2023 (5) TMI 1164 - HC - Companies Law

Requirement of maintenance of books of accounts - respondent can call upon the petitioner to provide the books of accounts for the period beyond the period of eight years or not (for financial years 2010-11 and 2011-12) - Section 128(5) of the Companies Act - HELD THAT - The learned SPP for the CBI has now taken a plea per proviso to sub- Section 5 Section 128 of the Companies Act they have the power to ask the petitioner to provide the books of account prior to the period mentioned in sub-section. However, a bare perusal of the proviso would show it requires a direction by the Central Government to the company to keep the books of account for a longer period as it may deem fit. Admittedly, no such direction was ever passed per proviso to Section 128(5) of the Companies Act. The petition stands allowed in terms of prayer a of the petition on the plea the petitioner does not have any books of account beyond the period of eight years viz. for the financial year 2010-11 and 2011-12. The respondent is at liberty to take further action in accordance with law, since the investigation is still going on. The petitioner shall continue to cooperate in the investigation.

Summary

Issues involved: Interpretation of Section 128(5) of the Companies Act regarding maintenance of books of account beyond eight financial years

Summary:
The petitioner, represented by counsel, argued that they are not obligated to keep records of books of account for the financial years 2010-11 and 2011-12 as per Section 128(5) of the Companies Act. The definition of "books of account" under Section 2(13) of the Companies Act was highlighted, encompassing various financial records. The petitioner contended that the documents requested by the respondent fell within this definition. Reference was made to legal precedents such as Standard Chartered Bank vs Directorate of Enforcement and Union Of India vs Citi Bank, supporting the petitioner's position that they cannot be compelled to provide records beyond eight years.

The Special Public Prosecutor for the CBI argued that they had the authority under the proviso to Section 128(5) to request books of account for periods preceding the eight-year limit. However, it was noted that this provision required a specific direction from the Central Government, which was absent in this case. Consequently, the petition was allowed on the grounds that the petitioner did not possess books of account for the specified years. The respondent was permitted to take further lawful action as the investigation continued, with the petitioner's cooperation mandated.

In conclusion, the petition was disposed of with the petitioner prevailing on the issue of maintaining books of account beyond eight years. Any pending applications were also resolved, and the order was directed to be issued promptly.