CA penalised for Not Complying with Auditor Resignation Rules as per Companies Act:

CA penalised for Not Complying with Auditor Resignation Rules as per Companies Act The Ministry of Corporate Affairs (MCA) has recently taken action against a Chartered Accountant for violating the provisions of Section 140(2) of the Companies Act, 2013. Shri Vijay Bora, the Chartered Accountant and auditor in M/s Doogar & Associates, received an adjudication notice for not following the proper rules for resignation under section 140(2) of the Companies Act, 2013. He filed an appeal against the penalty under Section 454(5) of the Companies Act.

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What is Section 140(2) of Companies Act?

Section 140(2) requires an auditor who has resigned to file a statement in the e-form ADT-3 to to company and the Registrar within 30 days from the date of resignation. The statement should outline the reason for the resignation. If an auditor does not file this statement, then this can result in a penalty order to the auditor.

Background of Case

As mentioned earlier, an adjudication notice was sent by the Registrar of Companies (ROC), West Bengal, to Vijay Bora. However, there was no reply received from CA Vijay Bora. Therefore, the Registrar of Companies (ROC) levied a penalty of Rs. 50,000 on the auditor, for which multiple hearings were scheduled. Even after scheduling a hearing on multiple dates, the authorised representative kept seeking adjournments. Finally, on May 5, 2025, the matter was heard. However, the representative could not provide any valid reasons to modify the penalty.

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The auditor is now liable to pay the penalty amount of Rs. 50,000 from his own pocket within 90 days. If the penalty is not paid within 90 days, further legal action may be taken under Section 454(8)(ii) of the Companies Act.