[Opinion] Silent Ledgers | The Price of Unsigned Profit & Loss account – A Corporate Case Study
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- 3 Min Read
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- Last Updated on 10 October, 2024
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Prof R Balakrishnan – [2024] 167 taxmann.com 244 (Article)
1. Background of this case
This case pertains to the signing of the financial statements of the company as mandated by the provisions of the Companies Act. M/s. Loin Technology Private Limited, a company incorporated under the Companies Act, failed to get the signature on the profit and loss account of the company for the financial year ended 31st March 2021 by any of its directors and the same was filed with the Registrar of Companies of Gwalior, Madhya Pradesh. The Registrar of Companies, upon scrutiny, found this failure on the part of the company and initiated action against the company. As per the framework of the Companies Act 2013, the duly signed financial statements, i.e. balance sheet, profit and loss account and cash flow statement, where applicable, were required to be filed with the regulator, which constituted the violation of sections 134(1) and 134(6) of the Companies Act 2013. Upon scrutinizing the documents, the Ministry of Corporate Affairs, through the Office of the Registrar of Companies in Madhya Pradesh, followed the procedures of issuing a show cause notice to the company, followed by a personal hearing and passed an adjudication order for the default committed by the company and its directors. The company’s directors admitted the violation committed, and the Adjudication Officer penalized the company and its directors to the tune of rupees four lakh rupees for the default as per the provisions of the Companies Act 2013. The order of the Adjudicating Officer was uploaded at the website of the Ministry of Corporate Affairs site on 2nd May 2024 although the order was passed by the Registrar of Companies on 2nd August 2022. Let us have a brief look at this interesting case law in details in order to understand the intricacies involved on this matter.
2. Provisions relating to this case under the Companies Act 2013
The relevant provisions pertaining to this case is section 134 of the Companies Act 2013, read with the relevant rules framed thereunder. The extracts of the relevant provisions are given below.
| Companies Act 2013 Chapter IX – Accounts of Companies Section 134 – Financial statements, board report etc. |
|
| Section | Provision |
| 134 (1) | The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board at least by the chairperson of the company where he is authorised by the Board or by two directors out of which one shall be managing director and the Chief Executive Officer, if he is a director in the company, the Chief Financial Officer and the company secretary of the company, wherever they are appointed, or in the case of a One Person Company, only by one director, for submission to the auditor for his report thereon. |
| 134 (2) | The auditors’ report shall be attached to every financial statement |
| 134 (6) | The Board’s report and any annexures thereto under sub-section (3) shall be signed by its chairperson of the company if he is authorised by the Board and where he is not so authorised, shall be signed by at least two directors, one of whom shall be a managing director, or by the director where there is one director |
| Penal section for non-compliance/default if any | |
| 134 (8) | If a company is in default in complying with the provisions of this section, the e company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall liable to a penalty of fifty thousand rupees. |
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