• Notification Date: 26-09-2023
• Notification No: N/A

MCA imposes Rs 1,00,000 Fine on Auditor for Non-Filing of ADT-3 for Resignation

The Ministry of Corporate Affairs (MCA) has imposed Rs. 1,00,000 fine on the auditor’s firm, M/s DKN & Associates, which were appointed as Statutory Auditors of the company Dexter Biochem Private Limited for non-filing of e-form ADT-3 for their resignation. In compliance with the Directorate’s instructions, the adjudication office has issued SCN under Section 140(2) of the Companies Act, 2013 to M/s DKN & Associates, Statutory Auditors company on 16.12.2021. However, no reply has been received from the Auditor company. 

The Directorate, through a letter dated 02.05.2023, has requested the submission of an action taken report within 15 days. In response to this, the adjudication office has issued a letter to both the company and DKN & Associates, the Chartered Accountant Firm, seeking clarification on the matter. They are requested to provide supporting documents indicating whether the company removed the auditor under Section 140(2) of the Companies Act, 2013, or if Auditor’s Firm M/s. DKN & Associates resigned pursuant to Section 140(2) of the Companies Act, 2013. 

The company’s response unveiled that the auditor’s firm had breached the regulations specified in Section 140 of the Companies Act, 2013. This breach occurred because they failed to submit their resignation notice in the prescribed e-form ADT-3 on the MCA21 portal, which amounts to a violation of Section 140(2) of the Companies Act. As a result, penal provisions under Section 140(3) of the Companies Act have been triggered. 

The Authorised Representative of the Auditor submitted that due to ill health conditions, the auditor was not able to file e- form ADT-3 for his resignation in a time bound manner as per the provisions of section 140 of the Companies Act. However, the Auditors has filed ADT-3 vide SRN F6179 544 on 08.06.2023 under the MCA portal with additional Fee of Rs. 7,200/-. 

He further submitted that the office address of the auditor M/s DKN & Associates, Chartered Accountant was also changed. Therefore, the Adjudication Notice issued by this office to the Auditor was returned undelivered with remark “Left”. It was also submitted that the Auditors were engaged in a small company and the provisions of Section 446B be considered at the time of levying penalties. 

Considering Section 140(3) of the Companies Act, considering the provided facts and submissions, the department has valid grounds to suspect that the auditing firm, M/s. DKN & Associates, in default, has not adhered to the requirements outlined in Section 140(2) of the Companies Act. Given these circumstances, the officer held that it is both reasonable and justifiable to impose a penalty of Rs. 1,00,000/- on the auditors.