ROC levies Rs.100000 Penalty on Auditor for non-Filing of ADT-03

The Registrar of Companies in the matter of Dexter Biochem Private Limited has levied Rs.100000 Penalty on Auditor for non-Filing of ADT-03.

Dexter Biochem Private Limited (herein after referred to as “the Company”) is a Company registered under the provisions of the Companies Act, 1956/2013 in the State of Gujarat, having “CIN: U24120GJ2012PTC069603” and presently having its registered office situated at Plot No. Al/5301, NR. MEGA MACHINERY, GA CHOKADI, GIDC ANKLESHWAR, ANKLESHWAR, GUJARAT-393002, INDIA.

On perusal of MCA21- portal record, it is observed that the Auditor’s Firm M/s DKN & Associates, was appointed as Statutory Auditors of the company from 01.04.2015 to 31.03.2020 (five financial years). Further, the company had appointed M/s. P.U. Nensonaiya & Co., Chartered Accountant Firm as statutory Auditors of the Company from 01.04.2017 to 31.03.2022. Whereas, no compliance of Section 140(2) of the Companies Act, 2013 has been made by the Auditors of the Company. This office has reported the aforesaid violation to the Directorate vide letter No. ROC- GJ/2/Sec.140/2021-22/9893 dated 04.10.2021. The Directorate vide order dated 25.11.2021 has issued directions to ROC, Ahmedabad to take necessary action for observations reported in report dated 04.10.2021 and submit action taken report within 15 days.

In compliance of the Directorate’s instructions, this office has issued SCN u/s 140(2) of the Companies Act, 2013 to M/s DKN & Associates, Statutory Auditors of the company on 16.12.2021. However, no reply has been received from the Auditors of company. The Directorate vide letter dated 02.05.2023 has asked to furnish Action taken report within 15 days. Accordingly, this office has issued a letter to the company and DKN & Associates, Chartered Accountant Firm to clarify the matter along with supporting documents, whether the company had removed the Auditor u/s 140(1) of the Companies Act, 2013 or Auditors Firm M/s. DKN & Associates had resigned pursuant to Section 140(2) of the Companies Act, 2013. The company vide letter dated 24.05.2023 has replied that “we have forwarded the above referred notice to M/s DKN & Associates and have requested to file Form ADT-3 for their resignation at the earliest to make the default good”. It was revealed from the reply of the company that M/s DKN & Associates, Statutory Auditors have violated the provisions of Sub-Section 2 of Section 140 of Companies Act, 2013 due to non- filing of notice of resignation in prescribed e-form ADT-3 on MCA21 portal which is a violation of Section 140(2) of the Companies Act, 2013 attracted penal provisions of Section 140(3) of the Companies Act, 2013.

The presenting Officer responded that additional fees paid for delayed filing prescribed under the Companies (The Registered offices and Fees) Rules, 2014 is only a fees paid for filing of form as the cost of facility of delayed filing and it is neither Fine nor Penalty specified under the Act. Fine is “a sum of money exacted as a penalty by a court of law for the criminal liability” and Penalty is “a sum of money imposed for breaking a law, rule, or contract in the nature of civil default” by an authority prescribed under the law other than the Courts of Justice. Therefore, payment of the additional fee does not absolve the Auditor Firm of the default and from payment of Penalty as prescribed under the Act.

However, the Auditors in default have filed e-form ADT-3 SRN F61797544 on 08.06.2023 with a delay of 1711 days beyond the prescribed time limit and thus it is an established violation of Section 140(2) of the Companies Act, 2013. Hence, the matter is fit to impose penalty against the Auditors in default for violation of the provisions of Section 140(2) of the Companies Act, 2013 read with Rule 8 of Companies (Audit and Accounts) rules, 2014 from the period om 01.10.2018 to 07.06.2023 (1711 days) as contemplated in Section 140(3) of the Companies Act 2023 read with Rules made thereunder as ignorance of the law is no excuse.

The Presenting Officer further submitted that as per the provision of section 10(3) of the Companies Act, 2013, if the auditor does not comply with the provisions of sub-section (2), he or it shall be liable to a penalty of fifty thousand rupees r an amount equal to the remuneration of the auditor, whichever is less, and in ca e of continuing failure, with further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupe s. It is observed from the master data available on MCA’s website that the paid-up capital of the company is Rs. 2,25,45,000 /- and Turnover is 9,47,98,190/-. Hence, as per the Ministry’s Notification No. G.S.R. 700(E) dated 15.09.2022 for Notification of Companies (Specification of definition details) Amendment Rules, 2022 read with provisions of Section 2(85) of the Companies Act, 2013, the Company does fall under the ambit of “small company”. Therefore, the provisions of imposing lesser pe would be governed pursuant to Section 4468 of the Companies Act, 2013.

While adjudging the quantum of penalty under section 140(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, when ver quantifiable, made as a result of default.

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

c. The repetitive nature of the 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 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 be added that it is difficult to quantify the unfair advantage made by the notice 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, after taking into accounts the factors above, the undersigned has reasonable cause to believe that the Auditors Firm M/s. DK & Associates in default have failed to comply with the provisions of Section 140(1) of the Companies Act, 2013. With the aforementioned circumstances on hand, it is felt due and justified to levy a penalty of Rs. 1,00,000/- on the Auditors of company in default.

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