Knowingly false disclosure under Companies Act requires intent to mislead; mere omission or inexact reporting is insufficient.

A mere omission or inexact statement in a directors' report does not attract liability under section 628 of the Companies Act, 1956 unless the statement is knowingly false or made with intent to conceal a material fact. The Calcutta High Court noted that the alleged misstatement about continued erosion of net worth was supported by the annual report as a whole and did not conceal the company's financial position. It also held that non-disclosure of the NHB condition attached to prudential norm relaxation did not amount to knowing concealment, as the record showed substantial compliance with the condition's substance. Relief under section 633(2) was therefore available.

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Issues: (i) Whether the statement in the directors' report that the company's net worth continued to remain fully eroded due to non-infusion of capital constituted a false or misleading statement attracting liability; (ii) Whether omission to expressly state the NHB condition attached to relaxation of prudential norms amounted to knowing concealment of a material fact or a false statement under the Companies Act, 1956.

Issue (i): Whether the statement in the directors' report that the company's net worth continued to remain fully eroded due to non-infusion of capital constituted a false or misleading statement attracting liability.

Analysis: The statement was read in the context of the entire annual report, including the financial results and accompanying disclosures. The reported erosion of net worth was already apparent from the accounts, and the challenged sentence did not conceal the company's financial position. It conveyed that the erosion continued because fresh capital had not been infused, and not that the erosion itself was caused by non-infusion of capital in a false sense. The same statement had already been held not to involve any misdeclaration.

Conclusion: No offence was made out on this count and the petitioners were entitled to relief.

Issue (ii): Whether omission to expressly state the NHB condition attached to relaxation of prudential norms amounted to knowing concealment of a material fact or a false statement under the Companies Act, 1956.

Analysis: The omission was considered against the background of the NHB relaxation, the company's restructuring, and the later measures taken by the State Bank of India to address the company's NPAs. Even if the condition could have been described more fully, the material showed substantial compliance with the objective of the NHB's conditions. The record did not establish that the omission or statement was made knowingly false or with intent to conceal a material fact. On the facts, the substance of the condition had been satisfied through alternative means and the alleged suppression did not justify criminal exposure under section 628.

Conclusion: The omission did not justify prosecution or refusal of relief, and the petitioners succeeded on this count.

Final Conclusion: The applications were allowed and the petitioners were excused from liability in respect of the alleged offences noticed by the Registrar.

Ratio Decidendi: For liability under section 628 of the Companies Act, 1956, a mere omission or inexact statement is insufficient unless it is shown to be knowingly false or made with knowledge of the material fact concealed; where the substance of the disclosure is borne out by the record and there is no intent to mislead, relief under section 633(2) may be granted.

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