ROC Ahmedabad imposed penalty of 6,00,000 on Company and Directors for not mentioning the DIN in the Financial Statements

The Registrar of Companies Ahmedabad has imposed penalty of Rs.600000 on Private Limited Company and its Directors for not mentioning DIN in the Financial Statements.

M/s. Premier Solution Private Limited (herein after referred to as “company”) is a company having its registered office at “Universal House, 50/A-1 Shreekunj Society, Alkapuri, Vadodara, Gujarat, 390007, India” registered under the provisions of the companies Act, 1956. The CIN of the company is U93000GJ2008PTC053827.

Fact of the Case

Ministry of Corporate Affairs, Ahmedabad has informed ROC, Ahmedabad that, “it is observed from last three years financial statements filed by Transferor and transferee company that both companies have not mentioned DIN therein in accordance with section 158 of the Companies Act, 2013. Thus, the Transferor and Transferee company have violated the provisions of the Section 158 of the Companies Act, 2013. In this regard, Directorate has instructed to take necessary action for violation of Section 158 of the Companies Act, 2013 and submit action taken report to the Directorate.”

Section 158 of the Companies Act, 2013 provides that Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director.

Mr. Chirag Shah, Practicing Company Secretary, attended the hearing conducted and submitted the reply that, “Penalty should not be imposed on the company and its Directors/ Officers in default under the provisions of Section 172 of the Companies Act, 2013. As obligation to indicate Director Identification Number u/s 158 of the Act very clearly stated that DIN shall be mentioned in return, information or particulars in case where such return, information or particulars related to the Director or contain any reference or any director. In their case, the documents as referred in the SCN are the financial statements filed by the company for the financial years 2013-14 to 2020-21, through e-Form(s) 23AC/AOC-4, as the case may be, in which DIN of the Directors of the company were not mentioned.”

In common parlance, Financial Statements are formal records of the financial activities and positions of a business or entity. Accordingly, it is being noted that financial statements are not the return/ information /particulars related to Directors of the Company. Further, it can not be considered as document containing reference of any Director as Financial Statement are written records of financial position of the company as mentioned above.

Ld. PCS reliance the judgement of Zila Singh v. State of Haryana (2004), the Supreme Court examined the various authorities on statutory interpretation and concluded as under: It is cardinal principal of construction that every statue is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. Unless there are words in the statue sufficient to show the intension of legislature to affect existing rights, it is deemed to be prospective only.

Ld. PCS further submitted that company is small company, paid-up capital of the Company is Rs. 50lakhs and Turnover is Nil. No borrowing from Bank / Financial Institutions, No public money involved, Indicia of a ‘Pseudo Partnership’ as family members are the only Director as well as Shareholders of the Company. Company is very much compliant on the part of timely filing of required e-Form(s) on the postal of the MCA. Financial Statements are not exposed to the ‘Public at large as it’s a Private Limited Company and documents are only filed with honorable office.

The Presenting 0fficer responded that provisions of Section, 158 regarding obligation to indicate Director Identification Number is enforced with effect from 01.04.2074 which intra ; alia provides that Every person or Company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mentioned the DIN in such return, information or particulars in case such return, information or particulars related to the director or concoction any reference of any director. Financial Statement should not be discrete with the word’ any return, information or particulars’ provides under the Law. Hence, submission of the Ld. PCS not sustainable.

The Coram Stated that, “Under the above circumstances, it is concluded that the company and its 0fficers in default are liable for penalty under section 172 of the companies Act, 2013 for non mentioning Director Identification Number (DIN) in Financial Statement 2018-19, 2019-20 and 2020-21, which attracted non compliance of the provisions of Section 158 of the Companies Act, 201″3 and the undersigned has reasonable cause to believe that the company and its Director[s) have violated the provisions of Section 158 of the Companies Act, 2013 as noticed from aforesaid financial Statement available under the MCA21 portal. In view the facts narrated above, the company and its directors /officers, in default are liable for penalty as per Section 172 of the Companies Act.”

The Judgment held, “Penalty levied by the Registrar of Companies, Ahmedabad for not mentioning the DIN of directors in the financial statements. This is a violation of Section 158 of Companies Act, 2013. Total penalty of ₹6,00,000 on the company and the directors.”

The Judgment was made by R.C. Mishra.

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