Tribunal Grants Revision of Financial Statements under Companies Act

The Tribunal allowed the petition by M/s Nabha Steels Private Limited, permitting the revision of financial statements for the years 2015-16, 2016-17, and 2017-18 under Section 131 of the Companies Act, 2013. The Tribunal rejected objections raised by the Registrar of Companies and the Income Tax Department, allowing the revision based on compliance with statutory requirements. The petitioner was directed to file the revised statements with the Registrar of Companies within 30 days, with liabilities for charges or taxes as per the law.

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Issues Involved:
1. Voluntary revision of financial statements under Section 131 of the Companies Act, 2013.
2. Compliance with Reserve Bank of India (RBI) Prudential Norms.
3. Objections by the Registrar of Companies (ROC) and Ministry of Corporate Affairs.
4. Objections by the Income Tax Department.
5. Necessity of including the bank as a party to the petition.

Detailed Analysis:

1. Voluntary Revision of Financial Statements under Section 131 of the Companies Act, 2013
The petitioner, M/s Nabha Steels Private Limited, sought voluntary revision of its financial statements for the years 2015-16, 2016-17, and 2017-18 under Section 131 of the Companies Act, 2013, read with Rule 77 of the National Company Law Tribunal Rules, 2016. The company claimed that due to an accounting error, the financial statements did not comply with the provisions of Section 129 of the Act. The error involved the incorrect treatment of interest on a Non-Performing Asset (NPA) account, which should have been recorded in a separate suspense account as per RBI guidelines.

2. Compliance with RBI Prudential Norms
The petitioner-company argued that the bank did not follow the RBI's "Prudential Norms on Income Recognition, Assets Classification and Provisioning-pertaining to Advances" when treating the loan as an NPA. The interest on the NPA account was incorrectly included in the NPA account itself rather than being shown in a separate account. This mistake was not detected by the company's management, leading to incorrect financial statements for the years in question.

3. Objections by the Registrar of Companies (ROC) and Ministry of Corporate Affairs
The ROC contended that the petition could not seek revision of financial statements for any year prior to 2016-17 since Section 131 was notified on 01.06.2016. The ROC also argued that the petitioner-company should have filed for compounding of the contravention of Section 129 before filing the petition. Additionally, the ROC suggested that the concerned bank should be made a party to the petition to ascertain the correct status of the loan.

The Tribunal rejected the ROC's contentions, stating that Section 131 allows for revision of financial statements for any of the three preceding financial years, thus encompassing years prior to 2016-17. The Tribunal also found that the petitioner had fulfilled the requirements under Section 131 and Rule 77 of the 2016 Rules.

4. Objections by the Income Tax Department
The Income Tax Department argued that the revision of financial statements would adversely affect revenue, as the interest component claimed as an expense in the profit and loss account would need to be adjusted. The Department provided a table showing the tax impact for the relevant years.

The Tribunal dismissed this objection, noting that the interest amounts were already added back in the computation of assessable income in the Income Tax Returns for the relevant years. Therefore, there would be no adverse impact on revenue from the perspective of the Income Tax Department.

5. Necessity of Including the Bank as a Party to the Petition
The ROC suggested that the concerned bank should be made a party to the petition to verify the status of the loan. The Tribunal found this contention untenable, as the petitioner had sufficiently proved the treatment of the NPA account and the subsequent One Time Settlement (OTS) with the bank through various undisputed documents.

Conclusion
The Tribunal allowed the petition, permitting the petitioner to revise its financial statements for the years 2015-16, 2016-17, and 2017-18 as per the accounting standards and its Board’s reports. The Tribunal directed the petitioner to file a certified copy of the order with the ROC within 30 days. The order clarified that this would not preclude any authority from seeking information or documents from the petitioner in accordance with law during the assessment proceedings as per the revised financial statements. The petitioner would be liable to pay any charges or taxes arising from the revised statements, as per the law.

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