MCA Penalizes Company and Directors for Failure to Address Auditor’s Remarks in Directors’ Report for FY 2019-20 [Read Order]

In the adjudication order passed by the Ministry of Corporate Affairs (MCA) Registrar of Companies under Section 454 of the Companies Act, 2013, a penalty was imposed on the company and its 3 directors for failure to address the auditor’s remarks in the directors’ report for FY 2019-20

The company named Triveni  Nidhi Limited was registered under the Companies Act, 2013, and its authorised capital is Rs. 1 crore.

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During the inquiry, it was observed that the directors had not given proper explanations in the Directors Report for the financial year ended 31.03.2020 regarding the non-compliances pointed out by the auditor.

The adjudicating authority reached the conclusion that there was a violation of Section 134(3)(f) of the Companies Act, 2013, and decided to impose a penalty under Section 134(8) of the Companies Act.

Section 134(3)(f) of the Companies Act states that "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."

Further, Section 134(8) of the Companies Act 2013, which deals with the penalty which is imposed, states that: “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.”

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Although a show cause notice (SCN) was issued to the company and its officers on 31-5-2024, no reply was furnished, and as the company and its officers neglected to respond to the SCN, therefore, no hearing was scheduled.

The adjudicating authority observed that the company violated the provisions of Section 134(3)f of the Act, and a penalty of Rs. 4,50,000 was imposed. They were instructed to make an e-payment within 90 days of the receipt of the order. The penalty imposed was clearly given in the table of the order.

This order was issued by Seema Rath, Registrar of Companies & Adjudicating Officer, Uttar Pradesh, Kanpur.

To Read the full text of the Order CLICK HERE

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