Penalty levied on company for not attaching Cash Flow Statement along with Financials

The Ministry of Corporate Affairs(MCA) has levied a penalty on company for not attaching Cash Flow Statement along with Financials.

SMP CONSTRUCTIONS PRIVATE LIMITED (herein after referred to as “company”) is a company was registered under the provisions of the Companies Act, 1956/2013 in the State of Gujarat, having CIN: U45201GJ2002PTC041739 and presently having its registered office situated at “P-156, PHASE 11, GIDC INDUSTRIAL ESTATE, BEHIND MIPCO, BHOLAV, BHARUCH, GUJARAT-392015, INDIA”.

Fact about the case:

During the procedural Scrutiny of the e-Forms AOC-4 filed by the Company under the MCA21 portal, it is observed from the Balance Sheet as at 31.03.2019, 31.03.2020 and 31.03.2021 filed vide SRN R16008534, R88507603 and T75991539 on 25.11.2019 25.01.2021 and 03.02.2022 respectively in AOC-4 that the turnover of the company is exceeding the prescribed limit for filing Cash Flow Statement However, the company has failed to attach Cash Flow Statement with the aforesaid e-Forms/ AOC-4 which was required to be attached. Thus the company /Officers have violated the provisions of Section 2(40) read with Section 129 of the Companies Act, 2013 read with Rules made thereunder. The matter has been reported to the Directorate vide this office report dated 04.07.2022. The Directorate vide letter dated 09.09.2022 directed ROC, Ahmedabad to take appropriate action as per the provisions of Companies Act, 2013 and Rules made thereunder against the defaulting company and submit report. Accordingly, the matter has been taken with the company vide this office letter dated 21.09.2022 regarding non-compliance of provisions of the Companies Act, 2013. The company vide its reply dated 04.11.2022 replied that the company has regularly filed its financial statements including Balance Sheet and Statement of Profit and Loss for the FY 2018-19, 2019-20 and 2020-21. The company has duly prepared Cash Flow Statements for all the years under consideration, however inadvertently the cash flow statements were not attached in Form AOC-4 along with other attachments for the said financial years. Non attachment of Cash Flow statement is accidental omission and unintentional.

Show Cause Notice and reply of Company:

On the scheduled date of hearing Mr. Umesh Parikh, PCS, Authorized representative of the Company appeared before the Adjudicating Officer on 04.07.2023 and submitted that the alleged default regarding non-submission of Cash Flow Statement was accidental omission and unintentional. The company has filed a Cash Flow Statement for the period from 01.04.2018 to 31.03.2021 relevant to Balance Sheet as at 31.03.2019, 31.03.2020 and 31.03.2021 on 28.06.2023 under the MCA21 portal in compliance to the Notice dated 12.05.2023 issued by the Office of the ROC, Ahmedabad. Now, the default has been made good by the company/ Directors. Ld. PCS requested to take sympathetic view and please consider that the said lapse be not treated as non-compliance under the provisions of the Companies Act, 2013 on the part of the Company. We assure that the company will be more cautions and particular in future compliances.

Submission of Presenting Officer:

The Presenting Officer submits that onus on company to file copy of financial statements, including consolidated financial statement, if any along with all the documents which are required to be of attached to such financial statements under the Act. However, company has failed to attach/file cash flow statement as per provisions of Section 2(40) read with Section 137 of the Act and Rules made with the Balance Sheet/ AOC-4 filed under the MCA21 portal for the FY 2018-19, 2019-20 and 2020-21. It revealed that the company /Officers have not performed their duly as prescribed under the Companies Act and such ignorance of Law should not be excused. Therefore, the company and its officers are liable to penalize under Section 137(3) of the Companies Act, 2013 for the period from after 30 days from the date of issue Notice to the date of filing Cash Flow Statement under MCA21 portal in light of Ministry’s General Circular No. 01/2020 dated 02.03.2020.

Order

While adjudging quantum of penalty under section 137(3) of the Act, the Adjudicating Officer shall have due regard to the following factors, namely;

a. The amount of disproportionate gain or unfair advantage, whenever quantifiable, made as a result of default.

b. The amount of loss caused to an investor or group of investors as a result of the default.

c. The repetitive nature of default.

With regard to the above factors to be considered while determining the quantum of penalty, it is noted that the disproportionate gain or unfair advantage made by the noticee or loss caused to the investor as a result of the delay on the part of the notice to redress the investor grievance are not available on the record. Further, it may also be added that it is difficult to quantify the unfair advantage made by the noticee or the loss caused to the investors in a default of this nature.

Having considered the facts and circumstances of the case and submissions made by the Presenting Officer and Ld. PCS and after taking into accounts the factors above, the undersigned has reasonable cause to believe that the company and its officers have failed to comply with the provisions of Section 137(3) of the Companies Act, 2013. Total Penalty of Rs.70200 has been imposed on the company in default.

The noticee shall pay the amount of penalty individually for the company and its officers from their personal sources/income by way of e-payment available on Ministry website www.mca.gov.in under “Pay miscellaneous fees” category in MCA fee and payment Services under Rule 3(14) of Company (Adjudication of Penalties) (Amendment) Rules, 2019 within 90 days from the date of receipt of this order and copy of this adjudication order and Challan/SRN generated after payment of penalty through online mode shall be filed in INC-28 under the MCA portal without further reference.

For Official Order Download PDF Given Below: