9289379709 7838392800

Learning

Advisory Services

Savvy Midha
| Updated: 19 Oct, 2019 | Category: Finance & Accounting

A Tribunal Overview on Account Reopening

Account Reopening

With the introduction of section 130 of Companies Act 2013, any statutory body, if cast the doubt about the accuracy of financial statements prepared by a company or the accounts contain the misleading or fraudulent information, can approach Tribunal or court of law for account reopening of a company.

If the Tribunal believes that the account was prepared in a fraudulent manner or Tribunal has a doubt relating to the company’s affairs were mismanaged during previous years shall pass an order for account reopening or recast its financial statements & books of accounts.Thus, this article presents a Tribunal overview on Account Reopening.

Application to the Tribunal for Books Opening

Following statutory bodies or stakeholders can apply to the competent court or Tribunal for the account reopening or financial statement of a company:

  • Central Government
  • Income-Tax Authorities
  • SEBI
  • Any other regulatory body or statutory authority

Provided, on receipt of such application, Tribunal before passing any order under this provision shall give notice to such applicants or any other concerned person, and it shall consider the representation made by such applicants. And the accounts so revised after the order under this section shall be final and binding.

Voluntary Revision or Restatement of the Director’s Report

As per Section 131 of Companies Act 2013[1], financial statements and board’s report of the company is allowed to be restated on the application of board of directors, if they assume that financial statement doesn’t comply with the provisions of law.

After approaching the Tribunal for revision of financial statements or account reopening and after receipt of such orders of Tribunal, directors can revise any of the preceding three financial year’s board reports or financial statements.

Such a revised financial statement shall not be filed more than once in a financial year. Detailed reason for such revision shall be disclosed in the board’s report of the relevant financial year to which such a revised statement relates.

Rules can be made by Central Government on this behalf that relates to a revised financial statement by issuing different provisions for replacing or supplementing the previous financial statements with revised statements along with stating the provisions for governing the functions of the company’s auditors for such revised statements.

Duration for which revision is permitted

The revision of board report and financial statements in reference to any of the three previous financial years are allowed by the Tribunal. The revised boards report and financial statements is not mandated to be prepared or filed for more than one in a given financial year. The full details of the reason for which the revision of board report or financial statements is done shall be mentioned in the board report during the relevant financial year in which the revision is being made.

Conditions for Books Opening or Revising Financial Statements

Account reopening or revision of financial statements can be done in the following two conditions:

  • Mandatory: Company shall mandatorily revise its books of accounts in the case where the order is passed by the Tribunal on an application made to it by any regulatory or statutory authority for the fraudulent or misleading accounts and information of a company.
  • Voluntary: Books can be revised voluntary by the company’s board if its board of directors assumes the financial statement requires such revision or correction.

Filing of revised Financial Statement

The company can consider account reopening or revise its financial statement even after its adoption in AGM and filing with ROC. However, a company cannot file more than one set of annual returns in a particular financial year until the same has been revised.

It was a director to ROC to have a check and eye on such repeated filing of annual accounts.

However, under this section, Tribunal cannot order to revise or account reopening of the books before eight financial years preceding the current financial year immediately except for those books which are ordered to be kept or preserved for more than eight years.

Difference between Voluntary and Compulsory Accounts Revision

Following is the difference between two provisions of companies acts governing revising of books of account :

Basis of Difference Section 130 Section 131
Application The statutory body can apply to the Tribunal for directing the company to reopen or revise its statement The company can apply to the Tribunal for the revision of its statement.
Reason for revision If the financial statements are fraudulent, mismanaged, inaccurate, or misleading. If the financial statement is not prepared as per the provisions of law.
Financial year The application can be made for opening the books of a maximum of 8 preceding years. The application can be made for revising the books of a maximum of three preceding years.
Restriction on application The application can be made any such number of times with no restrictions upon it. Revised statements can be filed only once in a financial year.  
Fraud/misleading information Fraud or misleading information is a necessary element before applying. No such requirement under this section.
Mode of application This is a compulsory form of revision to be done following the Tribunal orders Voluntary revision of financial statements.

Punishment for false statement

  • Section 448 provides that, if in any financial statement, report, return, prospectus, certificate, document required for the purposes of any provisions of the Companies Act 2013 or the rules that is made there under or any person makes any such statement,
    • which is false in any particular matter knowing it to be false; or
    • which has omitted any material fact, even on knowing it to be material, such person shall be liable under section 447.

Thus, every professional who gives or signs or certifies or attests a financial statement, return, certificate, report etc. under the 2013 Act shall be punishable under section 447 if the provision stated in Section 448 is fulfilled.

  • There is no particular penal provision given in this section 130. Hence, under section 450 the given penal provision shall apply in cases of non-compliance of this section. Consequently, for any such contravention the company and the officer’s of the company who are in default shall be liable for the punishment with a fine up to Rs.10,000 and wherein case of the continued contravention then the fine levied shall be Rs. 1,000 each day. Also, the offences are compoundable under this section of the Act.

Experts Opinion

As we understand from the above article that the Government of India, with its intention to curb the occurrence of fraud and corruption, has introduced these provisions to keep the mismanagement or incorrect information to the lowest. Through these strict provisions, the government keeps an eye on fraudulent activities of companies to make the operations of companies more transparent and compliant.

Read our article:Voluntary Revision of Financial Statement

Savvy Midha

Savvy Midha holds the degrees of Bachelor of Commerce(honors), LL.B and Company Secretary. She is an experienced Legal and Financial writer with expertise in research, drafting, and copy-writing.

Advisory Services

Pankaj Tyagi
Pankaj Tyagi | Date: 22 May, 2021

RBI to limit funding in NBFCs...

To curb money laundering in India, Reserve Bank vide its Notification released on February 12, 2021, clarifies that...

Continue Reading
Shubham Chauhan
Shubham Chauhan | Date: 03 Mar, 2020

Essentials to Create a Compell...

You may have a brilliant business idea but to bring it on the surface you need capital. You will have to raise fund...

Continue Reading

No Comments

Leave a Reply

Request a Call Back

Are you human? : 8 + 9 =

Transform your Business. Subscribe our Newsletter.