W.P. (C) 9003/2011
Decided on: 23rd July, 2013
Companies Act, 1956 – Section 210 – extension of accounting period – whether the decision is required to be taken within 3 months – Held, No.
Section 210 of the Companies Act, 1956 to the extent it is relevant for our purpose requires a company to hold its Annual General Meeting for considering Profit and Loss Account and Balance Sheet, within six months of the close of the financial year. The said section also permits the company to extend the financial year by upto three months. The period can be further extended by upto 6 months with the special permission of the Registrar of Companies.
A company registered under the Companies Act, 1956 was required to hold its AGM on or before 30.09.2011, its financial year being 01.04.2010 to 31.03.2011. No decision prior to 11.08.2011 was taken by the company to extend the accounting year. It was only by way of resolution dated 11.08.2011 that the company decided to extend the accounting year 2010-11 by three months so as to end the said year on 30.06.2011. Consequently, it became eligible to hold the AGM, for the purpose of considering the accounts and balance sheet, on or before 31.12.2011.
Decision: Petition dismissed.
The contention of the learned counsel for the petitioner is that the decision to extend the accounting year for a period upto three months can be taken by the company before the end of the financial year or at best before the period by which the financial year is to be extended, expires and not thereafter. In other words, according to the learned counsel, the decision to extend the accounting year ought to have been taken on or before 31.03.2011 or at best by 30.06.2011 whereas in the present case it was taken on 11.08.2011 after the aforesaid three months had already expired.
The learned counsel for the Company, on the other hand, submits that the decision to extend the financial year could be taken by the company even after expiry of the period by which the financial year is sought to be extended and there is no requirement of law that such a decision has to be taken before expiry of the financial year or the period by which the financial year is sought to be extended.
I have carefully examined the provisions of Section 210 of the Companies Act. The said provision does not require the company to take decision to extend the financial year, either by the end of the financial year or within the time period by which the financial year is to be extended. The decision to extend the financial year, therefore, can be taken at any time though the period cannot be extended by more than three months without special approval of the Registrar of Companies.
To take an example, if a company is expecting to finalize its accounts and balance sheet in time and towards the fag end of the financial year, it finds that for some reason or the other, it shall not be in a position to finalize the accounts and balance sheet by the end of the financial year, in case the contention of the learned counsel for the petitioner is extended, it will have to convene a Board meeting on or before the end of the financial year. Considering that, sometimes, there may be a last minute glitch in finalization of accounts and balance sheet, the need to extend the accounting year may arise say on 29th or 30th of the March in a case where the financial year ends on 31st March, 2013. It may not be possible for every company to convene the Board Meeting at such a short notice. Therefore, it would be unrealistic to take a view that in every case, the company must take decision to extend the financial year, before the financial year or the period by which the financial year is sought to be extended, expires. Neither there is such requirement laid down in Section 210 of the Act nor there is any necessity to read such a requirement in the provisions of the Act.
Considering that the time available to the company is only three months and thereafter, it will necessarily have to go to Registrar of Companies seeking a special approval for extending the financial year beyond three months and obviously, the Registrar of Companies would not accord such an approval unless he is satisfied that there are sufficient reasons for granting such an extension, I find no illegality in the decision taken on 11th August, 2011, to extend the financial year by 3 months.
I find no merit in the present writ petition and the same is dismissed as such. No order as to costs.