Failure to show correct details of deposits/Borrowings in balance sheet- MCA imposes Penalty
The Ministry of Corporate Affairs (MCA) has taken action against M/s Iyyanar Benefit Fund Nidhi Limited for their failure to present accurate details of deposits and borrowings in their balance sheet. This violation of Section 92(3) of the Companies Act, 2013 has led to the imposition of penalties by the MCA. The following analysis delves into the specific details of the case and the consequences faced by the company.
Analysis: M/s Iyyanar Benefit Fund Nidhi Limited, incorporated under the jurisdiction of the Registrar of Companies, Chennai, was subject to an inspection authorized by the Central Government. The inspection revealed a violation of Section 92(3) of the Companies Act, 2013, which requires companies to disclose their annual return on their website and include the web-link to the annual return in the Board’s report.
Specifically, the company failed to accurately represent the details of their deposits and borrowings in their balance sheet. Discrepancies were identified between the amount of deposits shown in the balance sheet against trade payables and the amount of deposits reflected in the board’s report. Additionally, the company exhibited a lack of reduction in borrowed amounts and a minimal sum reported as deposits accepted. These discrepancies indicated that the board of directors did not furnish complete and correct information as required by Section 92(3) of the Act.
The Regional Director of the Ministry of Corporate Affairs, Chennai, issued directions for penal action against the company and its officers. Following an adjudication hearing, M/s Iyyanar Benefit Fund Nidhi Limited admitted their non-compliance for the financial years 2016-2017, 2017-2018, and 2018-2019.
As a result of the violation, penalties were imposed under Section 450 of the Companies Act, 2013. The company was fined Rs. 10,000/- for each year of default, and the officers in default, including the Managing Director, Shri. Veeraselvam Karimuthu, were also fined accordingly.
Conclusion: The imposition of penalties by the Ministry of Corporate Affairs highlights the significance of accurate and complete reporting in balance sheets. M/s Iyyanar Benefit Fund Nidhi Limited’s failure to disclose correct details of deposits and borrowings in their financial statements resulted in penalties being imposed. This case serves as a reminder to companies to diligently adhere to the reporting requirements outlined in the Companies Act, 2013, and avoid non-compliance to avoid legal consequences.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF THE REGISTRAR OF COMPANIES, TAMIL NADU
SHASTRI BHAVAN, II FLOOR, 26, HADDOWS ROAD, CHENNAI-6.
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Order No. F.NO.ROC/CHN/IYYANAR BENEFIT /ADJ Order/S.92 (3) /2023 Date:26 JUN 2023
ORDER OF ADJUDICATION OF PENALTY UNDER SECTION 454 OF COMPANIES ACT, 2013 READ WITH RULE 3 OF THE COMPANIES (ADJUDICATION OF PENALITES) RULES 2014 FOR VIOLATION OF PROVISIONS OF SECTION 92(3) OF THE COMPANIES ACT, 2013 BY M/S IYYANAR BENEFIT FUND NIDHI LIMITED.
1. M/s IYYANAR BENEFIT FUND NIDHI LIMITED incorporated on 10.2023 under the jurisdiction of Registrar of Companies, Chennai with the registered office situated at 113/59, Thalaiyur Street, Pattukkottai — 614601, Tamil Nadu.
2. Whereas the company was taken up for Inspection by the an Officer authorized by the Central Government and this office had issued Show Cause Notice dated 10.2022 for violation of Section 92 (3) of the Companies Act, 2013.
3. Whereas pursuant to sub-section (3) of section 92 which read as under “Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board’s report”.
4. Whereas “All the deposits accepted by the company are maturing in less than a year as per the details furnished in balance sheet. An extract of annual return in MGT-9 furnished forming part of the board of directors report attached to financial statement for the financial year ended on 31.03.2020 against Company has shown meagre-amount as addition to indebtedness and no amount is shown as reduction, shown a debt due opening balance of principal amount of Rs. 15.07 Cr and closing balance of Rs. 15.35 Cr. Further the amount of deposits shown in the balance sheet against the trade payable and the amount of deposits shown against indebtedness in the board’s report does not match. For the financial year ended on 31.03.2020 trade payables is shown at Rs. 15.07 cr. While all the deposits are maturing within one year as per the details furnished in note 3 to balance sheet, it is incorrect to show there is no reduction in amounts borrowed and showing a meagre sum as deposit accepted by subtracting the closing balance and opening balance clearly shows that the board of directors have not furnished complete and correct information in para V indebtedness in the extract of annual return mentioned above and hence the provisions of Section 92 (3) of the Act has been violated. Similar non-compliance has been made for the financial year ended 31.03.2017, 31.03.2018 and 31.03.2019 also”.
5. Whereas Regional Director, Ministry of Corporate Affairs, Chennai vide letter dated 31.03.2021 issued directions to initiate penal action against the company and its officers in default and the undersigned has reasonable cause to believe that the aforesaid provisions of the Act have not been complied with, and accordingly this office had issued Adjudication Hearing Notice to the company and its director vide notice dated 17.10.2022.
6. Whereas in pursuance of the adjudication hearing notice vide letter dated 05.2023 issued to the company and its directors, Shri. Veeraselvam Karimuthu, (Managing Director of the company) appeared before the undersigned on 18.05.2023 and made submissions under which they agreed that the compliance has not been made for Financial years 2016-2017, 2017-2018 and 2018-2019.
7. In view of the above, upon examination and hearing, the company has admitted the Violation of Section 92 (3) of the Companies Act, 2013 for which penalty shall be imposed as per Section 450 of the Companies Act, 2013.
8. Whereas pursuant to Section 450 of the Companies Act, 2013 which reads as under;
“if any 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 10 maximum of two lakh rupees in case of an officer who is in default or any other person”
9. Therefore in view of the above said non-compliance for the violation of Section 450 of the Companies Act. 2013. the undersigned hereby impose a penalty of Rs. 10,000/- to the company and Rs. 10,000/- each to the officers in default viz., Shri. VEERASELVAM KARIMUTHU, MANAGING DIRECTOR, for three years i.e. 31.03.2017, 31.03.2018 and 31.03.2019 who are officers in default under Section 2(60) (i) & (ii) respectively.
| Name | No of days of default | Year of default | PENALTY FOR FIRST DEFAULT (RS) | PENALTY IF DEFAULT CONTINUES RS)
|
TOTAL PENALTY (RS)
|
| M/s. Iyyanar Benefit Fund Nidhi Limited Company | N A | 31.03.2017 | Rs. 25,000/- | NA | Rs. 75,000/–
|
| N A | 31.03.2018 | Rs. 25,000/- | N A | ||
| N A | 31.03.2019 | Rs. 25,000/- | N A | ||
| Shri. VEERASELVAM KARIMUTHU, MANAGING DIRECTOR
|
NA | 31.03.2017 | Rs. 25,000/-
|
N A | Rs.75,000/-
|
| NA | 31.03.2018 | Rs. 25,000/-
|
NA | ||
| NA | 31.03.2019 | Rs. 25,000/-
|
NA |
(Totalling Rs.1,50,000/- as penalty amount) for non compliance of Section 92 of the Companies Act, 2013.
11. Whereas sub-section (5) of Section 454 of the Companies Act, 2013 provides that any person aggrieved by an order made by an order made by the adjudicating officer under sub-section (3) may prefer an appeal to the Regional Director having jurisdiction in the matter and further sub-section (6) provides that every appeal under sub-section (5) shall be filed within sixty days from the date on which the cop of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form. manner and he accompanied by such fees as may be prescribed.
12. Please note that as per Section 454 (8). which read as under:
(i) of the Companies Act, 2013. -where company fails to pay the penalty imposed by the adjudicating officer or the Regional Director 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 who is in default does not pay the penalty 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”.
In case of default in payment of penalty, prosecution shall be filed under section 454(8) (i) and (ii) of the Companies Act, 2013 at your own costs without any further notice along with the penalty to be imposed and the same should be submitted.
(K.LATHA PARI.MALA VADANA,ICLS)
REGISTRAR OF COMPANIES, ADJUDICATING OFFICERS
TAMIL NADU, CHENNAI, ANDAMAN & NICOBAR ISLANDS
At 8th point, Last by 3rd Line
[subject 10 maximum of two lakh rupees in case of an officer who is in default or any other person”]
correct statement was :
[subject to maximum of two lakh rupees in case of an officer who is in default or any other person”]