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

A Tribunal Overview on Account Reopening

Reopening of Accounts

Section- 130 of Companies Act 2013: Legal Provisions

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 to reopen or recast its financial statements & books of accounts.

Application to the Tribunal for Books Opening

Following statutory bodies or stakeholders can apply to the competent court or Tribunal for the reopening of books of accounts 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 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.

Conditions for Books Opening or Revising Financial Statements

Books of accounts can be revised or open 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.

Read our article:What are the Basic Financial Statements?

Filing of revised Financial Statement

The company can reopen 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 reopen 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 accounts:

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.

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

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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.

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