[Opinion] ROC Penalty on Auditor for Section 143 Lapses Upheld by RD

Prof R Balakrishnan – [2025] 175 taxmann.com 1020 (Article)

1. Background of the Case

The Regional Director, Eastern Region, Ministry of Corporate Affairs, Kolkata, heard an appeal filed by the statutory auditor of M/s. Maheep Marketing Pvt Ltd, CA Vijay Bora of M/S. Doogar & Associates against a penalty order issued by the Registrar of Companies, West Bengal. The appeal was filed under Section 454(5) of the Companies Act 2013, contesting a penalty imposed for violating Section 143 of the Companies Act 2013. The ROC, West Bengal, had issued an adjudication notice to the auditor, CA Vijay Bora, regarding three instances of Section 143 violations during the financial year 2014-15. Still, no response was received from the auditor. Consequently, a penalty of Rs. 1,50,000 was imposed upon the auditor CA Vijay Bora.

The appeal filed by the auditor was heard on 5th May 2025, which was represented by an authorised representative – a practising company secretary on behalf of the auditor. The authorised representative could not point out any infirmity in the order passed by the Registrar of Companies, and the Regional Director found no grounds on this matter either to modify or to set aside the original penalty order passed by the Registrar of Companies dated 31st July 2023. Exercising the powers vested under section 454(7) of the Companies Act 2013, the Regional Director confirmed the penalty imposed by the ROC, West Bengal. CA Vijay Bora directed the auditor to pay the penalty amount from his funds within 90 days of receiving the order. Let us examine this case in detail to understand the requirements of Section 143 regarding auditors’ duties and the lapses that occurred in this instance, as well as the rationale behind the Registrar of Companies’ order upheld by the Regional Director.

2. Details of the Company

M/s. Maheep Marketing Pvt Ltd was incorporated on 7th December 1994 as a private company under the provisions of the Companies Act, 1913 and presently has its registered office situated at premises No.69A, Prince Baktiar Shah Road, P.O. Tollygunge, Kolkata, Maheep Marketing Pvt Ltd in the state of West Bengal. The company falls under the jurisdiction of the Registrar of Companies in West Bengal, with the Registrar’s office located in Kolkata. According to the details provided on the MCA portal, the company has two directors on its board. The company is engaged in the wholesale distribution of electrical appliances, as well as television and radio sets.

3. Auditor of the Company

CA Vijay Bora, partner of M/S. Doogar & Associates, Chartered Accountants, 304, Dalamal Tower, Nariman Point, Mumbai, from the state of Maharashtra, was the statutory auditor of the company during the period of non-compliance.

4. Default/Violations Committed by the Auditor

As per the adjudication order passed by the Registrar of Companies/Adjudication Officer, the company had violated the provisions of section 143 of the Companies Act 2013 during the financial year 2014-15 in respect of the audit conducted for M/s. Maheep Marketing Pvt Ltd. According to the Adjudication Officer, the auditor had not included his comments in three instances in his audit report when issuing the auditor’s report for the financial year 2014-15 in respect of M/S. Maheep Marketing Pvt Ltd, and thereby failed to fulfil his duty mandatorily envisaged upon him.

In this connection, the Registrar of Companies initially issued an adjudication notice to the auditor, dated 20th January 2023, pointing out the violations under Section 143 of the Companies Act, 2013, and seeking explanations for the same before proceeding with this matter. However, no reply was received from the auditor by the Registrar of Companies regarding the notice issued. Thereafter, the Adjudication Officer passed an ex-parte penalty order dated July 31, 2023, for violating the provisions of Section 143 of the Companies Act, 2013, in the matter of CA Vijay Bora and M/S. Doogar & Associates, Chartered Accountants 304, Dalamal Tower, Nirman Point, Mumbai 400021, Maharashtra under Rule 3(12) of the Companies (Adjudication of Penalties) Rules 2014 read with section 143 of the Companies Act 2013, for failure to make compliance of the provision of section 143 of the Companies Act, 2013 in three instances. The details of the penalty imposed by the Registrar of Companies are provided in the table below.

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