Non-reporting of violations/non-compliance made by company in audit report: MCA imposes Penalty on CA
The Ministry of Corporate Affairs (MCA), through the Registrar of Companies, Bihar, has issued an order imposing a penalty on CA Dipak Kumar (Membership no. 542404) for violations under Section 143 of the Companies Act, 2013. Here’s a summary of the key points from the order:
Violation Details: CA Dipak Kumar was found in violation of Section 143 of the Companies Act, 2013 for the financial years 2016-17, 2017-18, and 2018-19. The violations primarily pertain to the non-reporting of certain compliance issues by Abhineet Nursing Homes And Laparoscopic Centre Private Limited in their audit reports.
Nature of Violations:
- Failure to report the non-attachment of Cash Flow Statements with financial statements, contrary to Section 129 and Section 2(40) of the Companies Act, 2013.
- Non-disclosure of class of share capital details as required by Schedule III of the Companies Act, 2013.
- Inadequate reporting of related party transactions as per AS-18 and Section 129 read with Schedule III of the Companies Act, 2013.
- Non-disclosure of revenue from operations and other income separately in the financial statements, also violating Schedule III.
- Failure to classify loans from directors as secured or unsecured, as required by Section 129 read with Schedule III of the Companies Act, 2013.
Auditor’s Reply: The auditor’s responses to these violations were found unsatisfactory or lacking sufficient evidence in several instances, contributing to the penalties imposed.
Penalty Imposed: CA Dipak Kumar has been fined Rs. 15,000 for these violations, considering the provisions of the Companies Act, 2013 and the penalties outlined therein. The penalty takes into account the status of Abhineet Nursing Homes And Laparoscopic Centre Private Limited as a small company.
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
(0612)- 2216150/2950121
Email Id : [email protected]
Website: www.mca.gov.in
Order N0: ROC/PAT/Sec. 143/37744/440 Date: 10.07.2024
Order for penalty for violation of section 143 of the Companies Act, 2013
In the matter of
ABHINEET NURSING HOMES AND LAPAROSCOPIC CENTRE PRIVATE LIMITED
CIN- U74120BR2009PTC015125
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- Abhineet Nursing Homes And Laparoscopic Centre Private Limited, CIN- U74120BR2009PTC015125, (hereinafter referred to as the company) for the financial year ending on 31.03.2017, 31.03.2018 and 31.03.2019, Shri Dipak Kumar, (Membership no. 542404) is the Auditor of the company.
Facts about the case:-
3. 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/ 37744/ 266 dated 30.05.2024.
4. However, this office has received a reply from the abovesaid auditor vide its letter dated 20.06.2024.
5. 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:
5.1 Contravention of section 129 and Section 2(40) of the Companies Act, 2013 read with Accounting Standard-3:
Description of Violation: 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 years ending as on 31.03.2018 and 31.03.2019, 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.
Reply of the Auditor: The Company has also prepared the Cash Flow Statement along with the Financial Statement as required by the Companies Act, 2013, for the year ended 31.03.2018 and 31.03.2019. Hence, the financial statements are reflecting the true and fair view of the state of affairs of the company. Cash Flow Statements for the said period are being attached along with this reply for your kind perusal.
Conclusion: As per MCA portal, it is found that the cash flow statements are not attached with the said financial statements and the auditor has not commented on the same. Thus, the reply of the auditor is not backed by any evidence. Hence, it is concluded that the auditor has violated the provisions of section 143(3)(e) of the Companies Act, 2013, w.r.t. failure of reporting violations/non-compliance made by the company in audit report.
5.2 Contravention of section 129 read with Schedule III of the Companies Act, 2013:
Description of Violation: 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.
For each class of share capital (different classes of preference shares to be treated separately) as per Schedule III of the Companies Act, 2013, the Company needs to disclose in the financial statements (a) the number and amount of shares authorized (b) the number of shares issued, subscribed and fully paid, and subscribed but not fully paid; (c) par value per share; (d) a reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period; (e) the rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital; (f) shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by or by subsidiaries or associates of the holding company or the ultimate holding company in aggregate; (g) shares in the company held by each shareholder holding more than 5 per cent. shares specifying the number of shares held; (h) shares reserved for issue under options and contracts/ commitments for the sale of shares/disinvestment, including the terms and amounts; (i) for the period of five years immediately preceding the date as at which the Balance Sheet is prepared: (A) Aggregate number and class of shares allotted as fully paid-up pursuant to contract(s) without payment being received in cash. (B) Aggregate number and class of shares allotted as fully paid-up by way of bonus shares. (C) Aggregate number and class of shares bought back. (j) terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date; (k) calls unpaid (showing aggregate value of calls unpaid by Directors and officers);(l) forfeited shares (amount originally paid-up).
Upon observation of the filed financial statements for the financial year ended on 31.03.2019, it is found that the Company has not disclosed the same, thereby affecting the true and fair view of the state of affairs of the Company.
Hence it is observed that the Company has contravened 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.
Reply of the Auditor: The Company has properly disclosed in its financial statements for the FY 2018-19, all the following requisite fields as applicable to the company.
Conclusion: As per MCA portal, it is found that the company has not shown class of share capital in its financial statements for the Financial Year 2018-2019 and the auditor has not commented on the same. Thus, the reply of the auditor is totally unsatisfactory. Hence, it is concluded that the auditor has violated the provisions of section 143(3)(d) of the Companies Act, 2013, w.r.t. failure of reporting violations/non-compliance made by the company in audit report.
5.3 Contravention of AS-18 read with section 129 r/w Schedule III of the Companies Act, 2013: Description of Violation: As per 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: (i) 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.
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 observation of the filed financial statements for the financial year ended on 31.03.2017, 31.03.2018 and 31.03.2019, 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.
Thereby the true and fair view of the state of affairs of the Company has been affected and contravention of AS-18 read with 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 AS-18 r/w. Section 129 r/w Schedule III of the Companies Act, 2013.
Reply of the Auditor: The Company has complied with all the relevant provisions of AS-18 and has adequately disclosed the required information in its Financial Statements as per AS-18 for all the related party transaction, if any, incurred during the period for the F.Y. ended 31.03.2017, 31.03.2018 and 31.03.2019. Hence, the Financial Statements are presenting the true and fair view of the state of affairs of the company.
Conclusion: As per MCA portal, it is found that the company has not reported about the related party transaction in the Financial Statements for the financial year ending on 31.03.2017 and 31.03.2018, and the auditor has not commented about the non-reporting of the related party transactions by the company and it has been found that the related party transactions has been mentioned by the company in the financial statements filed for the financial year ending on 31.03.2019. Thus, the reply of the auditor is satisfactory for the financial year 2018-19 and not satisfactory for the financial years 2016-17 and 2017-18. Hence, it is concluded that the auditor has violated the provisions of section 143(3)(e) of the Companies Act, 2013, w.r.t. failure of reporting violations/non-compliance made by the company in audit report for the financial years 2016-17 and 2017-18.
5.4 Contravention of section 129 r/w Schedule III of the Companies Act, 2013:
Description of Violation: As per Schedule III of the Companies Act, 2013 in respect of a company other than finance company revenue from operations shall disclose separately in the notes revenue from-(a) Sale of products; (b) Sale of services; (c) Other operating revenues; Less: (d) Excise duty. Revenue under each of the above heads shall be disclosed separately by way of notes to accounts to the extent applicable.
Upon perusal of the financial statements filed for the financial year ended on 31.03.2018, it is observed that in the attached financial statements, the Company has failed to disclose separately the revenue from operations and other income in the notes to accounts as per Schedule III of the Companies Act, 2013. However, the Company has contravened the provisions of the 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. However, the auditor has failed to comment on the same in the audit report for the aforesaid financial year.
Reply of the Auditor: It is stated that the company disclosed all the revenue under each of the above heads by way of notes of accounts as per the applicabilities.
Conclusion: As per MCA portal, it is found that the company has disclosed all the revenue under each of the above heads by way of notes of accounts. Thus, the reply of the auditor appears to be satisfactory. Hence, the charge is dropped.
5.5 Contravention of section 129 read with Schedule-III of the Companies Act, 2013:
Description of Violation: 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 111.
The Company has shown loans from directors under the head long term borrowings in the financial statements for the F.Y 2017-18 and 2018-19 amounting to Rs 20,80,000/- and Rs. 32,80,000/ – respectively.
However, such loans from directors have not been sub- classified as: – Secured and Unsecured. Further the Company has also failed to mention the nature of security of such loans as required is Schedule III of the Companies Act, 2013.
Hence the Company has violated with the Section 129 read with Schedule III of the Companies Act, 2013, thereby the true and fair view of the state of affairs of the Company has also been affected. However, the auditor has failed to comment on the same in the audit report for the aforesaid financial years.
Reply of the Auditor: It is stated that the amount shown in the loan from Directors under the head Loan Term Borrowings in the Financial Statements for the FY. 2017-18 and 2018-19 amounting to Rs. 20,80,000/- and Rs. 32,80,000/- respectively are all unsecured in nature. The company has no intention to non-disclose any material information and hence, forth while company will adequately disclose it as a sub-classification under the unsecure loan for the upcoming financial years.
Conclusion: As per reply of the auditor and as per MCA Portal, it is found that auditor has accepted that the auditor has accepted the default and hence, it is concluded that the auditor has violated the provisions of the section 143(3)(d) and 143(3)(j) of the Companies Act, 2013, w.r.t. failure of reporting violations/non-compliance made by the company in audit report.
Hence, the auditor viz., Shri Dipak Kumar, (Membership no. 542404) has violated the provisions of section 143(3)(d), 143(3)(e) and 143(3)(j) of the Companies Act, 2013.
6. Hence, from above the facts, it is concluded that the provisions of Section 143 of the Companies Act, 2013 have been contravened by the auditor and therefore he is liable for penalty u/s. 450 of the Companies Act, 2013 for the Financial Years 2016-17, 2017-18 and 2018-19.
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 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”.
7. Further Section 446B states that “if penalty is 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 any 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”.
8. As per clause 85 of section 2 of the Companies Act, 2013, small company means a company whose paid up capital and turnover shall not exceed rupees four crore and rupees forty crore respectively. As per MCA portal, paid up capital of the company- Abhineet Nursing Homes And Laparoscopic Centre Private Limited is Rs. 10,00,000/- and the turnover of the company is Rs. 64,75,150.00, Rs. 95,78,585.00 and Rs. 2,26,33,620.00 as per Financial Years 2015-2016, 2016-2017 and 2017-2018. Therefore, the benefits of small company are extended to this noticee while adjudicating penalty.
ORDER
9. 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. 15,000 (Fifteen Thousand) on CA Dipak Kumar, Chartered Accountant- Membership no. 542404 as per Table Below for violation of Section 143 of the Companies Act, 2013 for the financial year 2016-17, 2017-18 and 2018-19:
| 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.) |
Penalty Imposed (Rs.) As per Sec. 446B of the Act |
| Non- reporting of violations/ non- compliance made by the company in audit report | Section 143 |
CA Dipak Kumar, Chartered Accountants Membership no. 400984 | FY 2016- 2017 to FY 2018- 2019 | Rs.10000 | Rs.10000*3 no. of years = Rs. 30,000/ – | 15,000 |
10. The noticee shall pay the amount of penalty individually by way of e-payment (available on Ministry website www.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.
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 www.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}.
12. 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
