Section 128, corporate office demolished
This query is : Resolved
14 July 2016
One of the directors of Pvt. Ltd. Company has sold the corporate office which also used to be his residence without permission of board of directors and without informing ROC.How to file IT returns and other government liabilities as company was in compliance of section 128 kept all records there including some stock and c forms and other important documents too.What is the remedy available to other directors of the company to compliance the above section and fulfil their duties as director of the company.What action can be taken against director who has not only sold the corporate office to builder but also demolished the old structure.
15 July 2016
As per your query, I am assuming the property is residence of the Director as you have mentioned
• You can initiate action against a Director, only if you have entered into an agreement with the Director for your corporate office.
• In case of damage of Document you might consider taking action under Section 425 r/w 427 of Indian Penal Code.
• You can initiate action against a Director, only if you have entered into an agreement with the Director for your corporate office.
• In case of damage of Document you might consider taking action under Section 425 r/w 427 of Indian Penal Code.
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15 July 2016
What is the action sought under company law to fulfill IT return and sales tax responsibility ...creditors etc.?
19 July 2016
Companies Act mentions the Document retention period, Normally in case of loss or destruction of Documents we need to file an NC in nearest police station and a public advertisement for the same.
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21 July 2016
What is the action other directors can take to fill IT returns and other government tax liabilities, creditors liabilities etc. ? Bank account was also jointly operated!
23 July 2025
This is a serious issue involving a breach of company law as well as potential tax and regulatory non-compliance. I'll walk you through the necessary steps and actions the other directors can take to rectify the situation and fulfill their responsibilities under various laws, including Section 128 of the Companies Act (relating to maintenance of books of accounts) and other corporate, income tax, and sales tax obligations.
Key Issues:
Corporate Office Sold Without Board Approval
Demolition of Corporate Office Structure
Non-Compliance with Section 128 (Books of Accounts)
Failure to Inform the ROC (Registrar of Companies)
Non-Compliance with Tax and Creditor Liabilities
Joint Bank Account Operation
1. Breaches and Consequences:
The actions of the director who sold the corporate office and demolished the structure without board approval have violated Section 179 of the Companies Act, 2013, which holds directors liable for their duties and obligations. Furthermore, failing to keep the corporate office intact as required under Section 128 of the Companies Act, 2013 (which mandates the maintenance of proper books of accounts), could have serious implications for the company.
Additionally:
The IT (Income Tax) and Sales Tax obligations (such as filing returns) would have been impacted if these records were housed in the corporate office.
Liabilities towards creditors, including any undischarged debts, could also be at risk, especially if important documents were destroyed or inaccessible.
2. How the Other Directors Can Rectify the Situation:
A) Immediate Actions to Secure Records:
The other directors must immediately take the following actions:
Locate and Retrieve Documents:
Ensure that all important records (financial statements, stock, sales tax C-forms, etc.) are either physically secured or retrieved from alternate locations (e.g., if some records were transferred to other places by the sold property owner).
If the records have been destroyed, the directors need to assess the situation and recreate the financial records to the best of their ability.
File Intimations to the ROC:
Inform the Registrar of Companies (ROC) regarding the changes, including the sale of the corporate office, using Form INC-22 (for a change of registered office) and Form MGT-14 (to inform the board resolution if any). The ROC should also be updated about any impact on compliance.
If the company has changed its location or structure (due to the demolition), they need to update the registered office details in their filings with the ROC.
Secure Physical and Digital Records:
If not already done, the directors should secure the company’s physical records and make sure a digital backup of all critical documents is maintained (financial statements, bank statements, tax records, etc.).
B) Legal Action Against the Director Who Sold and Demolished the Property:
The action taken by the director who sold the corporate office without board approval may be considered a breach of fiduciary duty under Section 166 of the Companies Act, 2013, and Section 179 (Duties of Directors).
The other directors can initiate legal action against the director for breach of trust, fraud, and mismanagement.
Depending on the damage, they may report the matter to the Company Law Tribunal or take civil action if necessary.
A complaint can be lodged with the Police or the Economic Offenses Wing (EOW) if fraud is suspected.
C) Filing of IT Returns and Sales Tax Liabilities:
i) Income Tax Returns:
The company is still obligated to file its Income Tax returns even if its premises were sold or demolished. The directors need to ensure that:
All financial records are updated (i.e., loss of stock, loss of fixed assets, changes in liabilities, etc.).
If the company is still operational, returns need to be filed for the relevant period.
If the company has ceased operations, a final return needs to be filed.
ii) Sales Tax/Central Excise/Service Tax:
Sales Tax / GST: The company must ensure that GST returns or Sales Tax returns (depending on jurisdiction) are up to date and filed with the authorities.
Sales Tax C-forms: If these were stored at the corporate office, and now the company has lost access, it needs to notify the Sales Tax Department and provide valid justification (including seeking an extension if applicable).
iii) Accounting Adjustments:
If there were sales of property (office and stock), these transactions need to be accounted for properly.
Capital gains tax: If the sale of the property results in a capital gain, the company must report and pay any applicable capital gains tax.
D) Creditors' Liabilities:
The other directors need to ensure that all creditors are properly notified of the current state of affairs, and payments are made as per the agreed terms.
If the property was sold to pay creditors, the creditors should receive the appropriate payment.
If the company's operations have been disrupted due to the office sale, the creditors might need to be communicated with to renegotiate payment terms.
3. Role of the Bank:
If the bank account was jointly operated by the director who sold the property, the other directors should immediately:
Notify the Bank: Inform the bank of the change in the company's operations or structure, and request a change in the signatories.
Review Transactions: Ensure there are no unauthorized or fraudulent transactions in the account and that any outstanding liabilities (e.g., loans, bills) are settled.
4. Steps to Fulfill Tax Liabilities & Report
Income Tax Filing: Ensure that income tax returns are filed by the due date, covering all financial years, and update the returns if necessary.
Sales Tax/GST Compliance: Check if the GST/Sales Tax registration is still valid and file the pending returns.
Audit & Compliance: Depending on the company’s turnover and nature of business, conduct an audit to rectify any discrepancies and ensure financial records are up-to-date.
Conclusion:
Immediate Actions: The other directors need to secure company records (both physical and digital), inform ROC about changes in the office, and file tax returns.
Legal Actions: The offending director can be sued for breach of trust and fraud under company law.
Corporate Governance: The directors must now take control of the company's governance, ensure compliance with all tax obligations, and manage creditors' issues.
Key Issues:
Corporate Office Sold Without Board Approval
Demolition of Corporate Office Structure
Non-Compliance with Section 128 (Books of Accounts)
Failure to Inform the ROC (Registrar of Companies)
Non-Compliance with Tax and Creditor Liabilities
Joint Bank Account Operation
1. Breaches and Consequences:
The actions of the director who sold the corporate office and demolished the structure without board approval have violated Section 179 of the Companies Act, 2013, which holds directors liable for their duties and obligations. Furthermore, failing to keep the corporate office intact as required under Section 128 of the Companies Act, 2013 (which mandates the maintenance of proper books of accounts), could have serious implications for the company.
Additionally:
The IT (Income Tax) and Sales Tax obligations (such as filing returns) would have been impacted if these records were housed in the corporate office.
Liabilities towards creditors, including any undischarged debts, could also be at risk, especially if important documents were destroyed or inaccessible.
2. How the Other Directors Can Rectify the Situation:
A) Immediate Actions to Secure Records:
The other directors must immediately take the following actions:
Locate and Retrieve Documents:
Ensure that all important records (financial statements, stock, sales tax C-forms, etc.) are either physically secured or retrieved from alternate locations (e.g., if some records were transferred to other places by the sold property owner).
If the records have been destroyed, the directors need to assess the situation and recreate the financial records to the best of their ability.
File Intimations to the ROC:
Inform the Registrar of Companies (ROC) regarding the changes, including the sale of the corporate office, using Form INC-22 (for a change of registered office) and Form MGT-14 (to inform the board resolution if any). The ROC should also be updated about any impact on compliance.
If the company has changed its location or structure (due to the demolition), they need to update the registered office details in their filings with the ROC.
Secure Physical and Digital Records:
If not already done, the directors should secure the company’s physical records and make sure a digital backup of all critical documents is maintained (financial statements, bank statements, tax records, etc.).
B) Legal Action Against the Director Who Sold and Demolished the Property:
The action taken by the director who sold the corporate office without board approval may be considered a breach of fiduciary duty under Section 166 of the Companies Act, 2013, and Section 179 (Duties of Directors).
The other directors can initiate legal action against the director for breach of trust, fraud, and mismanagement.
Depending on the damage, they may report the matter to the Company Law Tribunal or take civil action if necessary.
A complaint can be lodged with the Police or the Economic Offenses Wing (EOW) if fraud is suspected.
C) Filing of IT Returns and Sales Tax Liabilities:
i) Income Tax Returns:
The company is still obligated to file its Income Tax returns even if its premises were sold or demolished. The directors need to ensure that:
All financial records are updated (i.e., loss of stock, loss of fixed assets, changes in liabilities, etc.).
If the company is still operational, returns need to be filed for the relevant period.
If the company has ceased operations, a final return needs to be filed.
ii) Sales Tax/Central Excise/Service Tax:
Sales Tax / GST: The company must ensure that GST returns or Sales Tax returns (depending on jurisdiction) are up to date and filed with the authorities.
Sales Tax C-forms: If these were stored at the corporate office, and now the company has lost access, it needs to notify the Sales Tax Department and provide valid justification (including seeking an extension if applicable).
iii) Accounting Adjustments:
If there were sales of property (office and stock), these transactions need to be accounted for properly.
Capital gains tax: If the sale of the property results in a capital gain, the company must report and pay any applicable capital gains tax.
D) Creditors' Liabilities:
The other directors need to ensure that all creditors are properly notified of the current state of affairs, and payments are made as per the agreed terms.
If the property was sold to pay creditors, the creditors should receive the appropriate payment.
If the company's operations have been disrupted due to the office sale, the creditors might need to be communicated with to renegotiate payment terms.
3. Role of the Bank:
If the bank account was jointly operated by the director who sold the property, the other directors should immediately:
Notify the Bank: Inform the bank of the change in the company's operations or structure, and request a change in the signatories.
Review Transactions: Ensure there are no unauthorized or fraudulent transactions in the account and that any outstanding liabilities (e.g., loans, bills) are settled.
4. Steps to Fulfill Tax Liabilities & Report
Income Tax Filing: Ensure that income tax returns are filed by the due date, covering all financial years, and update the returns if necessary.
Sales Tax/GST Compliance: Check if the GST/Sales Tax registration is still valid and file the pending returns.
Audit & Compliance: Depending on the company’s turnover and nature of business, conduct an audit to rectify any discrepancies and ensure financial records are up-to-date.
Conclusion:
Immediate Actions: The other directors need to secure company records (both physical and digital), inform ROC about changes in the office, and file tax returns.
Legal Actions: The offending director can be sued for breach of trust and fraud under company law.
Corporate Governance: The directors must now take control of the company's governance, ensure compliance with all tax obligations, and manage creditors' issues.
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