2018 (12) TMI 672 - Tri - Companies Law

Voluntary revision of financial statements or Board s report - Held that - Paragraph No. 2 of the affidavit, states that there would be no change in the financial statements or in the income tax returns already filed by the Company relating to financial year 2015-16. Further, it is stated in affidavit dated 04.08.2018 of Ms. Kanchan Kukreja, Company Secretary of the Company, filed by Diary No.2875 dated 07.08.2018 that the demand/claim of the Income Tax Department pending, if any, relating to previous years would not be affected adversely by way of present petition. Therefore, no effect on the outstanding demand raised by the Income Tax Department for the assessment year 2013-14 to 2015-16 is envisaged by the proposed changes. After taking into consideration the reports of the Central Government and the Income Tax Authorities, approval is granted under Section 131(1)(b) for revised report of the Board for the financial year 2015-16 in respect of the following disclosures stated to be not provided for in the Board Report for the financial year ending March, 2016 in respect of the following disclosures stated to be not provided for in the Board Report for the financial year ending March, 2016. Necessary further action be taken by the Company for filing certified copy of the order of the Tribunal with the Registrar of Companies within 30 days of the receipt of the certified copy and calling for General Meeting and further, filing with the Registrar of Companies as per Section 131 (1) of the Act read with Rule 77 of the Rules.

Issues Involved:
1. Jurisdiction and incorporation details.
2. Non-compliance in the Board Report for FY 2015-16.
3. Duty and responsibility for compliance.
4. Revision of the Board Report.
5. Impact of proposed corrections.
6. Reports and responses from government authorities and departments.
7. Compliance with procedural rules.

Detailed Analysis:

1. Jurisdiction and Incorporation Details:
The petition was filed under Section 131(1)(b) of the Companies Act, 2013, for revising the Board of Directors' report for FY 2015-16 of the Company. The registered office is in Gurugram, Haryana, thus falling under the jurisdiction of the Chandigarh Bench of the Tribunal. The Company was originally incorporated in Gujarat and later shifted its registered office to Gurugram.

2. Non-compliance in the Board Report for FY 2015-16:
The Practising Company Secretary identified several non-compliances in the Board Report for FY 2015-16:
- Section 134(3)(a): Improper extract of the annual return.
- Section 134(3)(m): Missing details of technology absorption.
- Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014: Missing details on the adequacy of internal financial controls.
- Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013: Missing disclosure about the constitution of the Internal Complaint Committee (ICC).

3. Duty and Responsibility for Compliance:
The responsibility for preparing the Board Report in compliance with Section 134(3) of the Act was on the Company Secretary, who failed to notice the disclosure requirements. The Board of Directors, being technocrats, relied on the Company Secretary for compliance.

4. Revision of the Board Report:
The Board of Directors accepted the Practising Company Secretary's suggestions for revising the Board Report and decided to seek necessary directions from the Tribunal. The petition was initially filed and later withdrawn with liberty to file afresh after removing defects. A fresh petition was filed after a Board resolution dated 14.02.2018.

5. Impact of Proposed Corrections:
The proposed corrections in the Board Report would not lead to any changes in the financial statements, Income Tax Returns, or Tax Audit Returns for FY 2015-16. It was asserted that no one would be adversely affected by these changes.

6. Reports and Responses from Government Authorities and Departments:
- Registrar of Companies: No prosecution, complaints, or inspections/investigations against the Company. The revision pertains to procedural documents attached to the financial statement or disclosures.
- Income Tax Department: Outstanding demands for the assessment years 2013-14 to 2015-16 were noted. The Company undertook to pay all legitimate dues in due course, ensuring that the proposed changes would not affect these demands.

7. Compliance with Procedural Rules:
- The petition was filed in the prescribed Form No. NCLT-1.
- Notice of the petition was advertised in accordance with Rule 35.
- No requirement to notify the auditor of the original financial statement as there were no changes in the financial statements.
- The Tribunal issued notices to the Central Government and Income Tax authorities and considered their representations before passing the order.

Conclusion:
The Tribunal granted approval under Section 131(1)(b) of the Act for revising the Board Report for FY 2015-16, addressing the identified non-compliances. The Company was directed to file a certified copy of the Tribunal's order with the Registrar of Companies within 30 days and call for a General Meeting to comply with the revised report requirements. The petition was disposed of accordingly.

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