Legal Updates

MCA penalises Auditor for mismatch in figures in financial Statements

May 11, 2024


Shinago International (India) Private Limited (hereinafter Known as “Company”) having CIN U51900TN2011PTC081421 is a company registered with this office of Registrar of Companies, Chennai, under the provisions of Companies Act, having its registered address at Raheja Towers, Unit No - 407, 4th Floor, 177,Anna Salai, Chennai, Tamil Nadu, India, 600002.

Provisions of the Companies Act, 2013

Section 143. Powers and duties of auditors and auditing standards

The auditor shall make a report to the members of the company on the accounts examined by him and on every financial statements which are required by or under this Act to be laid before the company in general meeting and the report shall after taking into account the provisions of this Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of this Act or any rules made thereunder or under any order made under sub-section (11) and to the best of his information and knowledge, the said accounts, financial statements give a true and fair view of the state of the company's affairs as at end of its financial year and profit or loss and cash flow for the year and such other matters as may be prescribed.

Section 450. Punishment where no specific penalty or punishment is provided

If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other person.

Facts of the Case

An inspection of Books and Accounts of the company was carried out u/s 206(5) of the Companies Act, 2013 by an Officer authorized by the Central Government wherein it was observed that there is a mismatch in the Figures for the Financial Year 2016-17 and 2017-18 and that the financial statements do not provide a true and fair view of the state of the company's affairs for the Financial Year 2016-17 and 2017-18. Hence, the Auditor has not complied with Section 143(2) the Companies Act, 2013.

In this regard, the Adjudicating Authority has issued Adjudication Notice to the company, and its directors vide Notice No. ROC/CHN/INSPN.FOLL/081421/P.24/S. 143(2)/2023 dated 07.07.2023.

Mr. T. Sivagurunathan (M. No. 220075), Partner of Madhu Balan & Associates vide letter dated 26.07.2023 requested to grant additional time till 16.08.2023 to give proper reply to the Adjudication Notice. After that no reply has been received from Auditor

Since no proper reply has been received from Auditor for the notice dated 07.07.2023, the Adjudicating Authority had issued Adjudication hearing Notice to Auditor on 13.10.2023 fixing the hearing date as on 19.10.2023 at 12:30 PM. Pursuant to hearing notice issued on 13.10.2023, Shri. T. Sivagurunathan, Partner of M/s Madhu Balan & Associates, has appeared before the Adjudication Authority on 19.10.2023 and made submissions that, “the said violation may be adjudicated and accepted to pay the penalty as prescribed under section 450 of the Companies Act, 2013

Order passed by Adjudicating Officer:

Having considered the facts and circumstances of the case and after taking into account the factors above, it is concluded that Auditor is liable for penalty as prescribed under Section 450 of the Act for violation of Section 143(2) of the Companies Act, 2013 for the FYs 2016-17 & 2017-18. The details of the penalty imposed on the company and officers in default are shown in the table below:

S. No Auditor in default Penalty for default (Rs.)   Maximum Penalty (Rs.) Period of Default Final Penalty Imposed (Rs.) 
1. Madhu Balan & Associates, Chennai Rs.10,000/- + Rs.1000/- per day for continuing contravention Rs.50,000/- 2016-17 Rs.10,000/-
2017-18 Rs.10,000/-
Total Rs.20,000/-


The complete text of the Order No. F.No. ROC/CHN/SHINAGO/ADJ/S. 143(2)/2024 may be viewed at the below link:

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