ROC Imposes Penalty on Statutory Auditor for Incorrect Audit Disclosure on Charges

Bhartia Infra Projects Limited was subjected to inspection pursuant to a Ministry of Corporate Affairs order dated 19.02.2024. During inspection, it was observed that in the notes to financial statements for the year ended 31.03.2022, the company had disclosed that no charges were required to be registered or satisfied during the year. However, as per MCA records, 44 charges were created during FY 2021–22.

Still, the statutory auditor did not qualify or report the same in the audit report. Based on the inspection findings, proceedings were initiated against the statutory auditor, Shri Manish Kumar Pareek, for violation of Section 143(3)(h) of the Companies Act, 2013. A show cause notice was issued, to which the auditor responded seeking a lenient view.

Main Issue: Whether failure by the statutory auditor to report material discrepancies relating to registered charges in the audit report amounted to a violation attracting penalty under Section 450 of the Companies Act, 2013.

ROC’s Decision: The Registrar of Companies, acting as the Adjudicating Officer, held that the statutory auditor failed to comply with the reporting requirements under Section 143(3)(h) of the Companies Act, 2013. The Adjudicating Officer imposed a penalty of Rs. 10,000 on the auditor under Section 450. No additional daily penalty was levied, as the default was taken care of. The auditor was directed to pay the penalty from personal sources within 90 days and informed of the right to appeal before the Regional Director, Guwahati.

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