ROC levies penalty on Auditors for Non-Reporting of Non-Compliance in Audit report

The Ministry of Corporate Affairs(MCA) has imposed penalty on Auditors for Non-Reporting of Non-Compliance in Audit report in the matter of Sonasuman Constech Engineers Private Limited.

Facts of the Case:

As per Section 129(1) of the Companies Act 2013, the Financial Statements shall give true and fair view of the state of affairs of the Company, comply with the accounting standards notified under section 133 and be in form as provided in Schedule III.

For each class of equity share capital as per Schedule III of the Companies Act, 2013, the Company needs to disclose in the financial statements, the shares held by each shareholder holding more than five percent shares specifying the number of shares held.

According to AS -18 nature of related party shall be disclosed irrespective of any transaction and if there have been transactions between related parties, during the existence of a related party relationship, the reporting enterprise should disclose the follfYWing: (i) the name of the transacting related party; (ii) a description of the relationship between the parties; (iii) a description of the nature of transactions; (iv) volume of the transactions either as an amount or as an appropriate proportion; (v) any other elements of the related party transactions necessary for an understanding of the financial statements; (vi) the amounts or appropriate proportions of outstanding items pertaining to related parties at the balance sheet date and provisions for doubtful debts due from such parties at that date; and (vii)amounts written off or written back in the period in respect of debts due from or to related parties.

However, the Company failed to disclose this information in its financial statement for the F.Y. 2019–20 and violated the provisions of AS–18 read in conjunction with Section 129 read in conjunction with Schedule III of the Companies Act, 2013, which had an impact on the true and fair view of the Company’s financial situation.

Thus, the auditor has failed to comment on the same in the audit report for the aforesaid financial years.

Whereas, this offke has issued show cause notice for default under section 143 of the Companies Act, 2013 vide this office letter no. ROC/PAT /SCN/sec.143/36124/2216-2217 dated 05.12.2022.

However, this office has not received any reply from the abovesaid auditors. Hence, the provisions of Section 143 of the Companies Act, 2013 has been contravened by the auditors and therefore they are liable for penalty u/s. 450 of the Companies Act, 2013 for the Financial Years 2017-2018, 2018-2019 and 2019-2020.

Order:

Having considered the facts and circumstances of the case and after taking into account the provisions of Rule-11 of Companies (Adjudication of Penalties) Rules, 2014 (as amended), MCA hereby impose a penalty of Rs. 10,000 (Ten Thousand) on Shri Ravikant Kumar, Kumar Vivek & Associates and Rs. 5000 on Shri Basant Kumar Jaiswal, Basant Jaiswal & Associates as per Table Below for violation of Section 143 of the Companies Act, 2013 for the financial years 2017- 2018, 2018-2019 and 2019-2020.

The noticee shall pay the amount of penalty individually by way of e-payment (available on Ministry website) under “Pay miscellaneous fees” category in MCA fee and payment Services within 90 (ninety) days of this order. The Challan/SRN generated after payment of penalty through online mode shall be forwarded to this office.

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