Penalty imposed by MCA on Chartered Accountant who failed to Disclose Specified Bank Notes in Audit Report

The Ministry of Corporate Affairs (MCA) has imposed Monetary Penalty of Rs.5000 on Chartered Accountant failing to Disclose Specified Bank Notes in Auditor’s Report.

Company M/s. Vinayak Builders and Developers Private Limited, CIN: U70101BR2008PTC013665 (herein after known as Company) is a company incorporated on 26.05.2008 under the provisions of Companies Act, 1956/2013 in the state of Bihar and having its registered office situated at 101, Vaidnath Appartment Road No. 3, Mahesh Nagar, Patna Bihar, India as per MCA website. As per documents available on MCA Portal, Shri Shishir Kumar was the auditor of the company for the financial year 31.03.2017.

It is apparent from the financial statements for the financial year ended 31.03.2017, in the column details of Specified Bank Notes (SBN) held and transacted during the period from 8th November, 2016 to 30th December, 2016, in which it has been mentioned that amount deposited in banks during 8th November, 2016 to 30th December is 0. However, the director in its reply dated 17.01.2019 has enclosed a letter dated 16.01.2019 of ICICI Bank in which the details of deposit amount has been mentioned.

Whereas, in Auditors report nothing has been mentioned in respect of Rule 11(d) of the Companies (Audit and Auditors) Rules, 2014.

Hence, it appears that the provisions of Section 143(3) of the Companies Act, 2013 r.w. Rule 11(d) of the Companies (Audit and Auditors) Rules, 2014 has been contravened by the auditor for the financial year 31.03.2017 and therefore he is liable for penalty u/ s 450 of the Companies Act, 2013, for the financial year 31.03.2017.

This office has issued show cause notice for default under section 143 of the Companies Act, 2013 vide this office letter no. ROC/PAT/Inquiry/13665/ 359 dated 29.05.2023. However, this office has not received any reply from the auditor.

This office had issued “Notice for Hearing” vide No. ROC/ PAT/ Inquiry/ 13665/ 706 dated 27.07.2023 to the auditor in default to appear personally or through authorizsed representative under Rule 3(3), Companies (Adjudication of Penalties) Rules, 2014 on 11.08.2023 at 12.30 PM and also to submit their response, if any, one working day prior to date of hearing i.e. 10.08.2023.

That, on the date of hearing, auditor does not appear also no submission has been made regarding the aforesaid non-compliance. Hence, it is concluded that the provisions of Section 143 of the Companies Act, 2013 has been contravened by the auditor and therefore he is liable for penalty u/s. 450 of the Companies Act, 2013 for the Financial Year 31.03.2017.

Section 450 states that:- “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 even; officer of the company who is in default or such other person shall be 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”.

Further Section 446B states that “if penalty is payable for non-compliance of any of the provisions of this Act by a One Person Company, small company, start-up company or Producer Company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be”.

As per clause 85 of section 2 of the Companies Act, 2013, small company means a company whose paid up capital and turnover shall not exceed rupees four crore and rupees forty crore respectively. As per MCA portal, paid up capital of the company- Vinayak Builders and Developers Private Limited is Rs. 8,00,000 and the revenue from operation is Rs. 27,47,500 as per balance sheet of the financial Year 31.03.2022. Therefore,. the benefits of small company are extended to this noticee while adjudicating penalty.

Having considered the facts and circumstances of the case and after taking into account the provisions of Rule 11(d) of Companies (Audit and Auditors) Rules, 2014 (as amended), Hereby a penalty of Rs.5000 imposed on Shri Shishir Kumar, Chartered Accountants for failure in compliance of section 143 of the Companies Act, 2013 r.w. Rule 11(d) of Companies (Audit and Auditors) Rules, 2014 for the Financial Years 31.03.2017.

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.

For Official Order Download PDF Given Below: