ROC Imposes Penalty on Company for Inadequate Directors’ Report Disclosures:

ROC Imposes Penalty on Company for Inadequate Directors’ Report Disclosures Pranam India Nidhi Limited, a Nidhi company registered in Uttar Pradesh, was subjected to an inquiry under Section 206(4) of the Companies Act, 2013 pursuant to directions issued by the Ministry of Corporate Affairs. During the inquiry, it was observed that the statutory auditor, in his report for the financial years ending 31.03.2016 and 31.03.2017, had recorded an adverse remark that the company had failed to maintain unencumbered term deposits of at least ten percent of outstanding deposits, as mandated under the Nidhi Rules, 2014. The directors did not provide any explanation or justification in the Directors’ Report for FY 2016-17. Based on the inquiry report, ROC initiated adjudication proceedings for non-compliance with Section 134(3) of the Act. A show cause notice was issued on 09.01.2026; however, neither the company nor its directors responded or sought a hearing. Issue Before Registrar: Whether failure to explain adverse audit remarks relating to statutory Nidhi deposit requirements in the Directors’ Report constitutes a violation of Section 134(3) of the Companies Act, attracting penalty under Section 134(8). ROC’s Ruling: The Registrar of Companies, Kanpur held that the company and its directors were in clear default of Section 134(3) for not addressing the auditor’s adverse observations in the Directors’ Report for FY 2016-17. The adjudicating authority imposed penalties under Section 134(8). A penalty of Rs. 3,00,000 was levied on the company, while each of the three directors was penalised Rs. 50,000. The order directed rectification of the default and payment of penalties within 90 days, with liberty to file an appeal before the Regional Director, Noida. To Read Full Judgment, Download PDF Given Below