Introduction: The Ministry of Corporate Affairs, under the Government of India, has recently imposed a substantial penalty on Hendrik Technology Private Limited for a violation of Section 134(3)(f) of the Companies Act, 2013. This article provides a detailed analysis of the case, the provisions of the Act that were violated, and the implications of this penalty.
Detailed Analysis: The case involves Hendrik Technology Private Limited, a company registered under the provisions of the Companies Act, 2013, on August 12, 2016. The company’s registered office is located at A-14, Sector 83, Noida, Gautam Buddha Nagar, Uttar Pradesh, 201301, with an authorized capital of Rs. 1,036,600/-.
Based on an inquiry conducted under section 206(4) of the Companies Act, 2013, it was observed that the company’s auditor had made specific notations in the audit report for the financial year ending March 31, 2020. These notations highlighted forfeited advances amounting to INR 5,96,00,000 and ongoing litigation against the company under Section 153A of the Income Tax Act, 1961. The company could not provide sufficient documentation or comments regarding these issues.
Consequently, a show-cause notice was issued to the company, but the responses provided were deemed unsatisfactory. A report under section 208 of the Companies Act, 2013 was submitted by the Inquiry Officer to the Regional Director, Northern Region, New Delhi, indicating non-compliance with Rule 134(3)(f) of the Companies Act, 2013.
The Regional Director, Northern Region, New Delhi, accorded the penal action for non-compliance of Rule 134(3)(f) and invoked the penal provisions under Section 134(8) of the Act.
Provisions of the Act: Section 134(3)(f) of the Companies Act, 2013, stipulates that statements presented in a company’s general meeting should include a report by its Board of Directors. This report must contain explanations or comments by the Board on any qualification, reservation, adverse remark, or disclaimer made by the auditor or the company secretary in their respective reports.
Section 134(8) of the Act states that a company will be liable to a penalty of three lakh rupees, and every officer of the company who is in default will be liable to a penalty of fifty thousand rupees.
Subsequently, a show-cause notice was issued to the officers in default under Section 134(3)(f) of the Companies Act, 2013. The company requested an extension of time, but the response was still found unsatisfactory during the hearing.
As a result, the company and its directors failed to comply with the provisions of Section 134(3)(f) and incurred penalties under Section 134(8) of the Act.
Conclusion: The imposition of a penalty of Rs. 3,00,000/- on the company and Rs. 50,000/- each on the three defaulting directors serves as a reminder of the importance of complying with the regulatory requirements and providing comprehensive explanations or comments on any audit-related qualifications or reservations. Failure to do so can lead to significant financial penalties, as demonstrated in this case. Companies and their directors should ensure strict adherence to the provisions of the Companies Act, 2013, to avoid such penalties and legal consequences.
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GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTRAR OF COMPANIES,
UTTAR PRADESH,
37/17, Westcott Building, The Mall,
Kanpur — 208001
Phone : 0512 — 2310323/2310443
Order No.07/01/Adj-Rule134(3)(f)/Hendrik/ Dated: 31/10/2023
ORDER FOR VIOLATION OF SECTION 134(3)(1) THE COMPANIES, ACT, 2013 READ WITH COMPANIES (ADJUDICATION OF PENALTIES) RULES 2014 & Companies (Amendment) Act, 2020
IN THE MATTER OF HENDRIK TECHNOLOGY PRIVATE LIMITED.
Appointment of Adjudicating Officer:-
1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-Ad.II dated 24.3.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules, 2014 & Companies (Amendment) Act, 2020 for adjudging penalties under the provisions of this Act.
Company: –
2. Whereas the Company M/S HENDRIK TECHNOLOGY PRIVATE LIMITED has been registered under the provisions of the Companies Act, 2013 on 12.08.2016, and is having its registered office situated at A-14, Sector 83, Noida,Gautam Buddha Nagar, Uttar Pradesh,201301. The authorized capital of the Company is Rs. 1,036,600/-.
3. On the basis of Inquiry under section 206(4) of the Companies Act, 2013, It has was observed that the auditor of the company had stated emphasis in his Audit report for the financial year ended 31.03.2020 regarding forfeited advance amounting to INR 5,96,00,000 and litigation against the company pending under Section 153A of the Income Tax Act, 1961 against which the company was unable to provide sufficient documents and the company had not commented on the same. Accordingly, this office has issued a show cause notice letter No. 01/38/Inquiry/Hendrik/2021/3468 to 3471 dated 07.03.2022 and summons vide letter no. 01/38/Inquiry/Hendrik/2021/2725-2726A dated 24.01.2022. The Company has failed to provide clarification/ explanation regarding emphasis in the director’s report for the financial year ended 31.03.2020. Hence the reply furnished not found satisfactory. The a report under section 208 of the Companies Act, 2013 submitted by the Inquiry officer to the Regional Director, Northern Region, New Delhi vide No.01/38/Inquiry/Hendrik/2021/672 dated 13.05.2022. The Regional Director, Northern Region, New Delhi vide letter Noinquiry/206(4)/Hendrik/RD(NR)/2022/3142 dated 07.06.2022 has accorded the penal action for non-compliance of Rule 134(3) (f) of the Companies Act, 2013 and are thus liable for penal provisions.
Provisions of the Act:-
3. Section 134(3) (f) of the Act reads as under: –
There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include. explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made—
(i) by the auditor in his report; and
(ii) by the company secretary in practice in his secretarial audit report.
Section 134(8) of the Act reads as under: –
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.
4. Accordingly, a Show Cause Notice No. 07/01/Adjudication-Rule12-A/ Hendrik /4265 to 4268 dated 14.09.2023 was issued to officer in default under section 134(3)(f) of the Companies Act, 2013. The company vide its letter dated 26.09.2023 has requested for an extension of time. Accordingly, a hearing was fixed for this matter on 30.10.2023.
5. Further, on the date of the hearing Mr. Abhineet Srivastava appeared on behalf of the company alongwith a reply by company which was not found satisfactory. Hence, the company and its Director have failed to comply with the provisions of section 134(3)(0 of the Companies Act, 2013 thereby attracting the penal provisions mentioned under Section 134(8) of the Act.
6. Having considered the facts and circumstances of the case and after taking into account the factors above, I hereby impose a penalty of Rs. 3,00,000/- on the company and Rs.50,000/- on the defaulting Directors under section 134(8) of the Companies Act, 2013 and Companies (Amendment) Act, 2020 for failure to make compliance of the section 134(3)(f). It is of this opinion that penalty is commensurate with the aforesaid failure committed by the Noticee.
7. The Noticee shall pay the amount of penalty by way of Demand Draft in favour of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days receipt of this order. The Demand Draft shall be forwarded to this office Address.
8. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form ADJ 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].
9. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of noncompliance of this order. In Case appeal is made 0/o Registrar of Companies, U.P. maybe informed alongwith the penalty imposed & the payments made.
(Seema Rath)
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur
