Financial Statements Can Be Revised If They Fail To Present True And Fair View: NCLT Chennai

The National Company Law Tribunal (NCLT) at Chennai has held that financial statements that do not accurately reflect the true nature of transactions and fail to present a true and fair view of a company's affairs may be revised.

A bench of Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam observed that when financial statements do not accurately reflect the true nature of transactions and require correction to present a true and fair view, they may be revised.

“Section 129 of the Companies Act, 2013 mandates that financial statements shall give a true and fair view of the state of affairs of the Company, comply with the accounting standards notified under Section 133, and be prepared in the manner prescribed under Schedule III. Therefore, where the financial statements do not accurately reflect the true nature of transactions and require correction to present a true and fair view, the jurisdiction under Section 131 can be invoked."

The tribunal was dealing with a petition filed by Cameron Manufacturing (India) Private Limited seeking permission to revise its financial statements for the financial year 2019-20.

The company sought to correct the classification of an inter-corporate deposit of about ₹14 crore that had been shown as Trade Receivables instead of Short-Term Loans and Advances.

After examining ledger extracts, bank statements, and other supporting documents, the bench found that the proposed changes were limited to correcting inadvertent misclassifications.

“Consequently, the proposed correction merely involves a reclassification within the same asset category and does not affect the overall asset position of the Company.”, it ruled.

The tribunal found that the proposed revisions were necessary to refelct the accurate position of company.

It accordingly allowed the petition and permitted the company to revise and recast its financial statements for 2019-20.