Financial Statements to be signed by ‘Suspended’ Board: Duties are not suspended

[2022] 137 taxmann.com 384 (Article)

Suspended Board appealed against the order of NCLT and challenged the direction of cooperating and singing the financial statements. The article attempts to dissect the judgement of NCLAT in the matter of Mukund Choudhary v. Subhash Kumar Kundra (Resolution Professional for CLC Industries Ltd.) [Company Appeal (AT) (Insolvency) NO. 452 of 2021, dated 18-4-2022] which has clarified the aspect of signing and also the filing of the financial statements.

The arguments by the appellant that they are not liable to sign the financial statements. Further, they argued that they were not required to sign in lieu of the Ministry of Corporate Affairs circular dated 06.03.2020.

The relevant excerpt of the MCA Circular is :

(iii) The IRP/RP/Liquidator shall be responsible for filing all the eforms in the MCA portal and sign the form in the capacity of CEO in order to meet filing protocol in the existing forms architecture. However, this shall in no way affect his legal status as IRP/RP/Liquidator. All filings of e forms including AOC-4 and MGT-7 shall be filed through e-form GNL-2 by way of attachments till the company is under CIRP. In the existing field no.3 of form no.GNL-2, IRP/RP/Liquidator will choose radio button “Filings under IBC”.

The respondent argued that the filings of the company shall be done by Resolution professional but the signature shall be of the directors since there is no provision that the duties are suspended.The respondent argued that the filings of the company shall be done by Resolution professional but the signature shall be of the directors since there is no provision that the duties are suspended.

NCLAT agreed with the views of NCLT and held that the financial statements are to be signed by the directors and they continue to be duty bound to do the same. There is no provision for denying the same and the MCA circular is only for the purpose of filing of forms with ROC and the same cannot be interpreted to disown the duty. The liability to sign the financials lies with the directors.

This judgement brings out the clarity on the aspect of signing the financial statements and clears the aspect of preparation, signing and filing of the same.

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