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

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=rvs123