Vibrant Textiles Limited is preparing its Board's Report for the financial year 2022-23. During internal review, the Company Secretary points out…

Directors' Responsibility Statement [Section 134(5) of the Companies Act, 2013]: The Board's Report of every company is required to include a Directors' Responsibility Statement. Under Section 134(5), this Statement must affirm, among other matters, that : in the preparation of the annual accounts, the applicable accounting standards had been followed, along with proper explanation relating to material departures, if any. the directors had selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the company as at the end of the financial year and of the profit or loss of the company for that period. the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities. the directors had prepared the annual accounts on a going-concern basis. the directors had laid down internal financial controls to be followed by the company, and that such internal financial controls were adequate and were operating effectively. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws, and that those systems were adequate and operating effectively. Examination of the Managing Director's View: The Managing Director's view that the Directors' Responsibility Statement is merely a formal, boilerplate declaration is not correct. Section 134(5) expressly requires the Statement to substantively affirm specific matters, like that of Vibrant Textiles Limited, the adequacy and effective operation of internal financial controls, as well as the adequacy and effective operation of systems to ensure compliance with all applicable laws. These are not optional or generic affirmations. They are mandatory statutory requirements, and the directors must have a real, substantive basis for making them, since incorrect statements in this regard can expose directors to liability. Accordingly, the Company Secretary's position is the correct one, and the Managing Director's view is legally untenable.