Penalty of Rs. 2 Lakh Imposed on CA Firm for Non-filing of e-Form ADT-3

In an adjudication order dated April 30, 2024, issued by the Registrar of Companies, Tamil Nadu, Chennai, under Section 140 of the Companies Act, 2013, MCA has imposed a penalty of Rs. 2,00,000 on the Chartered Accountant firm, Arasu & Arunachalam, for failure to file e-form ADT-3 for resignation related to M/s. Janaki Ram Steel and Power Private Limited.

M/s. Janaki Ram Steel and Power Private Limited, registered under CIN U27101TN2004PTC052868, is an active company based in Chennai. The company’s financial status includes a paid-up capital of Rs. 18,74,96,870 and recent filings up to FY 2021-22, as per MCA-21 records.

Arasu & Arunachalam Chartered Accountants, appointed as the auditor, failed to comply with Section 140(2) of the Companies Act, 2013. This section mandates auditors to file a resignation notice (ADT-3) within 30 days of resignation, which was not adhered to for the financial year 2016-17.

An inspection conducted under Section 206(5) of the Companies Act revealed the violation. Subsequently, an adjudication notice was issued to Arasu & Arunachalam, and hearings were held where the firm provided explanations regarding the inadvertent non-compliance.

Considering the arguments presented, the adjudicating authority concluded that the violation was established under Section 140(2). Therefore, a penalty of Rs. 2,00,000 was imposed on Arasu & Arunachalam Chartered Accountants. Additionally, the firm was directed to rectify the default by filing ADT-3 within 30 days from the order date.

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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/ JANAKI RAM/ADJ/S.140/2024 DATE: 30 APR 2024

ADJUDICATION ORDER UNDER SECTION 140 OF THE COMPANIES ACT, 2013
IN THE MATTER OF M/S JANAKI RAM STEEL AND POWER PRIVATE LIMITED

Non filing of e-form ADT-3 for resignation: MCA imposes penalty of Rs. 2 Lakh on CA Firm

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. JANAKI RAM STEEL AND POWER PRIVATE LIMITED with CIN: U27101TN2004PTC052868 (herein after referred as ‘ company’ or ‘ subject company’) is a registered company with this office under the Companies Act, 2013 having its registered office as per MCA21 Registry at No.117, Sadayan Kuppam Village Road, Manali, Chennai, Tamil Nadu 600103. The financial & other details of the subject company as available on MCA-21 portal is stated as under:

3. Auditor/ Auditor Firm during the period of violation:

• Arasu & Arunachalam Chartered Accounts, Chennai

4. Section and Penal Provision as per Companies Act, 2013

Section 140. Removal, resignation of auditor and giving of special notice.

(1) The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the previous approval of the Central Government in that behalf in the prescribed manner:

Provided that before taking any action under this sub-section, the auditor concerned shall be given a reasonable opportunity of being heard

(2) The auditor who has resigned from the company shall file within a period of thirty days from the date of resignation, a statement in the prescribed form with the company and the Registrar, and in case of companies referred to in sub-section (5) of section 139, the auditor shall also file such statement with the Comptroller and Auditor-General of India, indicating the reasons and other facts as may be relevant with regard to his resignation.

(3) If the auditor does not comply with the provisions of sub-section (2), he or it shall be liable to a penalty of fifty thousand rupees or an amount equal to the remuneration of the auditor, whichever is less, and in case of continuing failure, with further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.

5. Issue of Adjudication Notice:

An Inspection of Books and Accounts of the company M/s. Janaki Ram Steel and Power Private limited was carried out U/s 206(5) of the Companies Act, 2013 by an Officer authorized by the Central Government wherein the observations of the Inspecting Officer are as follows:

During the course of Inspection, it is observed that, the Auditor of the company, Arasu & Arunachalam, Chartered Accountants lies not filed the eform ADT-3 for resignation for the financial year 2016-17. Hence, the Auditor has violated Section 140(2) of the Companies Act,2013 and the Auditor is liable for penal action as per Section 140(3) of the Companies Act,2013.

After that the Adjudicating Authority has issued Adjudication Notice to the Auditor of the company vide Notice No. Roc/Chn/052868/Janaki ram steel/S.140/P.19/Inspn. fol. up/2022-23 dated 01.12.2023.

6. Reply of Company and Directors for Adjudication Notice issued:

Pursuant to the Adjudication notice dated 01.12.2023, Arasu & Arunachalam, Chartered Accountants has submitted an Adjudication application in eform GNL -1 vide SRN: F89730493 dated 08.01.2024 and also submitted physical application in this regard.

7. Adjudication Hearing: ?-•

(i) On receipt of the Adjudication application, the Adjudicating Authority had issued notice for hearing dated 25.01.2024 by fixing the hearing on 06.02.2024 at 11:30 AM. Pursuant to the notice dated 25.01.2024, Shri. H.P. Nitesh, Company Secretary in Practice has appeared before the Adjudicating Authority on 06.02.2024 and made submissions that to comply with the appointment procedure the e-form was filed for one year term instead of five years which resulted non filing of e-form ADT-3 for the FY 2016-17. So, the violation may be adjudicated as this non-compliance is not an intentional one.

(ii) The company is having paid up capital of Rs.18 Crores, does not fall under the definition of small company as per provision of section 2(85) of the companies Act, 2013. Therefore, of imposing the provision lesser penalty as per section 446(b) shall not be applicable in this case.

8. Decision

Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that the Auditor of the company has failed to file ADT-3 -notice of resignation for the FY 2016-17. Hence, the Auditor violated Section 140(2) of the Companies Act,2013 and is liable for penal action under Section 140(3) of the Companies Act, 2013.

(i) Accordingly, I am inclined to impose a penalty as prescribed under Sub-section 3 of Section 140 of the Companies Act, 2013. The details of the penalty imposed on the company and officers in default are shown in the table below:

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.2,00,000/- is imposed on the Auditor firm Arasu & Arunachalam, Chartered Accountants as penalty amount for violation of Section140(2)of the Companies Act, 2013. (ii)Further, in exercise of Section 454 (3)(b) of the Companies Act,2013 the Auditor of the company is directed to rectify the default by filing ADT-3 as required U/s. 140 of the Companies Act, 2013 and intimate to this office the details of fillings along with SRNs within 30 days from the date of this order.

9. The said amount of penalty shall be paid through online by using the website mca.gov.in(Misc. head) within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

10. 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 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 (Adjudication of Penalties) Rules, 2014].

11. 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 sub­section (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