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CA Intermediate · Corporate and Other Laws · Accounts of Companies

Orion Energy Ltd's Board has discovered that, in FY 2025-26, its Chief Financial Officer, Mr Iyer, who is a person charged with compliance, knowingly allowed the financial statements to be approved without complying with the prescribed requirements of Section 129 (financial statements to give a true and fair view and comply with accounting standards). Which statement best reflects the legal position on liability?

If the financial statements are approved without complying with the requirements of Section 129, both the company and every officer in default, including the CFO, are punishable. Officers face fine and imprisonment as prescribed, and no prior investigation order is needed.

  1. AOnly the company is liable, since a company alone acts through its Board and no officer can be punished
  2. BOnly the managing director is liable, and the CFO cannot be held responsible under any circumstances
  3. CThe company and every officer in default, including the CFO, are punishable with fine and, for the officers, also with imprisonment as prescribed in the ActCorrect
  4. DNo liability arises unless the Central Government first orders an investigation

Explanation

Non-compliance with the financial statement requirements attracts penalty on the company and every officer in default, including the CFO where responsible, with fine and for officers imprisonment as prescribed. Liability is not restricted to the company or the managing director, and it does not depend on a prior investigation order. Options A, B and D are therefore incorrect.

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