CAN A COMPANY SECRETARY CUM COMPLIANCE OFFICER OF A LISTED COMPANY CAN BE HELD ACCOUNTABLE FOR ACCOUNTING IRREGULARITIES WHILE SIGNING FINANCIAL STATEMENTS IN ADDITION TO CFO AND DIRECTORS?

 CAN A COMPANY SECRETARY CUM COMPLIANCE OFFICER OF A LISTED COMPANY CAN BE HELD ACCOUNTABLE FOR ACCOUNTING IRREGULARITIES WHILE SIGNING FINANCIAL STATEMENTS IN ADDITION TO  CFO AND DIRECTORS?

NOT ACCOUNTABLE

A Company Secretary cum Compliance Officer of a listed company is generally not held accountable for accounting irregularities in the same way as the CFO and directors, unless there is clear evidence of their active involvement or a specific statutory duty to verify financial data.

It has long been settled position that Company Secretaries are not responsible for ensuring that financial statements comply with accounting standards.

Under Sec 134(5)(a), 128 and 129(7) of the Companies Act 2013, the responsibility for preparing financial statements and ensuring compliance with applicable accounting standards primarily rests with the Directors and the CFO, not with the CS.

RECENT SAT RULING

Recent rulings by the Securities Appellate Tribunal (SAT) in India have clarified that mere signing of financial statements does not automatically impose liability.

PRIMARY RESPONSIBILITY RESTS UPON WHOM?

•     CFO and Directors bear direct responsibility for the accuracy of financial statements under the Companies Act, 2013 and SEBI regulations.

•     They are accountable for ensuring compliance with accounting standards and disclosure norms.

ROLE OF COMPANY SECRETARY/COMPLIANCE OFFICER:

•     Their role is primarily ministerial and procedural, focusing on ensuring compliance with corporate governance, regulatory filings, and board processes.

•     They are not expected to audit or verify financial data unless explicitly mandated.

SAT RULINGS (2025)  IN V. SHANKAR V SEBI

SAT held that compliance officers cannot be penalized for accounting irregularities unless they had a direct role in misrepresentation or fraud.

       IN THE DECCAN CHRONICLE HOLDINGS LTD. CASE

SAT quashed penalties against the Company Secretary, ruling that signing financial statements does not imply liability without proven involvement.

OFFICER IN DEFAULT:

Merely being a Company Secretary (and a Key Managerial Personnel) does not automatically make them an "officer in default" under Section 77A of the Companies Act (regarding buybacks) unless it is established they were part of the wrongdoing.

SEBI IN THE MATTER OF COFFEE DAY ENTERPRISES HELD COMPLIANCE OFFICER IS ACCOUNTABLE

SEBI examined the role of the CS by referring to Regulation 6(2) of the SEBI LODR Regulations, SEBI reasoned that the Compliance Officer is responsible for ensuring conformity with regulatory requirements and reporting non compliances to the Board.

Since the Compliance Officer was a signatory to the financial statements, SEBI observed that the Compliance Officer failed to ensure compliance with regulatory provisions applicable to the preparation of the financial statements and failed to bring such requirements to the notice of the Board.

REGULATION 6(2) OF THE SEBI LODR REGULATIONS

Referring to Regulation 6(2) of the SEBI LODR Regulations, SEBI reasoned that the Compliance Officer is responsible for ensuring conformity with regulatory requirements and reporting non compliances to the Board.

Since the Compliance Officer was a signatory to the financial statements, SEBI observed that the Compliance Officer failed to ensure compliance with regulatory provisions applicable to the preparation of the financial statements and failed to bring such requirements to the notice of the Board.

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.

HOW SEBI IN THE MATTER OF COFFEE DAY ENTERPRISES HELD COMPLIANCE OFFICER IS ACCOUNTABLE IS IN VARIANCE WITH SAT RULINGS (2025)  IN V. SHANKAR V SEBI AND SAT DECISION IN THE DECCAN CHRONICLE HOLDINGS LTD CASE

SEBI’s order in the Coffee Day Enterprises case (2026) held the compliance officer directly accountable for disclosure lapses, but this approach diverges from SAT’s 2025 rulings in V. Shankar v. SEBI and the Deccan Chronicle Holdings Ltd. case, where SAT limited liability of compliance officers unless specific involvement or statutory duty was proven.

IMPLICATIONS OF THE VARIANCE

REGULATORY UNCERTAINTY:

SEBI’s stance increases compliance risk for officers, while SAT rulings provide relief by narrowing liability.

CORPORATE GOVERNANCE IMPACT:

Companies may face difficulty attracting qualified compliance officers if SEBI continues imposing penalties without proof of involvement.

POTENTIAL APPEALS:

Coffee Day officers may challenge SEBI’s order before SAT, citing consistency with V. Shankar and DCHL precedents.

POLICY DEBATE:

Raises the question of whether compliance officers should act as watchdogs with substantive liability or remain ministerial facilitators.

KEY TAKEAWAY

The variance lies in SEBI’s expansive interpretation of compliance officer accountability versus SAT’s restrictive, evidence-based approach. Unless SEBI’s order is upheld on appeal, SAT precedents suggest compliance officers cannot be penalized merely for being signatories or procedural overseers without proof of complicity.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

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TRANSMISSION OF SHARES TO LEGAL HEIRS-- DEATH SHOULD NOT FREEZE SECURITY HOLDER’S WEALTH- SEBI EASES RULES FOR FASTER TRANSMISSION OF SECURITIES

 TRANSMISSION OF SHARES TO LEGAL HEIRS-- DEATH SHOULD NOT FREEZE SECURITY HOLDER’S WEALTH- SEBI EASES RULES FOR FASTER TRANSMISSION OF SECURITIES

PROPOSED MAJOR REFORMS

SEBI has proposed major reforms to simplify the transmission of securities after an investor’s death. The idea behind the reform is clear: an investor’s death should not cause their wealth to remain stuck in procedural hurdles.

SEBI’S KEY REFORM PROPOSALS (2026)

SEBI has proposed a framework to speed up and simplify the transmission process.

(a) Higher Thresholds for Simplified Documentation

For small-value holdings, heirs will be able to claim securities with minimal documentation.

Example thresholds proposed:

-        Up to ₹10,000 per listed entity / mutual fund (for physical or statement-of-account holdings).

-        Up to ₹30,000 per beneficial owner for demat securities.

This allows quick settlement of small claims.

THE NECESSITY OF SEBI’S REFORM

The Problem: Wealth Often Gets “Frozen” in the existing system.

When an investor holding shares, mutual funds, or demat securities dies, their family or legal heirs often face:

-        Complex paperwork

-        Multiple verification procedures

-        Long processing timelines

-        Confusion about nominee vs legal heir rights

This often results in assets remaining unclaimed or locked for years.

STRAIGHT-THROUGH PROCESSING (STP)

SEBI plans to introduce automatic processing for small claims without extensive manual verification.

BENEFITS:

-        Faster transmission

-        Reduced paperwork

-        Less dependency on legal documentation.

SEBI’S IMPLEMENTATION TIMELINE:

Proposals are open for public comments until April 2, 2026, meaning final rules may evolve.

KEY TAKEAWAY

SEBI’s initiative is a progressive step toward ensuring that death does not freeze wealth. By modernizing transmission rules, heirs will face fewer hurdles, and India’s financial markets will become more investor-friendly.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

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WHETHER THE OFFICE OF DIRECTOR AUTOMATICALLY BECOMES VACANT UNDER SECTION 167(1)(B) OF THE COMPANIES ACT, 2013 IF A DIRECTOR DID NOT ATTEND BOARD MEETINGS FOR 12 MONTHS?

WHETHER THE  OFFICE OF DIRECTOR AUTOMATICALLY BECOMES VACANT UNDER  SECTION 167(1)(B) OF THE COMPANIES ACT, 2013 IF A DIRECTOR DID NOT ATTEND BOARD MEETINGS FOR 12 MONTHS? 

SECTION 167(1)(B) OF THE COMPANIES ACT, 2013  EFFECT

 The office of a director shall become vacant if “he absents himself from all the meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board.

AUTOMATIC EFFECT:	The vacancy occurs by operation of law, meaning no separate resolution or action by the company is required.
SCOPE:	Applies to all directors (executive, non-executive, independent) unless specifically exempted by another provision.

PRACTICAL IMPLICATIONS FOR COMPANIES

Monitoring attendance:	Companies must maintain accurate records of board meeting attendance to identify when a director has crossed the 12-month threshold.
Filing requirements:	Once the office becomes vacant, the company must file Form DIR-12 with the Registrar of Companies to notify the change.
Board composition:	If the vacancy reduces the number of directors below the statutory minimum (e.g., 2 for private companies, 3 for public companies), the company must promptly appoint new directors.

 

BUT ROC MAY NOT APPROVE THE FORM DIR-12 AND ASK YOU TO RESUBMIT WITH THE FOLLOWING DOCUMENTS

·      Minutes of all Board Meetings during the relevant period

·      Board Meeting Attendance Register

·      AFFIDAVIT CONFIRMING:

• The director had not attended meetings for 12 months

• Meeting notices were properly issued

• No litigation existed regarding the cessation

• The company was regular in MCA filings

COMPLIANCE WITH SECTIONS 167 AND 164

·      The ROC also gave the concerned director an opportunity to submit objections.

·      If no response was received, the DIR-12 was eventually approved.

CASE LAWS ON THE SUBJECT

Union of India v. R. Gandhi (Madras High Court, 2015)	The court emphasized that vacation of office under Section 167 is automatic and does not require a board resolution.
M.K. Srinivasan v. Registrar of Companies (NCLT, 2017)	The NCLT held that once a director fails to attend all meetings for 12 months, the company must file DIR‑12 with the ROC. •      The tribunal rejected arguments that leave of absence could protect the director, affirming that leave is irrelevant under Section 167(1)(b).

KEY LESSON LEARNED

Even though the law provides automatic vacation of office, the ROC may require strong documentary proof before approving DIR-12.

Proper corporate records are therefore critical.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

CAN THE GST DEPARTMENT FREEZE A DIRECTOR'S PERSONAL BANK ACCOUNT FOR A COMPANY'S TAX DUES?

CAN THE GST DEPARTMENT FREEZE A

 DIRECTOR'S PERSONAL BANK ACCOUNT

 FOR A COMPANY'S TAX DUES?

KHALID BUHARI VS. ASSISTANT COMMISSIONER OF CGST & C.EX (FEB 2026) DECIDED BY CHENNAI HIGH COURT

FACTS OF THE CASE

ISSUE:	Director’s personal bank account was frozen to recover company’s GST dues.
COURT’S DECISION:	Recovery proceedings against the director were quashed
PRINCIPLE:	Directors are not automatically liable for company tax dues; liability under Section 89 arises only when: •        The company’s tax dues are irrecoverable. •        The GST department conducts a proper inquiry and follows due procedure.
IMPACT:	Reinforces the doctrine of separate legal entity — a company’s debts are its own, not its directors’, unless statutory exceptions apply.

 

DIRECTORS ARE NOT LIABLE

The Madras High Court has clarified that under Section 89 of the CGST Act, directors are shielded unless specific statutory conditions are met — personal liability arises only if the company’s tax dues are irrecoverable and due process is followed.

SECTION 89 OF THE CGST ACT – EXPLAINED

PURPOSE:	Provides for recovery of tax dues from directors of private companies in certain cases.
CONDITIONS FOR LIABILITY:	·       The company has defaulted on GST dues. ·       Recovery from the company is not possible (e.g., company is insolvent). ·       The director is shown to be responsible for the default.
COURT’S INTERPRETATION:	•        This is a last resort mechanism, not a blanket power for authorities to bypass the company and target directors directly.

 

WHAT THIS MEANS FOR DIRECTORS OF THE INDIAN COMPANIES

If you are a director of a private company:

•        Your personal assets are protected unless the company’s dues are irrecoverable.

•        Authorities must justify any move to attach your personal bank account.

•        Legal recourse is available — directors can challenge recovery notices in court, as seen in this case.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

EX COMPANY SECRETARY OF KALYANI STEELS LIMITED WAS FINED ₹95.55 LAKH (₹ 1 Crore)FOR RELATED PARTY VIOLATIONS BY SEBI

EX COMPANY SECRETARY OF KALYANI

 STEELS LIMITED WAS FINED ₹95.55 LAKH

 (₹ 1 Crore)FOR RELATED PARTY

 VIOLATIONS BY SEBI

RPT VIOLATIONS

Kalyani Steels Limited has settled a regulatory case with Securities and Exchange Board of India involving related-party transaction (RPT) violations by paying ₹4.12 crore under SEBI’s settlement mechanism.

WHAT TRIGGERED SEBI’S INVESTIGATION

A March 2023 examination report by the National Stock Exchange (NSE) flagged investments by Kalyani group entities into promoter-linked companies with weak financials, nil operations, and negative net worth.

Some investments were impaired shortly after being made, raising concerns about fund utilization and governance.

WHAT WAS THE CORE ISSUE?

SEBI examined whether:

·       Proper Audit Committee approvals were obtained

·       Required shareholder approvals were taken where applicable

·       Adequate disclosures were made under Listing Regulations

·       RPT norms were complied with consistently over multiple financial years

·       Without admitting or denying the findings, the entities opted for settlement under SEBI’s settlement mechanism — effectively closing the regulatory proceedings.

SEBI’S KEY FINDINGS

SEBI observed that:

·       Several related-party transactions were executed without prior approval of the audit committee or shareholders.

·       Required quarterly disclosures of material RPTs were not properly made to stock exchanges.

·       Summaries of RPTs were not placed before the audit committee as required under listing regulations

THE SETTLEMENT SNAPSHOT

Total Settlement Amount:	₹4.12 Crore
Kalyani Steels:	₹2.8 Crore
BF Utilities:	₹36.28 Lakh
Former CS & Compliance Officer:	₹95.55 Lakh

The case covered an extensive period — FY2010 to FY2022 — and revolved around alleged lapses in approvals and disclosures concerning Related Party Transactions (RPTs).

KEY TAKEAWAY

·       This SEBI’s order highlights that liability can extend beyond the company and promoters to compliance officers if they fail to ensure regulatory compliance and disclosure obligations

·       RPTs must obtain prior Audit Committee approval, and in many cases shareholder approval.

·       Companies must ensure timely stock exchange disclosures and maintain proper internal oversight mechanisms.

·       For Company Secretaries and compliance professionals, this isn’t just a news item. It’s a reminder that RPT compliance is a boardroom priority — and a personal responsibilit

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

WHETHER ARBITRATION PROCEEDINGS REMAIN VALID EVEN IF A SECTION 21 NOTICE IS NOT SERVED?

 WHETHER ARBITRATION PROCEEDINGS

 REMAIN VALID EVEN IF A SECTION 21

 NOTICE IS NOT SERVED?

SUPREME COURT  IN "M/S BHAGHEERATHA ENGINEERING LTD. VERSUS STATE OF KERALA"

The Supreme Court in M/s Bhagheeratha Engineering Ltd. v. State of Kerala (2026) clarified that arbitration proceedings remain valid even if a Section 21 notice is not served, provided the dispute is otherwise arbitrable.

CASE CONTEXT: BHAGHEERATHA ENGINEERING LTD. V. STATE OF KERALA

BACKGROUND:	Bhagheeratha Engineering Ltd. was awarded road maintenance contracts under the Kerala State Transport Project. Disputes arose and were referred to arbitration.
KERALA HIGH COURT’S VIEW:	It set aside the arbitral award, holding that claims beyond those raised in the Section 21 notice could not be decided.
SUPREME COURT’S RULING (2026):	Reversed the High Court. Affirmed that Section 21 notice is not mandatory for raising claims or counterclaims. Emphasized arbitration’s flexibility and party autonomy

 

KEY POINTS ON SECTION 21

•        Section 21 states that arbitration proceedings commence when the respondent receives a request for arbitration, unless otherwise agreed.

•        Traditionally, courts debated whether this notice was a mandatory condition precedent.

•        The Supreme Court in Bhagheeratha Engineering Ltd. v. State of Kerala (2026) held:

•        Notice under Section 21 is procedural, not substantive.

•        Its absence does not invalidate arbitration if the parties have otherwise submitted disputes to the tribunal.

•        The arbitral tribunal has wide jurisdiction to decide disputes beyond those specifically referred in the Section 21 notice.

 

EVOLUTION OF SECTION 21 INTERPRETATION

1.   STATE OF GOA V. PRAVEEN ENTERPRISES (2011)

The Supreme Court in State of Goa v. Praveen Enterprises (2011) held that Section 21 of the Arbitration and Conciliation Act is not a rigid prerequisite—arbitration can proceed even if claims or counterclaims were not explicitly mentioned in the initial notice.

This case laid the foundation for later rulings like Bhagheeratha Engineering Ltd. v. State of Kerala (2026), which further clarified that absence of a Section 21 notice is not fatal to arbitration.

CONCLUDING REMARKS

The Supreme Court has settled the issue: Section 21 notice is not a mandatory prerequisite, and its absence is not fatal to arbitrate

Aon proceedings. However, as a matter of best practice, parties should still issue such notice to avoid unnecessary procedural disputes.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

DOES SPIC TOILET CLEANER BOTTLE RESEMBLES HARPIC TOILET CLEANER BOTTLE- CALCUTTA HIGH COURT’S DIVISION BENCH SET ASIDE THE INTERIM INJUNCTION TO USE SPIC CLEANER BOTTLE

 DOES SPIC TOILET CLEANER BOTTLE

 RESEMBLES HARPIC TOILET CLEANER

 BOTTLE-  CALCUTTA HIGH COURT’S

 DIVISION BENCH SET ASIDE THE

 INTERIM INJUNCTION TO USE SPIC 

CLEANER BOTTLE

RECKITT BENCKISER (INDIA) PVT. LTD VS GODREJ CONSUMER PRODUCTS LTD.

THE CALCUTTA HIGH COURT

On February 27, 2026, the Calcutta High Court’s Division Bench set aside an ad-interim injunction that had restrained Godrej Consumer Products Ltd. from selling its “Spic” toilet cleaner.

BACKGROUND OF THE CASE:

Reckitt Benckiser (India) Pvt. Ltd., the maker of Harpic, filed a suit alleging that Godrej’s Spic toilet cleaner infringed its trademark rights by using a similar bottle shape.

RECKITT ALLEGED THAT THE GODREJ’S ADVERTISEMENT AMOUNTED TO:

·       Disparagement of its product

·       Misleading comparative advertising

·       Trademark infringement / dilution

·       Unfair trade practice

INITIAL INJUNCTION:

 A single judge had granted an ad-interim injunction on February 25, 2026, preventing Godrej from selling Spic in the contested packaging.

DIVISION BENCH RULING:

The Bench lifted the restraint, holding that the injunction was improperly granted at the interim stage. They questioned the urgency and rejected the idea that exclusive trademark rights could be claimed over the bottle shape alone, especially since Reckitt’s design rights had expired.

EARLIER CASE LAWS ON THE SUBJECT

·       Pepsi Co. Inc. vs Hindustan Coca Cola Ltd. (comparative advertising principles)

·       Colgate Palmolive (India) Ltd. vs Hindustan Unilever Ltd. (toothpaste comparative ads)

OUTCOME:

Godrej is now free to market and sell its Spic toilet cleaner in the disputed packaging.

This ruling highlights the tension between design rights and trademark protection in product packaging disputes.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB, 79047 19295