The Registrar of Companies (ROC), Chennai, imposed penalties on Cryo Scientific Systems Private Limited and its officers for violating Section 134 of the Companies Act, 2013. The violations involved non-disclosure of related party transactions, including loans from directors and remuneration to key personnel, in the financial statements for FY 2015-16 to FY 2017-18. Despite these transactions being reflected in other filings, the company failed to include them in the required financial statements as per Accounting Standard AS-18. The company was penalized Rs. 1.5 lakh, and each defaulting officer was fined Rs. 25,000 for each financial year. As a small company, Cryo Scientific benefited from reduced penalties under Section 446B of the Companies Act. The adjudication was based on an inquiry following observations that the company had understated related party dealings with an NGO and failed to disclose director remuneration in its financial statements. Appeals against the decision can be filed within 60 days of the order.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES, TAMIL NADU, ANDAMAN & NICOBAR ISLANDS, CHENNAI
II FLOOR, C- WING, SHASTRI BHAVAN, 26, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI- 6
F.NO.ROC/CHN/ CRYO SCIENTIFIC/ADJ/S.134/2024 DATE: 23 AUG 2024
ADJUDICATION ORDER UNDER SECTION 134 OF THE COMPANIES ACT, 2013
IN THE MATTER OF WS CRYO SCIENTIFIC SYSTEMS PRIVATE LIMITED
1. Appointment of Adjudicating Officer: –
Ministry of Corporate Affairs vide its Gazette Notification No. A-42011/112/2014-Ad.II, dated 24.03.2015 has appointed Registrar of Companies, Chennai as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 (hereinafter referred as Act or Companies. Act, 2013) r/w Companies (Adjudication of Penalties) Rules, 2014 for adjudging penalties under the provisions of this Act.
2. Company: –
Whereas the company viz M/s. Cryo Scientific Systems Private Limited with CIN: U36999TN1998PTC039872 (herein gun- referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the Companies Act, 1956 having its registered office as per MCA21 Registry at No. 2/268, Rapatd Nagar, Kunrathur, High Road, Gerugambakkam, Chennai, Tamil Nadu 602101. The financial & other details of the subject company as available on MCA 21 portal is stated as under:
| S.No. | Particulars | Information |
| 1. | Company’s Status | Active |
| 2. | Filing Status | Financial Statement: Up to 31.03.2023
Annual Return: Up to 31.03.2023. |
| 3. | Paid up Capital | Rs.59,83,000/- |
| a. Revenue from Operation | Rs.45,761,000/- | |
| b. Other Income | Rs.85,000/- | |
| c. Profit/Loss for the Period | Rs.389,000/- | |
| 4. | Whether it is a Holding Company | No |
| 5. | Whether it is a Subsidiary Company | No |
| 6. | Whether company registered under Section 8 of the Act? | No |
| 7. | Whether company registered under any other special Act? | No |
3. Directors during the period of violation:
| S.No. | Name of Director Default | Designation | Date of Appointment | Date of Cessation |
| 1. | Mr.Narayanan | Wholetime Director | 10.02.1998 | ….. |
4. Section and Penal Provision as per Companies Act, 2013
Section 134. Financial Statement, Board’s Report, etc.
(1) The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board by the chairperson of the company where he is authorised by the Board or by two Directors out of which one shall be managing director, if any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary of the company, wherever they are appointed, or in the case of One Person Company, only by one director, for submission to the auditor for his report thereon.
(3) There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include—
(c) Directors’ Responsibility Statement;
(h) particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the prescribed form;
(5) The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) shall state that—
(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(8) If a company is in default in complying ,14.ith the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.
5. Issue of Adjudication Notice:
An Inquiry was conducted on the affairs of the Company M/s. Cryo Scientific Systems Private Limited under Section 206(4) of the Companies Act,2013 by an Officer authorized by the Central Government wherein the observations of the Inquiry Officer are as follows:
5.1 On the basis of the Scrutiny of the General Ledgers submitted by the company, it was noted that during the year 2016-17 to 2017-18, the Company has made payments amounting to Rs.3,80,836/- and Rs. 4,37,550/- respectively to an NGO named “Changed India” under the expense head “Donations”. It was noted that Mr.A. Narayanan ( the member and Director in this company) is Director/ Trustee of the said NGO. Thus, the said NGO being a related party to the company. However, the company has made a false declaration in its Board Report as required under Section 134 of the Companies Act, 2013 stating that the company did not have any specified related party transactions during the aforesaid years.
5.2 In Schedule- 5 of the Balance Sheet for the financial year 2016-17, a sum of Rs. 14 lakhs have been shown as loan from Shri.A. Narayanan, Director of the Company and a sum of Rs. 2.25 lakhs and Rs. 23.45 lakhs have been shown loan from Shri. Nandhini Narayanan, Directors of the company and both are Related Parties. However, its observed that these related party transactions of loan from directors for the Financial Year 2015-16 to 2017-18 are not disclosed in the financial year statements as per AS-18 of Companies (Accounting Standard) Rules, 2006 for the financial year 2015-16 to 2017-18 as per Part -I of Schedule III.
5.3 In Note-6 of Notes of accounts of the Financial Year 2017-18, a sum of Rs. 12 lakhs to Shri. A Narayanan, a sum of Rs. 12 lakhs to Smt. Nandini Narayanan and a sum of Rs. 7.2 lakhs to Ms. Chandra have shown as Directors Remuneration. These three persons are the Directors of the company and also Related Parties. However, it is observed that these Related Party Transactions of remuneration to the Directors for the Financial Year 2015-16 to 201718 are not disclosed in the financial statement as per AS-18 of the Companies (Accounting Standards) Rules, 2006 for the financial year 2015-16 to 2017-18 as per Part -I of Schedule III. Hence, the company has not disclosed with AS-18 of the Companies (Accounting Standard) Rules, 2006 which contravened the provision of Section 134(5)(c) of the Companies Act, 2013 for the financial year 2015-16 to 2017-18.
Accordingly, on submission of the Inquiry report, the Regional Director, Ministry of Corporate Affairs, Chennai has directed to take necessary action against the defaulters as per the provisions of the Companies Act, 2013.
After that the Adjudicating Authority has issued notice to the company and Officers in default vide Notice No. Roc/ Chn.039872/CRYO SCIENTIFIC/S.134(5)(c)/P.4,5,6,&8/ADJ/2023 dt 17.04.2024.
6. Reply of Company and Directors for Adjudication Notice issued:
The Whole-time Director of the company vide letter dated 02.05.2024 submitted that (i) As per the provision of Section 188(1) of the Companies Act, 2013, making donation to an NGO where the Director of the Company is director/ trustee is not material transaction which can be covered under the categories as mentioned in Clause (a) to (g) to Section 188(1). Hence, the same has not been considered as Related Party Transaction and as result it was not disclosed in the Board Report.
(ii) The Loan from directors as shown in Schedule 5 of the Balance Sheet of FY 2016-17 and 2017-18 has been disclosed in the form AOC-4 in Point No. 22 under the Head “Gross Value Transaction as per AS 18 (if applicable)” under financial parameters- Balance Sheet items. However, the non-disclosure of such loans as per AS-18 of the Companies (Accounting Standard) Rules, 2006 in the financial Statement has been inadvertently missed to be disclosed.
(iii) In the FY 2017-18, the Company has paid remuneration of Rs. 12 lakhs to Shri. A. Narayanan and Smt. Nandini Narayanan and a sum of Rs.7,20,000/- to Ms. Chandra totaling to Rs. 31,20,000/-. Same has been missed inadvertently to be disclosed in the financial statement in notes to accounts.
7. Adjudication Hearing:
The Adjudicating Authority had issued notice of hearing dt 02.05.2024 by fixing the hearing on 08.05.2024 at 12:45 PM. Pursuant to the notice dt 02.05.2024, Shri.Gouri Shanker Mishra, PCS appeared before the Adjudicating Authority on behalf of the company and Whole- time Director on 08.05.2024 and made submission that the non- disclosure of such remuneration in the Financial Statement has not resulted into loss to any person as the same was clearly disclosed in the Form AOC-4 under the head Profit and Loss Account and Financial Parameters.
8. Analysis of violation of the Companies Act,2013
It is noticed that one of directors of the company is a Director/ Trustee of the said NGO. Thus, the said NGO being a related party to the company Section 134 of the Companies Act, 2013. But the company did not have any specified related party transactions during the financial years 2016-17 to 2017-18. Further, the Section 134 of the Companies Act,2013 is not differentiated material The related party transactions of loan from directors, and remuneration to Directors for the Financial Year 2016-17 to 2017-18 are not disclosed in the financial year statements as per AS-18 of Companies (Accounting Standard) Rules, 2006 for the financial year 2015-16 to 2017-18. Thereby the company has violated Section 134 of the Companies Act, 2013 and the Company and its Officers in default are liable for penalty under Section 134(8) of the Companies Act,2013.
(ii) Further Section 446 B of the Companies Act, 2013 states that ” ifpenaltyis payable for non-compliance of any of the provisions of this Act by a One person Company, Small Company, Start-up company or Producer Company or by anu of its Officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be shall be liable to a penalty which shall not be more than one half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an Officer who is in default or any other person, as the case may be”.
(iii) As per clause 85 of Section 2 of the Companies Act, 2013, small company means a company whose paid up capital and turn over shall not exceed four crore and rupees forty crore respectively. As per MCA portal paid up capital of the company is Rs.59 lakhs and turnover are less than Rs.40 Cores as per the MGT 7A filed by the company with this office for the immediately preceding FY i.e. 2021-22. Therefore, the benefits of small company are extended to this company while adjudicating the penalty.
9. Decision
Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that the company and Officers in default violated Section 134 of the Companies Act, 2013 by not disclosing and related party transactions of loan from directors for the Financial Year 2015-16 to 2017-18 as per AS-18 of Companies (Accounting Standard) Rules, 2006. Further, failed to disclose Remuneration to Directors in notes to accounts in the financial Statement.
Accordingly, I am inclined to impose a penalty as prescribed under Sub- Section 8 of Section 134 of the Companies Act, 2013. The details of the penalty imposed on the Company and Officers in default as follows:
I. FY 2015-16
| S.No | Company and Officers in default | Penalty for default (Rs.) | Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.)- 50 % being Small company U/s. 446 B of CA 2013 |
| 1. | Ws. Cryo Scientific Systems Private Limited | Rs.3,00,000/- | Rs.3,00,000/- | Rs.1,50,000/- |
| 2. | Mr. Narayanan | Rs.50,000/- | Rs.50,000/- | Rs.25,000/- |
Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the, Companies Act, 2013 a penalty of Rs.1,50,000/-(Rupees One lakh fifty thousand) is imposed on the Company and Rs.25,000/- (Rupees Twenty five thousand) is imposed on each Officers hi default. Totally Rs. 1,75,000/- (Rupees One lakh seventy five thousand) as penalty amount for violation of Section 134 of the Companies Act, 2013 for the FY 2015-16.
II. FY 2016-17
| S. No | Company and Officers in default | Penalty for default (Rs.) | Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.)- 50 % being Small company U/s. 446 B of CA 2013 |
| 1. | M/s. Cryo Scientific Systems Private Limited | Rs. 3,00,000/- | Rs. 3,00,000/- | Rs. 1,50,000/- |
| 2. | Mr. Narayanan | Rs. 50,000/- | Rs. 50,000/- | Rs. 25,000/- |
Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.1,50,000/-(Rupees One lakh fifty thousand) is imposed on the Company and Rs.25,000/- (Rupees Twenty five thousand) is imposed on each Officers in default. Totally Rs. 1,75,000/- (Rupees One lakh seventy five thousand) as penalty amount for violation of Section 134 of the Companies Act, 2013 for the FY 2016-17.
III. FY 2017-18
| S. No | Company and Officers in default | Penalty for default (Rs.) | Maximum Penalty (Rs.) | Final Penalty Imposed (Rs.)- 50 % being Small company U/s. 446 B of CA 2013 |
| 1. | M/s. Cryo Scientific Systems Private Limited | Rs.3,00,010/- | Rs.3,00,000/- | Rs.1,50,000/- |
| 2. | Mr. Narayanan | Rs.50,000/- | Rs.50,000/- | Rs.25,000/- |
Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) & (3) of the Companies Act, 2013 a penalty of Rs.1,50,000/-(Rupees One lakh fifty thousand) is imposed on the Company and Rs.25,000/- (Rupees Twenty five thousand) is imposed on each Officers in default. Totally Rs. 1,75,000/- (Rupees One lakh seventy five thousand) as penalty amount for violation of Section 134 of the Companies Act, 2013 for the FY 2017-18.
10. The said amount of penalty shall be paid through online by using the website www.mca.gov.in (Misc. head) within 90 days of receipt of this order and intimate this office with proof of penalty paid.
11. Whereas Appeal against this order may be filed with the Regional Director (SR), Ministry of Corporate Affairs, 5th Floor, Shastri Bhavan, 26 Haddows Road, Chennai-600006, Tamil Nadu within a period of sixty days from the date of receipt of this order, in Form ADJ [available on Ministry website www.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 Act read with Companies (Adjudicating of Penalties) Rules, 2014].
12. Your attention is also invited to section 454(8) of the Act in the event of non-compliance of this order, “(8)(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.”
(B. Srikumar, ICLS)
REGISTRAR OF COMPANIES
TAMILNADU, CHENNAI.
ADJUDICATING OFFICER
