WHETHER A COMPANY SECRETARY IS RESPONSIBLE FOR CERTAIN MISSTATEMENTS AND INCORRECT DISCLOSURES MADE BY THE COMPANY?

 

WHETHER A COMPANY SECRETARY IS

 RESPONSIBLE FOR CERTAIN

 MISSTATEMENTS AND INCORRECT

 DISCLOSURES MADE BY THE

 COMPANY?

In V. Shankar, the company secretary of Deccan Chronicle Holdings Limited (DHCL), SAT SAYS NO BUT SUPREME COURT set aside the SAT's order and remitted the matter back to the SAT for further consideration.

COMPANY SECRETARY IS NOT LIABLE FOR AUTHENTICATION OF FINANCIAL STATEMENTS-SAT

The case of V. Shankar c/o Manish Ghia & Associates vs. Securities Appellate Tribunal (SAT) involves the liability of a company secretary under securities laws.

The SAT initially exonerated Shankar , Company Secretary from liability.

 SAT held that a Company Secretary is not liable for authentication of financial Statements under the Companies Act, 1956.

EARLIER , SEBI HELD COMPANY SECRETARIES ARE ACCOUNTABLE FOR SIGNING OF FINANCIAL STATEMENT OF THE COMPANY

1)SEBI  earlier held the Company Secretary is liable for signing the financial statements;

2) Appeal by Company Secretary to Securities Appellate Tribunal (SAT) against the order.

3) SAT reverses the order passed by SEBI.

4) SEBI appealed to Supreme Court against SATs Order.

SUPREME COURT DECISION

The Supreme Court's decision emphasized that the SAT had erred in confining the role of the company secretary solely to investor grievance redressal, as per Regulation 19(3) of the SEBI (Buyback of Securities) Regulations, 1998.

The Supreme Court noted that the regulation imposes two separate obligations on the company secretary: ensuring compliance with the buyback regulations and addressing investor grievances.

 The Supreme Court found that the SAT had failed to consider the first, broader obligation. Consequently, the Supreme Court directed the SAT to reconsider the matter, keeping the rights and contentions of the parties open, and to decide the case within six months.

SAT REITREATS ITS EARLIER ORDER ON 5 MAY 2025.

SAT once gain rehears the matter as directed by Supreme Court and conclusively determines that Company Secretary is not liable for signing the financial statements in the present matter.

RESPONSIBILITIES OF COMPANY SECRETARIES UNDER CORPORATE AND SECURITIES LAWS

Having held the above, as professionals one needs to be tremendously cautious, while signing the financials or any other document containing the financial aspects even though approved by the Board or any other competent authority, as there is no blanket protection available to a company secretary, even though such checks have been carried out by an independent statutory auditor.

R V Seckar FCS , LLB 79047 19295