1981 (11) TMI 140 - HC - Companies Law

Summary

Issues:
Failure to submit statement of affairs under section 454 of the Companies Act, 1956 without reasonable excuse.

Detailed Analysis:
The official liquidator filed a criminal complaint against three accused individuals, who were directors and manager of a company in liquidation, for failing to submit the statement of affairs of the company as required under section 454 of the Act. The accused denied any deliberate default, citing lack of possession of necessary documents and belief that the official liquidator would provide access to the records. The prosecution presented evidence through witnesses and exhibits, while the accused individuals also testified and submitted their own exhibits.

The central issue in this case was whether the accused persons had committed a default in submitting the statement of affairs without reasonable excuse, and whether they could be relieved under section 633(1) of the Act. The defense argued that the accused had no access to the documents at the time of the court's directive and that the official liquidator did not make the records available to them promptly. On the other hand, the liquidator contended that the accused showed indifference and should not be entitled to relief under the Act.

The court analyzed section 454(5) of the Act, emphasizing that the default must be without reasonable excuse for it to be punishable. Referring to precedents, the court highlighted that the burden of proving the absence of a reasonable excuse lies with the prosecution. The court also considered what constitutes a reasonable excuse, noting that if the accused could not comply with the law due to circumstances beyond their control, it could be considered a reasonable excuse.

Upon reviewing the evidence, the court found that the accused had made efforts to retrieve the company's records but faced obstacles such as the records being in the custody of the Revenue Divisional Officer. The official liquidator only recovered the records after a significant delay, and no notice was issued to the accused informing them of the availability of the documents for statement preparation. The court concluded that the prosecution had not proven beyond reasonable doubt that the accused had no reasonable excuse for the failure to submit the statements, thus acquitting the accused individuals based on the benefit of reasonable doubt.

In conclusion, the court's judgment focused on the requirement of proving a default without reasonable excuse under section 454 of the Companies Act, highlighting the burden on the prosecution to establish this element. The court considered the circumstances surrounding the accused individuals' access to the company's records and found that they had a reasonable excuse for their failure to submit the statements, leading to their acquittal.