2010 (4) TMI 605 - HC - Companies Law

Cognizance of the offence committed by the accused in not complying with the requirement of provision of section 454 of the Act - Held that - From the evidence on record the official liquidator has not established as to who were the directors on the date of winding up of the company by producing the relevant documents, nor the defects cured by respondent Nos. 4, 5 and 2 was not in consonance with section 454(b) and further respondent Nos. 4 and 5 apart from their evidence, have stated that they had appeared before the official liquidator as and when they were called, and this is admitted by PW1. This circumstance also shows that there was justification for respondent Nos. 4 and 5 in not filing the company affairs statement in time and have shown the bona fides, and reasonable cause to excuse. In case of criminal prosecution, the prosecution is required to prove the charge beyond reasonable doubt, in this case the official liquidator has failed to prove the accusation against the respondents. The material produced is not sufficient to hold the respondents guilty under section 454 of the Act. In the circumstances stated above, these respondents cannot be held guilty under section 454 of the Act and accordingly they have to be acquitted. Hence the application is liable to be dismissed.

Issues Involved:
1. Non-compliance with Section 454 of the Companies Act, 1956.
2. Validity of the evidence provided by the official liquidator.
3. Justification for the delay in filing the statement of affairs.
4. Criminal liability under Section 454(5) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Non-compliance with Section 454 of the Companies Act, 1956:
The official liquidator filed a company application under Section 454(5) and (5A) of the Companies Act, 1956, seeking cognizance of the offence committed by the accused for not submitting the statement of affairs within the stipulated time after the winding-up order dated 17-4-2002. The respondents, who were directors of the company, failed to submit the required documents within twenty-one days from the winding-up order, thereby committing an offence punishable under Section 454(5) of the Act.

2. Validity of the evidence provided by the official liquidator:
The official liquidator relied on several exhibits, including annual reports and notices, to establish the case. However, the evidence presented by the official liquidator was found to be insufficient. The annual report of 1994-95 and Form No. 32 from 1991 were not relevant for prosecuting the directors as on the winding-up date, which was 17-4-2002. The official liquidator failed to provide documents showing the directors as on the relevant date of winding up.

3. Justification for the delay in filing the statement of affairs:
Respondent Nos. 4 and 5 filed their statement of affairs, albeit with defects that they later attempted to rectify. Respondent No. 2 filed his statement of affairs after the company application was filed. The respondents argued that the delay was due to the seizure of company records by KSIIDC, which was not disputed by the official liquidator. Additionally, Respondent No. 5 was an additional director whose term ended with the next annual general meeting, further complicating the responsibility for filing the statement of affairs.

4. Criminal liability under Section 454(5) of the Companies Act, 1956:
The court emphasized that proceedings under Section 454 are criminal in nature and require the prosecution to prove the case beyond a reasonable doubt. The official liquidator failed to establish who the directors were on the date of winding up and did not produce relevant documents to support the accusation. The respondents provided reasonable excuses for the delay and demonstrated bona fides by attending meetings and attempting to rectify defects.

Conclusion:
The court concluded that the official liquidator did not provide sufficient evidence to hold the respondents guilty under Section 454 of the Companies Act, 1956. The application was dismissed, and the respondents were acquitted of the charges. The judgment highlighted the necessity for the prosecution to prove the charge beyond a reasonable doubt in criminal proceedings.

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