ROC Imposes Penalty for Non-Disclosure of Related Party Transactions

The Registrar of Companies (ROC) Coimbatore imposed a penalty of Rs 3 lakh on Sri Ramakrishna Mills Limited and Rs 50,000 each on all officers for not properly disclosing the related party transactions under Section 188 of the Companies Act, 2013.

For the financial year 2016-17, non-disclosure was noticed in relation to an entity called JGOM. The ROC observed that the company did not properly disclose its related party transactions as required under the Companies Act, 2013. The balance sheet showed that an amount of Rs 4,01,43,547 was due from a firm in which one of the company’s directors is a partner, and this information was not clearly disclosed in the specific section meant for related party transactions. This is a violation of Section 134(3)(h) of the Act.

ROC also issued an adjudication notice to the company and its responsible officers. However, the Company stated that all necessary information was already disclosed in the Balance Sheet. It explained that the difference shown in the Related Party Disclosure happened due to an oversight. After reviewing the reply, ROC concluded that since the company is a listed company, it was mandatory to fully disclose all related party transactions in the designated disclosure section. A physical hearing was conducted based on the company’s request, and thereafter, orders were passed imposing the penalty on the company and its directors.