Delay in Secretarial Audit Report and AGM: ROC Mumbai Slaps Rs. 2 Lakh Penalty Under Section 204(4)

The Registrar of Companies, Mumbai has passed an adjudication order under Section 454 of the Companies Act, 2013 imposing a monetary penalty on a company for failing to obtain the Secretarial Audit Report in time and consequently not annexing it to the Board’s Report as mandated by Section 204(1) read with Section 204(4).

The matter relates to the financial year 2021-22, where the financial statements were approved in the Annual General Meeting (AGM) on 29.09.2022, but the Secretarial Audit Report was obtained only on 29.03.2023, just a day before filing Form AOC-4 on 30.03.2023. This time gap led the ROC to treat the lapse as a violation of Section 204(1) and to initiate adjudication proceedings.

Background of the Adjudication

Appointment of Adjudicating Officer

The Ministry of Corporate Affairs, through Gazette Notification No. S.O. 831(E) dated 24.03.2015, appointed the Registrar of Companies as Adjudicating Officer in exercise of powers under Section 454 of the Companies Act, 2013. This notification authorises the ROC to levy penalties for non-compliances covered by the Companies (Adjudication of Penalties) Rules, 2014, including those under Section 204.

Company and Key Person Details

The proceedings were initiated in the case of EVONIK INDIA PRIVATE LIMITED, a company registered under the provisions of the Companies Act, 2013/1956 with CIN U25200MH1998PTC113786. The registered office of the company is situated at:

PLOT NO. D-5, WAGLE INDUSTRIAL ESTATE ROAD NO. 34, PANCHPAKHADI WAGLE I.E. THANE, THANE, MAHARASHTRA, INDIA 400604

The adjudication process also initially involved Mr. Vinod Paremal, Managing Director (DIN: 08803466), though the ultimate liability was fastened only on the company and not on the Managing Director.

Statutory Mandate Under Section 204

Section 204(1) lays down that:

“Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report made in terms of sub-section (3) of Section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed.”

Further, Section 204(2) makes it obligatory for the company to extend full cooperation and provide all assistance and facilities to the practicing company secretary for conducting the secretarial audit and examining the company’s secretarial and related records.

The penal provision is contained in Section 204(4), which states:

“If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be liable to a penalty of two lakh rupees.”

Thus, non-compliance with the requirement of annexing the Secretarial Audit Report to the Board’s Report is treated as a specific contravention drawing a fixed penalty liability.

Linkage With Section 134: Board’s Report and Financial Statements

Section 134(4) provides that the report of the Board of Directors must be attached to the financial statements laid before the company in general meeting. Since Section 204(1) mandates that the Secretarial Audit Report must be annexed to the Board’s Report, it follows that:

  • The Secretarial Audit Report must be obtained before the Board’s Report is finalised and signed.
  • The Board’s Report (with annexed Secretarial Audit Report) must accompany the financial statements presented at the AGM.

Any delay in obtaining the Secretarial Audit Report that prevents its annexure to the Board’s Report for the relevant financial year will amount to a clear violation of Section 204(1), attracting the penalty prescribed in Section 204(4).

Facts Leading to the Penalty

Timeline of Events

The sequence of events as recorded by the ROC is as follows: