Section 128: Books of account, etc., to be kept by company
This section is for requiring companies to maintain accurate and transparent books of account and other relevant documents.
Penalty
(6) If the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes such provisions, such managing director, whole-time director in charge of finance, Chief Financial Officer or such other person of the company shall be punishable 1*** with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees 2***.
The section, clause by clause
What the section says
In plain terms
(1)Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any, and explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting: Provided that all or any of the books of account aforesaid and other relevant papers may be kept at such other place in India as the Board of Directors may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that other place:
Every company must keep books of account and other relevant documents at its registered office that give a true and fair view of the company's affairs, including those of its branch offices, and these books must be kept on an accrual basis and according to the double entry system of accounting, but they can be kept at another place in India if the Board of Directors decides and notifies the Registrar within 7 days.
provisoProvided further that the company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed.
(2)Where a company has a branch office in India or outside India, it shall be deemed to have complied with the provisions of sub-section (1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarized returns periodically are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1).
A company with a branch office in or outside India can be considered to have complied with the rules if it keeps proper books of account at the branch office and sends summarized returns to the company's registered office.
(3)The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hours, and in the case of financial information, if any, maintained outside the country, copies of such financial information shall be maintained and produced for inspection by any director subject to such conditions as may be prescribed:
A company's books of account and other documents must be open for inspection by any director during business hours at the registered office or another place in India, and if financial information is kept outside India, copies must be maintained and produced for inspection.
provisoProvided that the inspection in respect of any subsidiary of the company shall be done only by the person authorised in this behalf by a resolution of the Board of Directors.
(4)Where an inspection is made under sub-section (3), the officers and other employees of the company shall give to the person making such inspection all assistance in connection with the inspection which the company may reasonably be expected to give.
When an inspection is made, the company's officers and employees must give reasonable assistance to the person making the inspection.
(5)The books of account of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been inexistence for a period less than eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such books of account shall be kept in good order:
A company must keep its books of account for at least 8 financial years, along with relevant vouchers, in good order, but the Central Government can direct that they be kept for a longer period if an investigation is ordered.
provisoProvided that where an investigation has been ordered in respect of the company under Chapter XIV, the Central Government may direct that the books of account may be kept for such longer period as it may deem fit.
(6)If the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes such provisions, such managing director, whole-time director in charge of finance, Chief Financial Officer or such other person of the company shall be punishable 1*** with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees 2***.
If a managing director, whole-time director, Chief Financial Officer, or other person responsible for complying with these provisions contravenes them, they can be punished with a fine of at least 50,000 rupees but not more than 5 lakh rupees.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. The words “with imprisonment for a term which may extend to one year or” omitted by Act 29 of 2020, s. 24 (w.e.f. 21-21- 2020).
- 2. The words “or with both” omitted by s. 24, ibid. (w.e.f. 21-12-2020).
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.