Section 450 Penalty Imposed for Auditor’s Failure to Report Related Party Disclosure Non-Compliance: ROC Chennai
The Registrar of Companies, Chennai, issued an adjudication order under Section 454 of the Companies Act, 2013, for violation of Section 450 arising from non-compliance with Section 143(3)(e). Following an inquiry under Section 206(4), the Ministry directed initiation of proceedings after it was observed that the company had disclosed loans from related parties amounting to ₹5,59,960 in its balance sheet as on 31.03.2016 without disclosing the related party details required under Section 129 read with AS-18 of the Companies (Accounting Standards) Rules, 2006. The inquiry also noted that related party transactions relating to loans from directors and remuneration paid to directors for FY 2017-18 were not disclosed in the financial statements as mandated under AS-18. The adjudicating authority stated that the auditor did not report these non-compliances under Section 143(3)(e). No reply was received to the show cause notice, and no one attended the hearing, resulting in ex parte proceedings. A penalty of ₹10,000 was imposed on the auditor under Section 450. The order directs payment within 90 days, provides for payment through the MCA e-Adjudication facility, allows an appeal before the Regional Director, Chennai, within 60 days, and refers to Section 454(8) regarding non-payment.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
ROC Chennai
Registrar Of Companies, Block No.6,B Wing 2nd Floor, Shastri Bhawan 26, Haddows Road, Chennai, Tamil Nadu, India,
600034
Phone: 044-28276652/28276654
E-mail: roc.chennai@mca.gov.in
Order ID: PO/ADJ/06-2026/CN/02365 Dated: 24/06/2026
ORDER FOR ADJUDICATION OF PENALTY UNDER SECTION 454 OF THE COMPANIES ACT, 2013 (‘THE ACT’) FOR VIOLATION OF SECTION 450 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 CRYO SCIENTIFIC SYSTEMS PRIVATE LIMITED [herein after known as Company] bearing CIN U36999TN1998PTC039872, is a company registered with this office under the Provisions of the Companies Act, 2013/1956 having its registered office situated at NO. 2/628, RAPID NAGAR, KUNRATHUR HIGH ROAD, GERUGAMBAKKAM, CHENNAI GERUGAMBAKKAM SRIPERUMBUDUR KANCHIPURAM TAMIL NADU INDIA 600122
Individual details:
C. Provisions of the Act:
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 1[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]
D. Facts about the case:
1. Default committed by the officers in default/noticee – Pursuant to the observations made by the authorized inquiry officer during the inquiry that was conducted on the affairs of the Company under Section 206(4) of the Companies Act, 2013, the ministry has directed the Office of ROC, Chennai to initiate prosecution proceedings against the subject company for the observed violations. The legal cell of this office has transferred for adjudication u/s 454 of the Companies Act, 2013 for violation of Section 143(3)(e) of Companies Act, 2013; which reads as follows;
143(3) The auditor’s report shall also state- (e) whether, in his opinion, the financial statements comply with the accounting standards;
The observations of the Inquiry officer are as follows: In Schedule 5 of the Balance Sheet of the subject company as on 31.03.2016, the Company has disclosed loans from related parties amounting to Rs. 5,59,960/-. However, the details of related party transactions such as name of the related party, nature of relationship, nature of transactions, and amount of transactions were not disclosed as required under Section 129 of the Companies Act, 2013 read with AS-18 of the Companies (Accounting Standards) Rules, 2006.
Further, the Company has failed to disclose the Related party transactions pertaining to loans from directors for the Financial Year 2017-18, and Remuneration paid to directors for the Financial Year 2017-18, in its financial statement, as mandated under AS-18.
However, the Auditor has not made any reporting on the above non-compliances. Therefore, the Auditor has violated the provisions of Section 143(3)(e) of the Companies Act, 2013. Hence, the Auditor in default is liable for action under Section 450 of the Companies Act, 2013.
2. The Adjudicating Authority has issued notice for e-Adjudication vide SCN/ADJ/01-2026/CN/03370 for defaults under the section 450 of the Companies Act, 2013 on 07.01.2026, but no reply has been received from the Officer in default or their authorized representatives. Further, the Adjudicating Authority had issued notice dated 17.02.2026 for e-Hearing, scheduled on 20.02.2026. Neither the Officer in default nor their authorized representatives attended the hearing fixed on 20.02.2026. Therefore, as per Rule 3(8) of the Companies (Adjudication of Penalties) Rules 2014, the matter is being proceeded with in the absence of such person (ex-parte).
E. Order:
1. It is noticed that, upon conducting inquiry under Section 206(4) of the It is noticed that upon conducting inquiry under Section 206(4) of the Companies Act, 2013 the Company has shown in the Schedule 5 of the Balance Sheet of the subject company as on 31.03.2016, the company disclosed loans from the related parties amounting to Rs. 5,59,960/-. However, the details of the related party transactions such as name of the related party, nature of the relationship, nature of the transactions and amount of transactions were not disclosed under Section 129 of the Companies Act, 2013 read with AS-18 of the Companies (Accounting Standards) Rules, 2006. Further, the company has failed to disclose the related party transactions pertaining to loans from the directors for the Financial year 2017-18 in its Financial Statement, as mandated under AS-18. In view of the above, it is evident that the auditor has violated the provision of Section 143(3) (e) of the companies Act, 2013. Hence, the Auditor in default is liable under Section 450 of the Companies Act, 2013.
2. The details of penalty imposed on the company, officers in default and others are shown in the table below:
| (A)
|
Name of person on whom penalty imposed (B) | Rectification of Default required (C) | Penalty Amount (D) | Additional Penalty
(E) (*Per day of continuing default i.e. date of rectification of default less order issue date) |
Maximum limit for Penalty (F) |
| 1 | SRIRAM V having as – |
10000 | 0 | 50000 |
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.
B SRIKUMAR,
Registrar of Companies
ROC Chennai
