A company is not required to disclose a contingent liability in its accounts if it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.

Arindam Sinha, J.

The petitioners are aggrieved by the contents of letter dated 28th January, 2009 issued by Indian Oil Corporation. The offending portion in that letter, according to the petitioners, is as follows:-

“Subsequent to the re-interview, we have come to know from our Retail/Sales group that, there was undisputed liability of Rs.87,09,420.00 towards Municipal and other taxes to Howrah Municipal Corporation for the financial year 2005-06 which had not been shown in the books of account and audited balance sheet submitted along with the application. Had the amount been shown in the balance sheet, the profit amount would have reflected a negative balance during the reference period 2004-05, 2005-06 and 2006-07.”

2. Mr. Saha Roy, learned advocate appearing on behalf of the petitioners submitted, as required under the advertisement for applications by persons seeking to be selected as dealers of the respondent Oil Company, the petitioners had submitted their accounts duly audited which included the details of balance sheet items for the year ending on 31st March, 2006, copy of which is appearing at page 94 of the writ petition. Mr. Saha Roy submitted, the particulars of liabilities for expenses given thereby were correct particulars which showed Howrah Municipal Corporation tax payable for the year ending on 31st March, 2006, by the petitioners, to be of the sum of Rs.34,428/-. He submitted further, the Howrah Municipal Corporation had issued a demand dated 29th May, 2008 for the sum of Rs.87,09,420/- which was the basis for the impugned letter as would appear from paragraphs 3 and 4 therein reproduced above. The petitioners had stated in paragraph 22 of the writ petition that this was a demand made for the first time and made known to them on the receipt thereof. Hence, according to Mr. Saha Roy, there was no suppression or misrepresentation. The respondent Company had not been able to demonstrate that the duly audited account submitted for the period required was incorrect or false as had been shown to be or pronounced by any Authority including the Income Tax Authority. He therefore submitted, the said letter should be set aside and the respondent Oil Company compelled to appoint the petitioners as their dealer since they were otherwise found eligible to be so appointed.

3. On such submissions being made Ms. Meharia, learned advocate appearing on behalf of the respondent Oil Company had obtained leave to file a supplementary affidavit on behalf of her client, in spite of an affidavit-in-opposition, already filed. The reasons for leave granted to the Oil Company to use a supplementary affidavit were recorded in order dated 23rd December, 2015. Briefly, the reasons were that there was an interim order dated 7th August, 2009 made in which there were findings to the effect that the question for adjudication that remain in the writ petition, for it to be maintained and kept in the file, was regarding whether or not the private respondent was eligible to be appointed. Pursuant to such interim order the Oil Company had filed its affidavit-in-opposition. However, the petitioner having preferred an appeal, was successful in obtaining order dated 27th July, 2010 by which the findings in the interim order were held as could not be considered to be conclusive. In such circumstances, this Court had allowed the Oil Company to file supplementary affidavit.

4. Upon the supplementary affidavit having been filed, Mr. Saha Roy was once again invited to make his submissions. He submitted, the requirement for a candidate to be eligible for selection by the Oil Company included, inter alia, the candidate, if a company duly registered under the Companies Act, 1956, to furnish certificate from a Chartered Accountant to the effect that such company was a profit making one for the years ending 2004-05, 2005-06 and 2006-07. The certificate was to be issued on the basis of audited accounts. The petitioner no.1, being a company, furnished su