A pvt ltd co was having its authorised and paid up capital of 50 crores and the shareholders included 5 holding cos i.e. A,B,C,D & F. The co gave advances to its group co and tha group co gave advanced the fund to 5 holding cos. During 3 years the transactions of advances to group co and to holding cos by group co were through banking channel having common bank for pvt ltd co, group co and 5 holding cos. The pvt ltd co gave advances to group co on different dates by cheques and the group co gave the same amounts to 5 holding cos on the same dates. The holding cos invested the aforesaid amounts in pvt ltd co as shattered application money and the authorised and paid up capital of pvt ltd co was increased to 100 crores in the first year, 200 crores in the second year and 500 crores in the third year. The neccssary resolutions were duly passed. Intimation to ROC was given in form nos.2 and 5 for the first year. For subsequent 2 years the forms were not filed with ROC. And therefore, the authorised and paid up capital as per ROC records was 100 crores only. The pvt ltd co have not filed its audited accounts for 2 years wherein there was an increase in share capital. Thus accounts were not available in ROC records. The pvt ltd co submitted its accounts to banks for obtaining guarantees. Upon failure of the pvt ltd co to fulfill its obligations, the banks suffered losses. The banks have relied upon unregistered accounts. The query is whether the auditors have any civil/ criminal liabilities for defaults of pvt ltd co and if so, what is the remedy for auditors to defend themselves from any such legal proceedings?
CAclubindia
