[Opinion] Company and Its Directors Penalized for Filing Unsigned Financial Statements and Enclosures by the ROC

Prof R Balakrishnan – [2024] 162 taxmann.com 915 (Article)

1. Background of this case

This is the case where a company named M/s Regent Professional Academy Private Limited had filed its financial statements along with other documents by way of annual filing through the Ministry of Corporate Affairs portal for the financial year 2020-21, which happened to be the time of pandemic COVID-19 period. The financial statements filed by the company were found to be unsigned by the company directors and the company’s statutory auditors. As per the framework of the Companies Act 2013, the duly signed financial statements were required to be filed with the regulator, which constituted a violation of sections 134(1) and 134 (6) of the Companies Act 2013. Upon scrutinising the documents, the Ministry of Corporate Affairs, through the Office of the Registrar of Companies in Madhya Pradesh, followed the procedures of issuing a show cause notice to the company, followed by a personal hearing and passed an adjudication order for the default committed by the company and its directors. However, the company defended its default of filing the unsigned financial statements along with attachments instead of the signed version, stating that it was due to oversight, attributing to the challenges posed by the pandemic COVI-19 and other personal issues. At the time of response to the show cause notice, the company provided the signed financial statements, directors’ report, and auditors’ report along with their response and requested leniency due to the inadvertent nature of the error. The Adjudicating Officer did not accept the stand taken by the company and held that the company and its directors had committed the default and penalised the company and its directors to the tune of rupees four lakh rupees for the default as per the provisions of the Companies Act 2013. The order of the Adjudicating Officer was uploaded to the Ministry of Corporate Affairs website on 21st May 2024, although the order was passed by the Registrar of Companies on 26th June 2023. Let us have a brief look at this interesting case law in detail in order to understand the intricacies involved in this matter.

2. Provisions relating to this case under the Companies Act 2013.

The relevant provisions pertaining to this case are section 134 of the Companies Act 2013, read with the relevant rules framed thereunder. The extracts of the relevant provisions are given below.

3. Consequences of default/violation

To understand the consequences of any default/non-compliance while complying with the provisions of section 134 of the Companies Act 2013 relating to signing of the financial statements by the director and the auditors of the company within the frame of the Companies Act 2013 and the related procedures to be complied with, let us go through the decided case law by the Registrar of Companies of Gwalior of Madhya Pradesh on this matter on 26th June 2023 relating to M/s. Excel Vehicles Private Limited.

4. The relevant case law on this matter

We shall go through the adjudication order passed by the Registrar of Companies, Gwalior on 26th June 2023 – Companies/Adjudication Officer of Gwalior of Madhya Pradesh on 26th June 2023 adjudication order bearing No. F.no.ROC/G/Adj. Pen/u.s.134(1) /Regent/780 – order under section 454 of the Companies Act 2013 for violation of section 134(1) of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules 2014 – In the matter of Companies Act 2013 and in the matter of adjudication proceeding under sub-section (1) of section 134 of the Companies Act 2013 and in the matter of M/s. Regent Professional Academy Private Limited

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