ROC Kanpur imposes penalty for non-compliance with Section 134(3) disclosure obligations
The Registrar of Companies, Kanpur has passed an adjudication order on 06 February 2026 under Section 454 of the Companies Act, 2013, levying monetary penalties on PRANAM INDIA NIDHI LIMITED and its directors for violation of Section 134(8) arising from non-compliance with Section 134(3). The core lapse related to the failure of the Board of Directors to address and explain an adverse remark recorded by the statutory auditor in respect of mandatory unencumbered term deposits required under the Nidhi Rules, 2014.
This order highlights the increasing regulatory scrutiny over the quality and completeness of disclosures in the Directors’ Report, particularly where the statutory auditor has made a qualification, adverse remark or reservation.
Background and Appointment of Adjudicating Officer
The Ministry of Corporate Affairs, through Gazette notification number S.O. 831(E) dated 24/03/2015, appointed the Registrar of Companies, Kanpur as the Adjudicating Officer empowered under Section 454 of the Companies Act, 2013, read with the Companies (Adjudication of Penalties) Rules, 2014. In this capacity, the Adjudicating Officer is authorised to examine violations and impose penalties prescribed under the Act.
The present adjudication relates to alleged non-compliance with disclosure requirements under Section 134(3) and consequent penalty under Section 134(8).
Company and Officer Details
The proceedings concern:
Company: PRANAM INDIA NIDHI LIMITED
- Corporate Identity Number: U65991UP2014PLC067506
- Registered office: SONBARSA BAZAR P.O.SONBARSA NA GORAKHPUR GORAKHPUR UTTAR PRADESH INDIA 273002
Directors / Officers in default:
- AWADHESH KUMAR JAISWAL (DIN: 00447341)
- SUNIL KUMAR GUPTA (DIN: 01936421)
- SUNIL KUMAR JAISWAL (DIN: 06755485)
These individuals were treated as “officers in default” for the purpose of penalty under Section 134(8).
Statutory Framework: Section 134(8)
Section 134 of the Companies Act, 2013 prescribes the contents and standards for the financial statements and the Board’s Report/Directors’ Report. Specifically, Section 134(3) mandates that the Board’s Report shall include explanations or comments on every qualification, reservation or adverse remark made by the auditor in his report.
Section 134(8) stipulates the penalty for default in complying with any requirements of Section 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.
The penalty is fixed in quantum by statute and is not discretionary in terms of amount, once a violation is established.
Origin of Proceedings: Inquiry under Section 206(4)
Direction to conduct inquiry
The matter arose out of an inquiry ordered under Section 206(4) of the Companies Act, 2013. The SCA of MCA, through its minutes dated 10.04.2020, directed that an inquiry be conducted into the affairs of the company.
During this inquiry, the Inquiring Officer identified certain material non-compliances relating to the company’s obligations as a Nidhi company, as well as deficiencies in the Directors’ Report.
Auditor’s observation on Nidhi term deposits
In the course of examination, it was noted that the statutory auditor, in the audit report attached to the balance sheet of PRANAM INDIA NIDHI LIMITED for the financial years ending 31.03.2016 and 31.03.2017, had recorded an adverse remark in respect of Nidhi deposit requirements. Specifically, the auditor reported that:
the company has not maintained unencumbered term deposits i.e. a minimum of ten percent of the outstanding deposits as specified in Rule 5(1) (c) read with Rule 14 of the Nidhi Rules, 2014.
Under the Nidhi Rules, 2014, Nidhi companies are required to maintain unencumbered term deposits equivalent to at least ten percent of outstanding deposits.