2007 (11) TMI 415 - HC - Companies Law

Winding up Statement of affairs to be made to official liquidator - Held that - One should not lose sight of the fact that after 12 years of closure of the company and death of the main promoter as well, as professionals associated with the company wherein all the staff including senior officials having left not only the company but also the place where the company is situated it was very difficult for accused Nos. 2 and 3 or even accused No. 5 to furnish all these informations. The court, there fore is of view that whatever compliance was made by the accused persons till this date is considered to be sufficient compliance and they are not to be burdened with any further agonies by continuing these criminal proceedings against then. Since the court has come to the conclusion that this is not a case where a view can be taken that the default was committed without reasonable excuse. Hence, there is no question of awarding any sentence. Even when the court is satisfied that there is a reasonable excuse, the court takes a lenient view while awarding the fine. The court, therefore, holds that interest of justice would better be served if accused Nos. 2, 3 and 5 are punished with a fine of ₹ 5,000 each for late filing of the statement of affairs. Accordingly, accused Nos. 2, 3 and 5 are punished with a fine of ₹ 5000 each. The amount of fine shall be deposited with the official liquidator within four weeks from today.

Issues Involved:
1. Default under Section 454(5) of the Companies Act, 1956.
2. Submission of the statement of affairs.
3. Death and resignation of accused directors.
4. Compliance with statutory obligations.
5. Reasonable excuse for non-compliance.
6. Penalty for late filing.

Issue-wise Detailed Analysis:

1. Default under Section 454(5) of the Companies Act, 1956:
The official liquidator filed a criminal complaint under Section 454(5) of the Companies Act, 1956, against the accused directors for failing to submit the statement of affairs within the stipulated time. The court recognized that the accused persons had not filed the required statement of affairs within the 21-day period as mandated by the Act.

2. Submission of the Statement of Affairs:
The court noted that the ex-directors were legally bound to file the statement of affairs within 21 days from the date of the winding-up order, which was January 20, 2000. Despite notices issued on February 10, 2000, the accused failed to comply. The official liquidator emphasized the importance of this document for the liquidation process.

3. Death and Resignation of Accused Directors:
The court acknowledged the deaths of accused Nos. 1, 4, 6, and 10, and the resignation of accused No. 7 before the winding-up order. Consequently, these accused were discharged from the proceedings. The court also noted that accused Nos. 8, 9, and 11 were nominee directors and not actively involved in the management.

4. Compliance with Statutory Obligations:
Accused Nos. 2, 3, and 5 provided affidavits explaining their inability to submit the statement of affairs due to various reasons, including the death of key personnel and non-availability of records. The court considered these explanations and the efforts made by the accused to comply with the statutory obligations.

5. Reasonable Excuse for Non-compliance:
The court evaluated the reasons provided by the accused for the delay in filing the statement of affairs. It was noted that the main promoter and key personnel had passed away, and the company had been closed for 12 years, making it challenging to gather the necessary information. The court found these reasons to constitute a reasonable excuse for the delay.

6. Penalty for Late Filing:
Despite recognizing the reasonable excuse, the court held that the accused had committed a default by filing the statement of affairs 11 months and 9 days late. Under Section 454(5), the court could impose a penalty of imprisonment or a fine. However, considering the circumstances, the court opted for a lenient approach and imposed a fine of Rs. 5,000 each on accused Nos. 2, 3, and 5.

Conclusion:
The court concluded that substantial compliance had been made by the accused and continuing the proceedings was unnecessary. The court imposed a fine of Rs. 5,000 each on accused Nos. 2, 3, and 5 for late filing of the statement of affairs. The other accused, who were either deceased, resigned, or nominee directors, were exonerated from the proceedings. The criminal case was accordingly disposed of.

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