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Sun Pharmaceutical Industries Limited Adjudication Order dated April 28, 2023
Issue
Whether a Secretarial Auditor can rely on the Statutory Auditor’s report for identification and reporting of related-party transactions.
Background
An inquiry by the Ministry of Corporate Affairs (MCA) was initiated based on a whistleblower complaint alleging diversion of funds from Sun Pharmaceutical Industries Ltd. to Aditya Medisales Ltd.
Non-Compliance Identified
The Secretarial Auditor failed to report Aditya Medisales Ltd as a related party as required under IND-AS-24/AS-18 in the financial statements for FY 2014-15, 2015-16, and 2016-17.
Auditor’s Contention
The Secretarial Auditor contended that reliance was appropriately placed on the Statutory Auditor’s reports and that financial statement audits were not within their scope, citing various provisions and citations to support this view.
Decision by Adjudication Officer
The Officer rejected the Secretarial Auditor’s argument, holding that the identification and reporting of related-party transactions clearly falls within the responsibilities of Secretarial Auditors, referencing the Guidance Note issued by ICSI. A penalty of ₹1.50 lakh was imposed on the Secretarial Auditors.
Impact
This ruling emphasizes the duty of Secretarial Auditors to independently verify and report related-party transactions to uphold transparency and ensure corporate governance compliance.