2012 (10) TMI 736 - HC - Companies Law

Violation / breach of Section 454 of the Act by non submission of Statement of Affairs of the company in liquidation Appellant submitted that no case / charge of violation / breach of Section 454 of the Act can be made without service of a notice under Rule 124 of the Companies (Court) Rules, 1959 and which has not been served on the appellant. From the complaint under Section 454(5) of the Act, it is shown that it is the admitted position that the notices though issued to the appellant, were received back undelivered. Held that - Section 454(2) having created two categories and having made the duty, to submit and verify a statement on the first category, to be automatic and not dependent on any direction of the Court or a notice from the Official Liquidator, mere use of the word are along with the words have been in Clause (a) of Sub-section (2) should not be allowed to dilute the obligation placed on the first category of persons aforesaid to submit Statement of Affairs within the time prescribed in Sub-section (3). The complaint under Section 454(5) against the appellant has been filed in his capacity as a Director of the company in liquidation at the relevant time i.e. falling in the first category of persons aforesaid and thus the obligation of the appellant to submit the Statement of Affairs was not dependent on the service of any notice. That being the position, the argument of the senior counsel for the appellant that no notice was served on the appellant is of no avail The persons under Section 454 of the Act who are required to submit the Statement of Affairs cannot create circumstances where neither can notice be served on them nor do they file Statement of Affairs. The appellant has all defences open to him in the prosecution and no case for discharging the appellant as sought is made out - no merit in this appeal, the same is dismissed. We refrain from imposing any costs.

Issues Involved:
1. Whether the appellant could be discharged from criminal proceedings under Section 454 of the Companies Act, 1956.
2. Whether the appellant had ceased to be a Director of the company in liquidation.
3. Whether the requisite notice under Rules 124 and 125 of the Companies (Court) Rules, 1959 was served on the appellant.

Issue-wise Detailed Analysis:

1. Discharge from Criminal Proceedings:
The appellant sought discharge from criminal proceedings initiated under Section 454 of the Companies Act, 1956 for non-submission of the Statement of Affairs of the company in liquidation. The learned Company Judge dismissed the application for discharge, citing that there is no provision for discharge once criminal proceedings have been initiated and cognizance taken. However, the High Court observed that the power of discharge or quashing vests in the High Court under Section 482 of the Code of Criminal Procedure, 1973. The Court acknowledged that a Judge of the High Court exercising power as a Company Court has the authority to discharge or quash a prosecution if a case is made out. Despite this, the Court found no case for discharge or quashing in the present facts and refrained from giving a final opinion on this aspect.

2. Status as Director:
The appellant contended that he had ceased to be a Director of the company in liquidation since 1997 and thus could not be held responsible for the obligations of a Director. The High Court noted that the question of whether the appellant had ceased to be a Director is a matter of evidence and cannot be adjudicated under Section 482 Cr.P.C. The appellant failed to provide any documentary evidence, such as a passport, to support his claim of having left the country. The Court agreed that this question needs to be decided in the prosecution if it continues.

3. Service of Notice under Rules 124 and 125:
The appellant argued that no case of violation of Section 454 could be made without the service of a notice under Rule 124 of the Companies (Court) Rules, 1959, which had not been served on him. The High Court examined the provisions of Section 454 and Rule 124. It was noted that Section 454(2) creates two categories of persons required to submit the Statement of Affairs: those who are officers of the company at the relevant date (automatic duty) and those who may be required to submit the statement by the Official Liquidator subject to the court's direction (dependent on notice). The Court concluded that the obligation for the first category, which includes Directors, Managers, Secretaries, and Chief Officers at the relevant time, is automatic and not dependent on the service of notice. The Court referenced various judgments supporting this interpretation, including decisions from the High Courts of Andhra Pradesh, Kerala, and Delhi.

The complaint against the appellant was filed in his capacity as a Director of the company in liquidation, falling into the first category of persons with an automatic obligation to submit the Statement of Affairs. Therefore, the appellant's argument that no notice was served was deemed irrelevant. Additionally, the appellant had sought time to file the Statement of Affairs after summons and bailable warrants were issued, which further undermined his claim of not receiving notice.

Conclusion:
The High Court dismissed the appeal, finding no merit in the appellant's arguments. The Court held that the appellant's obligation to submit the Statement of Affairs was not contingent on the service of notice, and the appellant's defenses could be addressed in the prosecution. The appeal was dismissed without imposing any costs.

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