Penalty Imposed for Inadequate Related Party Transaction Disclosure

The Registrar of Companies, Coimbatore passed an adjudication order under section 454 of the Companies Act, 2013, holding that the company violated section 134(3)(h) by failing to properly disclose related party transactions in its financial statements for FY 2016–17. Although an amount of ₹4.01 crore due from a firm in which a director was a partner was reflected in the balance sheet, the transaction was not adequately disclosed in the dedicated related party disclosure section as required, particularly for a listed company. The company contended that sufficient disclosure had been made and that the lapse was due to oversight, claiming substantial compliance. This explanation was rejected. The adjudicating authority held that partial or indirect disclosure does not meet statutory requirements and that full, specific disclosure of related party transactions is mandatory. Consequently, a penalty of ₹3 lakh was imposed on the company, and ₹50,000 each on the managing director, whole-time director, company secretary, and chief financial officer, payable from personal sources, with directions to rectify the default.

GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
ROC Coimbatore
Registrar Of Companies, No.7, AGT Business Park, I Floor, Phase II, Avinashi Road, Civil Aerodrome Post, Coimbatore,
Tamil Nadu, India, 641014
Phone: (0422) -2629640,2628170
Fax: 0422-2628089
E-mail: roc.coimbatore@mca.gov.in

Order ID: PO/ADJ/01-2026/CB/01377 Dated: 12/01/2026

ORDER FOR ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 (‘THE ACT’) FOR VIOLATION OF SECTION 134(8) OF THE COMPANIES ACT, 2013.

A. Appointment of Adjudicating Officer:

Ministry of Corporate Affairs vide its Gazette notification number S.O. 831(E) dated 24/03/2015 appointed undersigned as Adjudicating Officer in exercise of the powers conferred by 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.

B. Company details:

In the matter relating to SRI RAMAKRISHNA MILLS (COIMBATORE) LIMITED……………..

Individual details:

In the matter relating to KRISHNAKUMAR GOPALSWAMY ———

In the matter relating to SRIKANTAN ANANTHA SUBRAMANIAN——-

In the matter relating to DORAISWAMI LAKSHMINARAYANASWAMY ——-

In the matter relating to NAGASWARNA LAKSHMINARAYANASWAMY ——-

C. Provisions of the Act:

(8) If a company is in default in complying with 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

D. Facts about the case:

1. Default committed by the officers in default/noticee – The company has not properly disclosed the Related party Transactions under section 188 of the Companies Act, 2013. However, in the Balance Sheet under the entry Due from firm in which a director is a partner an amount of Rs.4,01,43,547/- is shown which is a violation of section 134(3)(h) of Companies Act, 2013.

2. It is observed that the Company has violated Section 134(3)(h) of Companies Act 2013 by not disclosing Related Party transactions relating to entity JGOM, in the Financial Statements for the Financial Year 2016-17. Adjudication Notice was sent to the Company and the Officers in Default. The Company has replied that sufficient disclosure was made in the Balance Sheet itself and that due to oversight there has been a discrepancy in the disclosure under Related Party Disclosure and claimed that substantial compliance has been made. The reply of the Company is scrutinized. Though the information about the related party is present in the Balance Sheet and the respective Notes To Accounts, being a Listed Company, the Company ought to have given the full disclosures in the Related Party Disclosure portion of the Financial Statements. Based on the request of the Company physical hearing was conducted and orders passed.

E. Order:

1. The contravention of the Company is established by the insufficient disclosure about the transactions held with the related entity JGOM in the financial statements for the financial year 2016-17 and hence provisions of section 134(3)(h) of Companies Act 2013 is attracted. Since the reply of the Company is not satisfactory a penalty of Rs. 3.0 Lakhs is imposed on the Company and a penalty of Rs. 50,000/- is imposed on all officers in default viz MD, WTD, CS and CFO.

2. The details of penalty imposed on the company, officers in default and others are shown in the table below:

3. The notified officers in default/noticee shall rectify the default mentioned above and pay the penalty, so applicable within 90 days of receipt of the order.

4. The notified officers in default/noticee shall pay the penalty amount via ‘e-Adjudication’ facility which can be accessed through the respective login IDs on the website of Ministry of Corporate Affairs and upload the copy of paid challan / SRN of e-filing (if applicable) on the ‘e-Adjudication’ portal itself. It is also directed that the penalty so imposed upon the officers in default shall be paid from their personal sources/income.

5. Appeal against this order may be filed in writing with the Regional Director, RD Chennai within a period of sixty days from the date of receipt of this order, in Form ADJ setting for 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 (Adjudication of Penalties) Rules, 2014].

6. For penal consequences of non-payment of penalty within the prescribed time limit, please refer Section 454(8) of the Companies Act, 2013.

Vairamuthu Nagarajan,
Registrar of Companies
ROC Coimbatore