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While conducting the secretarial audit, each secretarial auditor must adhere to the requirements of the 2013 Companies Act. Inspecting is done by the Ministry in accordance with section 206(5) of the 2013 Companies Act.

However, the inspecting officer identified a violation of Section 204 of the Company Act 2013 by the Secretarial Auditor during the inspection. The Company's noncompliance has not been noted by the Secretarial Auditor in its report.


As per Data available with ROC Gujrat, Dadra & Nagar Haveli have issued an adjudication order u/s 454 of CA, 2013 for violation of Section 204 to Secretarial Auditor of the Company.

The MCA, RD, and ROC made a very wise decision to send notices to companies and professionals in the event that the Company has not complied with the compliances and the latter has not qualified the same in their report. It is advised that RD/ROC send notices to Directors and other professionals who do not indicate non-compliances in MGT-7, MGT-8, etc.

"Adjudication Order in the Matter of M/s ESSAR SHIPPING Limited"

Penalty of Rs. 2 lakh on Secretarial Auditor


In accordance with section 206(5) of the 2013 Company Act, the Ministry has requested that the company be inspected. The violator of Section 204 of the Company Act was identified during the inspection by the inspection by the inspecting officer. It is apparent from the Secretarial Auditor's Report that Section 186 of the 2013 Company Act compliance was not addressed. The board meeting minutes, and the audit committee minutes books are not kept in accordance with Secretarial Standards. Therefore, it violates Section 204 of the 2013 Company Act.

On April 11, 2023, the Secretarial Auditor of the Company received an adjudication notice from the undersigned's office under section 454 of the Companies Act, 2013 for violating section 204 of that law, along with a request to pay the fine specified by the Companies Act.

After that, the Secretarial Auditor requested in writing dated April 26, 2023, that the undersigned attend a hearing in person on May 9, 2023. In light of this, the undersigned set the hearing for Tuesday, May 9, 2023, at 2.30 p.m. in the O/o ROC, Ahmedabad.

  • Authorized Representatives of the Secretarial Auditor present in the hearing proceeding on 09.05.2023.They submitted that the Company does not have any operations and is running in losses. The observation made by the Inspecting Officer is due to inadvertent error in the part of Secretarial Auditors. Therefore, neither any unfair advantage made by Secretarial Auditor, nor any loss caused to investor. During the hearing the Authorized Representatives of Secretarial Auditors have requested to take lenient view in the matter,
  • The presenting officer mentioned that the Secretarial Auditor of the company has not reported the facts and figure about the non-compliance of section 186 of the Companies Act, 2013 as well as non-maintaining of Minutes Books of the Board Meetings and Audit Committee as required under the Secretarial Standards issued by lCSI.
  • It is submitted that the Secretarial Auditors of the company should Be liable for the penalty under the provisions of section 204(4) of the Companies Act, 2013.


While adjudging quantum of penalty under section 204 of the Companies Act, 2013, the Adjudication Officer shall have due regard to the following factors, namely;

  • The amount of disproportionate gain or unfair advantage, whenever quantifiable, made as a result of default
  • The amount of loss caused to an investor ‹ii group ofinvestors as a result of the default.
  • The repetitive nature of default.

Penalty: The Secretarial Auditor of the Company has been fined Rs. 200,000 by ROC.



I consider the ROC's directive to be an eye-opening one as a company secretary. We are required to audit every portion of the Companies Act and every procedure used by the company for any transactions such loans, guarantees, related parties, etc. as company secretaries.

One could argue that not only a Secretarial Auditor but also the professional certifying MGT-7 and MGT-8 must ensure compliance with the provisions of the Companies Act, 2013. Because it is the professional's responsibility to check the same before certification.

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Published by

CS Divesh Goyal
(Practicing Compnay Secretary)
Category Audit   Report

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