Can it be said that just because the Accounting Standards are not complied with, the accounts of a company do not present a true and fair picture of its financial position? Is compliance with the Accounting Standards mandatory, or are certain deviations justified? The Supreme Court’s observations in JK Industries v. Union of India,  143 Comp Cas 325 (SC), appeared to have settled the issue in Indian law. The Court had stated, in the context of whether A.S. 22 was ultra vires the Companies Act:
…implementation of the Accounting Standards and their compliance are made compulsory and mandatory by the aforestated sections 211 (3A), (3B) and (3C)… Before introduction of Sub-sections (3A), (3B) and (3C) in Section 211 (w.e.f. 31.10.98), these Standards were not mandatory. Therefore, the companies were then free to prepare their annual financial statements, as per the specific requirements of Section 211 read with Schedule VI. However, with the insertion of Sub-sections (3A), (3B) and (3C) in Section 211 the P&L a/c and the balance-sheet have to comply with the Accounting Standards … non-compliance with these Standards would lead to violation of Section 211 inasmuch as the annual accounts may then not be regarded as showing a "true and fair view”...
A recent decision of the Bombay High Court, however, indicates that the question is still an arguable one. In Re Hindalco,  94 SCL 1 (Bom): MANU/MH/0927/2009, Justice Khanwilkar observed:
On conjoint reading of Sub-sections (3A) and (3B) of Section 211, it necessarily follows that deviation from the accounting standards is permissible subject, however, to compliance of the requirement of disclosure in the profit and loss account and balance sheet of such deviation and the reasons for such deviation and financial effects thereof; in other words, deviation of accounting standards is not wholly prohibited, but is regulated by the provisions of Section 211 of the Act.
In making these observations, the Bombay High Court did not refer to JK Industries. The Bombay High Court’s view is premised on the fact that Section 211(3B) itself states that where the accounting standards are not complied with, the company has to disclose certain particulars (such as the reasons and effect of the deviation). Thus, a consequence of non-compliance is provided for in the Act itself; non-compliance then, under the language of Section 211(3B), would be justified in at least some circumstances. The Supreme Court’s observations are to the effect that compliance with the accounting standards is inherent in “true and fair view” in Section 211(1) itself. The observation that “with the insertion of Sub-sections (3A), (3B) and (3C) in Section 211 the P&L a/c and the balance-sheet have to comply with the Accounting Standards” appears slightly unjustified insofar as Section 211(3B) directly contemplates a situation of non-compliance. Furthermore, the observations of the Bombay High Court also appear to be in tune with the English position on the point, where it has been held, “(the standards) are very strong evidence as to what is the proper standard which should be adopted and unless there is some justification, a departure from this will be regarded as constituting a breach of duty…” (Lloyd Cheyham v. Littlejohn, 1987 BCLC 303). Recent developments in English law on the "true and fair" view have been discussed in this post.
In sum, the Bombay High Court’s decision seems to have reached the right conclusion on principle; however, non-consideration of the Supreme Court’s decision in JK Industries might render it per incuriam and non-authoritative.