Non-reporting of related party transactions led Secretarial Auditor to penalty. Discuss with the help of a leading case of Sun Pharmaceuticals industries Limited [Adjudication order passed by the Registrar of companies (

Non-reporting of related party transaction led Secretarial Auditor to pay penalty. In the matter of Sun Pharmaceutical Industries Ltd, Adjudication Order passed by the Registrar of companies (ROC) Gujarat, Dadra & Nagar Haveli dated 28.04.2023). Facts of the case: On receipt of whistle blower compliant in respect of Related Party Transaction, money diversion from Sun Pharmaceutical Ltd to Aditya Medisales Ltd and other group companies, the Inquiry of M/s Sun Pharmaceutical Industries Ltd under section 206(4) of the Companies Act, 2013 was ordered by Ministry of Corporate Affairs for FYS 2014 to 2018. During the inquiry it was observed by the inquiry officer that Secretarial Auditor of the company has not reported "Aditya Medisales Ltd.' as related party. As per section 204 of the Companies Act, 2013 the Secretarial Auditor plays a crucial role in laws for effective compliances. The object of Secretarial Audit is evaluation and form an opinion and to report to the shareholders as to whether, the company has complied with the applicable laws comprising various statutes, rules, regulations, guidelines, followed by board processes also to report on existence of compliance management system. The Practicing Company Secretary has to examine the transactions during the period of audit to identify whether any fraud element is present in the transaction. Also that, the ICSI has issued Guidance Note for Secretarial Audit. As per the Guidance Note, the Secretarial Auditor needs to adhere to the checklist to review the related party transaction. In this matter, instead of complying with his duty as per the Guidance Note in respect of related party transaction u/s 188, the Secretarial Auditor has merely relied on the statutory Auditors report, which led to non-compliance on his part pertaining to non-reporting of related party transaction. Decision: After considering the facts and submissions, the adjudicating officer had reasonable cause to believe that the Secretarial Auditor of the company has failed to discharge their duty as per provisions of section 143(14) read with section 188 and 204 of the Companies Act, 2013 read with ICSI Guidance Note on Secretarial Audit issued by ICSI and imposed a penalty on Secretarial Auditor.