Z, one of the director of Shyam International Ltd. leaked an insider information in the market for personal benefit. Ram, Secretarial auditor of the company, in the course of performance of his duties find out this offen

No director is allowed to provide any Insider information (Unpublished Price Sensitive information) to any person except authorized persons (as per his functioning in the company or appointed by central government or state government). Duty to Report Fraud: Section 143(12) read with the Rule 13 of the Companies (Audit and Auditors) Rules, 2014 provides that if an auditor of a company in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud which involves or is expected to involve individually an amount of rupees one crore or above, is being or has been committed against the company by its officers or employees, the auditor shall report the matter to the Central Government or to the Audit Committee of the Board. The auditor shall report the matter to the Central Government as under: the auditor to report the matter to the Board/Audit Committee, as the case may be, immediately but not later than 2 days of his knowledge of the fraud, seeking their reply or observations within 45 days; on receipt of such reply, the auditor to forward his report and the reply of the Board/Audit Committee along with his comments to the Central Government within 15 days from the date of receipt of such reply or observations; in case the auditor fails to get any reply or observations from the Board/Audit Committee within 45 days, he shall forward his report to the Central Government along with a note containing the details of his report that was earlier forwarded to the Board or the Audit Committee for which he has not received any reply or observations; the report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in confirmation of the same. the report shall be in the form of a statement as specified in Form ADT-4. Penalty for Incorrect Audit Report: While the Companies Act, 2013 provides a new and significant area of practice for Company Secretaries. It casts immense responsibility on the practicing company secretaries. Company Secretaries must take care while conducting such audits. Any failure or lapse on the part of secretarial auditor may attract penalty for incorrect report and disciplinary action for professional or other misconduct under the provisions of the Company Secretaries Act, 1980. Further, Section 448 of Companies Act, 2013 deals with penalty for false statements. The section provides that if in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement, which is false in any material particulars, knowing it to be false; or which omits any material fact, knowing it to be material, he shall be liable under Section 447. Section 447 deals with punishment for fraud which provides that any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud. In case, the fraud in question involves public interest, the term of imprisonment shall not be less than three years. In view of this, a company secretary in practice will be attracting the penal provisions of Section 448, for any false statement in any material particulars or omission of any material fact in the Secretarial Audit Report. However, a person will be penalised under section 448 in case he makes a statement, which is false in any material particulars, knowing it to be false, or which omits any material fact knowing it to be material. It is pertinent to note that Section 448 applies to 'any person'. In view of this, a company secretary in practice, who is an independent professional, will be attracting the penalty, as prescribed in Section 448 in case his observations in the secretarial audit report turns out to be false or omits any material fact, knowing it to be false or material, along with the other signatories to the Annual Return. Section 204(4) also cast responsibility on the company secretary in practice in case of default of provision of Section 204 and shall be liable to a penalty of two lakh rupees.