The company secretary (CS) of Deccan Chronicle Holding Limited ('DCHL') was absolved by the Securities Appellate Tribunal ('SAT'), Mumbai, from the liability imposed by the Adjudicating Officer ('AO') of the Securities Exchange Board of India ('SEBI') on DCHL for misleading financial statements and information given by the company. 

Earlier this year, SEBI had investigated the scrip of DCHL to ascertain if the company shares were fraudulently pledged without appropriate disclosures. From the investigation, it was specifically gleaned that the public announcement made in 2011 for buying back its equity shares had misled the investors/shareholders. Mr. Shankar filed an appeal before the SAT which examined the provisions of the 1956 Act under Section 68 and Section 77. 

Section 68 provides that 'any person knowingly or recklessly makes a statement which is false, deceptive, or misleading he would be punishable with imprisonment for a term which may extend to five years or with fine or both’. 

The tribunal also examined the provision laid under Section 215 (Authentication of balance sheet and profit and loss account) of the 1956 Act.

 A company secretary is under no obligation to undertake utmost due diligence to check the veracity of the buyback offer before ascribing his signatures to the same. Once the balance sheet or profit and loss account are approved by the Board of Directors, the role of a company secretary in signing them is merely Administrative in nature. 

NCLT earlier this year in Technology Frontiers (India) Private Limited v. Global Sports Commerce Pte Ltd & Ors. took an alternative stance and held that a company Secretary is a 'Watchdog of protecting the Principles of Corporate Governance.


Audio Source: An article published on the LKS website in November 2022
Company Secretary whether liable for misleading financial information given by a company | Lakshmikumaran & Sridharan Attorneys (lakshmisri.com)

Author: Manan Chhabra, Senior Associate (LKS)