[Opinion] Company and WTD Fined for Omitting DIN in Financials & Risk Management Disclosure in Board’s Report
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- Last Updated on 28 August, 2023
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Prof R Balakrishnan – [2023] 153 taxmann.com 517 (Article)
1. Brief about this case
M/s. Subaranarekha Port Private Limited had been filing its annual financial statements from with the Registrar of Companies. During the inspection carried out by the Registrar of Companies, the inspecting officials observed that the company did not indicate the director identification number for the financial years 2010-11 to 2017-18 filed by the company. As we are all aware that it is a mandatory requirement under the provisions of the Companies Act 2013 that the DIN number is always required to be mentioned underneath the signature of the director whenever any document, information, or return would be submitted to the regulator under any law. Since DIN was not indicated, the company had violated the requirement of the provisions of the Companies Act 2013.
The board report is one of the enclosures to the financial statements and the Companies Act 2013 specifies in one of the sections the contents of the board report specifying the items of disclosures. One of the disclosure items being on risk management – the company did not disclose the risk management policy for the company – identification and elements of risk, if any, which in the opinion of the board of directors and the mitigation process put in place as required. This again turns out to be a violation committed by the company
The Registrar of Companies, after conducting an enquiry and ascertaining the facts that the company had violated on the above matters proceeded with the adjudication proceedings and ultimately the company and its whole-time director – both were penalized to the tune of seven and a half lakh rupees. Let us go through the case in detail and the events which took place in this case, which would be helpful to our professional in employment to avoid such defaults/violations.
2. Provisions of the Companies Act 2013 relating to this case
The following sections are the relevant sections pertaining to this case and the company is required to adhere and ensure the compliance of these sections in relation to financial statements and board reports. Giving below the extracts of the above-mentioned two sections herein below.
| Companies Act 1956 as amended by Companies (Amendment) Act 2006 Chapter II Directors – Constitution of Board of Directors Section 266F – Obligation to indicate Director Identification Number |
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| 266F | Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall quote the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of the director. |
| Companies Act 2013 Chapter XI- Appointment and Qualifications of Directors Section 158 – Obligation to indicate Director Identification Number |
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| 158 | Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director. |
| Penalty in case of non-compliance/default if, any | |
| 172 | If a company is in default in complying with any or the provisions of this chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees, and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default. |
| Companies Act 2013 Chapter IX- Accounts of Companies Section 134 – Financial statement, Board report etc. |
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| 134 (3) | There shall be attached to a statement laid before a company in general meeting, a report by its board of directors which shall include:- |
| 134 (3) (n) | A statement indicating the development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which it the opinion of the board may threaten the existence of the company. |
| Penalty in case of non-compliance/default if, any | |
| 134 (8) | If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees. |
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