum Limit for Penalty (In Rs.) | Final Penalty Imposed (In Rs.) |
| Non appoint-ment of internal auditor in the company during Financial Year-2022- 23 |
Section 138 of the Companies Act, 2013 read with Rule 13 of the Companies (Accounts) Rules, 2014 | Systematix Securities Ltd | 365 | 10,000/- +365 * 1000/- | 3,75,000 | 2,00,000 | 2,00,000 |
| Rajesh Kumar Inani | 365 | 10,000/- +365 * 1000/- | 3,75,000 | 50,000 | 50,000 | ||
| Grand Total | 2,50,000 | ||||||
| That the number of days calculated from 01.04.2022 to 31.03.2023. | |||||||
I am of this opinion that penalty is commensurate with the aforesaid failure committed by the respondents and penalty so imposed upon the officers-in-default shall be paid from their personal sources/ income. It is further directed that penalty imposed shall be paid through the Ministry of Corporate Affairs portal only as mentioned under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 under intimation to this office.
5. Appeal against this order may be filed in writing with the Regional Director (NWR), Ministry of Corporate Affairs, Ahmedabad within a period of sixty days from the date of receipt of this order, in e-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) & 454(6) of the Companies Act, 2013 read with Companies (Adjudicating of Penalties) Rules, 2014).
6. Attention is also invited to section 454(8)(1) and 454(8)(ii) of the Companies Act, 2013, which state that in case of non-payment of penalty amount, 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 and officer in default 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 both.
7. In terms of the provisions of sub-Rule (9) of Rule 3 of the Companies (Adjudication of Penalties) Rules, 2014, copy of the order is being sent to the following: –
I. Systematix Securities Ltd at Plot No. 35, Old Industrial RIICO Area, Chittorgarh, Rajasthan- 312001.
II. Rajesh Kumar Irani at ______.
III. Regional Director, NWR, Ministry of Corporate Affairs, Ahmedabad at ROC Bhavan, Opp. Rupal Park Society, Behind Ankur Bus Stop, Naranpura, Ahmedabad, Gujarat-380 013.
The adjudication notice stands disposed off with this order.
(RUVIT KUMAR)
ROC-cum-OL & Adjudicating officer,
Rajasthan, Jaipur
Signed on this 15th April 2024
Place: Jaipur, Rajasthan.
File No. ROCJP/SCN/Sec. 138/2023-24/668
Date: 15/04/2024
