Reading: Two directors of a private limited company in India are facing a dispute. Both hold equal shares (50% each). One director has taken control of all financial documents and bank accounts, setting up a new company with similar business activities. He diverted the original company’s business to the new entity. The financial statements for the year 2014-2015 were not signed or approved by the other director, yet an income tax return was filed with the first director’s signature and the auditor’s report. Can the second director sue the auditor in this situation?

Two directors of a private limited company in India are facing a dispute. Both hold equal shares (50% each). One director has taken control of all financial documents and bank accounts, setting up a new company with similar business activities. He diverted the original company’s business to the new entity. The financial statements for the year 2014-2015 were not signed or approved by the other director, yet an income tax return was filed with the first director’s signature and the auditor’s report. Can the second director sue the auditor in this situation?

Last updated: August 25, 2025 1:04 pm

Apni Law

2 years ago

Law Forum › Category: Corporate › Two directors of a private limited company in India are facing a dispute. Both hold equal shares (50% each). One director has taken control of all financial documents and bank accounts, setting up a new company with similar business activities. He diverted the original company’s business to the new entity. The financial statements for the year 2014-2015 were not signed or approved by the other director, yet an income tax return was filed with the first director’s signature and the auditor’s report. Can the second director sue the auditor in this situation?

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Apni Law Staff asked 2 years ago

Two directors of a private limited company in India are facing a dispute. Both hold equal shares (50% each). One director has taken control of all financial documents and bank accounts, setting up a new company with similar business activities. He diverted the original company’s business to the new entity. The financial statements for the year 2014-2015 were not signed or approved by the other director, yet an income tax return was filed with the first director’s signature and the auditor’s report. Can the second director sue the auditor in this situation?

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Apni Law Staff answered 2 years ago

The second director may have grounds to sue the auditor, as the auditor’s report was filed without the required signatures and approvals. The auditor has a duty to ensure compliance with accounting and legal requirements, including proper authorization of financial statements. The second director could argue that the auditor failed in this duty, potentially leading to financial losses.