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CS Executive · Company Law and Practice · Introduction to Company Law

Mehta Textiles Ltd's books for an old year are suspected to be fraudulently prepared. Under section 130, which is correct about re-opening them?

A company cannot re-open its books or recast its financial statements unless an eligible applicant, such as the Central Government, Income-tax authorities, SEBI or a person concerned, applies and a competent court or the Tribunal orders it on grounds of fraud or mismanagement.

  1. AThe company may re-open its books on a board resolution alone
  2. BThe Registrar may order re-opening without any application
  3. CRe-opening needs an application by the Central Government, Income-tax authorities, SEBI, another statutory regulator or a person concerned, and an order of a court of competent jurisdiction or the TribunalCorrect
  4. DOnly the Income-tax authorities can apply, and the Tribunal need not give notice to anyone

Explanation

Section 130(1) bars re-opening or recasting unless an eligible applicant applies and a competent court or the Tribunal orders it on grounds of fraudulent preparation or mismanagement. A board resolution is not enough, and applicants are not limited to Income-tax authorities.

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