Balance Sheet is an acknowledgement of a debt of a company

In the case given in question the offence relates to non-disclosure of true and fair view of the state of affairs as provided in Section 211 (1) of the Act. According to Section
211 (8) the default carries a fine of Rs. 1.2tQ.00' risonment for a period of six
months or both. Thus the offence under Section 211 can be compounded by the Regional Director with Court's approval under section 621A (7) (a) The Compound.ing Authority has the power to give necessary directions to make good the default whH2 passing the compounding order and levying the compounding fee.
Q; 17. How far is Balance Sheet an acknowledgement of a debt of a company? ijoard of Directors of Halim Abdul & Sultan Company Limited passed a resolution for
<'Payment of sitting fees to Directors and the same was shown as fees due to Directors in the Balance Sheet of the Company. Examine whether this provision of fees due to Directors in the Balance Sheet can be considered as an effective enforceable acknow
ledgement of debt of the company. [C.A. (Final) November, 1999J
.9Lns. Balance Sheet is an acknowledgement of a debt of a company. Where the company admits its indebtedness of a certain sum of money which included the debt owing to a shareholder/creditor, it is sufficient acknowledgement of the debt.
The approval of the Balance Sheet in Board Meeting and signing of it by two
~ectors is sufficient acknowledgement of debt for the purpose of Limitation A~
It must, however, be noted that as the Balance Sheet is signed by the Directors on behalf"of the company several months after the Balance Sheet date, the acknowledgement can only relate to the date of the Balance Sheet and not the date on which Directors sign it [Re, Gee & Co. (WoolwiclI) Ltd. (1994) All ER 1149 ClI.D.].
But, a Balance Sheet showing fees due to Directors has been held not to amount to an acknowledgement on the ground that it is not competent fort he Board ot~ Directors to promise to pay themselves since each is interested in the matter and incapable of binding the company by passing any resolution. [Malai Iyenger V s. Official Liquidator, Srinivasa Mills Ltd. (1961) 30 Compo Case 561 Mad).
Q; 17.9L X Ltd. has a subsidiary company called Y Ltd. The financial year of the holding company is 31 st March, whereas that of the subsidiary company ends on 30th June every year. The management of the holding company decides that the financial year of the subsidiary company for the year 1.7.2000 to 30.6.2001 should be extended up to 31.3.2002, so that the financial years of the holding and subsidiary companies end on 31 st March every year. Advise the management about the steps to be taken
under the Companies Act to achieve the purpose. [CA. (Final) May, 2001J
.9Lns. According to Section 213 of the Companies Act, 1956, where it appears to the Central Government desirable for a holding company or a holding company's subsidiary to extend its financial year so that the subsidiary's financial year may end with that of the holding company, and for that purpose to postpone the submission of the relevant accounts to a general meeting, the Central Government may, on the application or with the consent of Board of Directors of the company whose financial year is to be extended, direct that ill the case of that company, the submission of accounts to a general meeting, the holding of an annual general meeting or the making of an annual return, shall not be required to be submitted, held or made earlier than the dates specified in the direction, notwithstanding anything to the contrary in this Act or in any other Act for the time being in force. Th~s, the managel1!~.Dt of ~ Ltd. can make an application to the Central Government for extension 00he financial year <2f the