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Issues Involved:
1. Alleged false statements and omissions in the company's balance-sheet. 2. Whether the sale of machinery was complete or executory. 3. The applicability of mens rea under Section 628 of the Companies Act. Issue-wise Detailed Analysis: 1. Alleged False Statements and Omissions in the Company's Balance-Sheet: The complainant alleged that the accused, being the managing director and directors of the company, made false statements in the balance-sheet for the year 1962 by showing the value of plant and machinery as Rs. 1,51,492, despite having sold the machinery for Rs. 1,65,000. The sale agreement was entered on 1st February 1963, with an advance received, and the sale was completed by 13th February 1963. However, the balance-sheet published on 2nd September 1963 still listed the machinery as an asset. The accused contended that the sale was subject to the approval of the Kerala Financial Corporation, which held the machinery as collateral, and thus, they were obligated to list it as an asset until such approval was obtained. 2. Whether the Sale of Machinery was Complete or Executory: The court examined whether the sale was complete or still executory. The assignment deed (Exhibit D-4) indicated that the company had transferred its rights in the machinery to the Corporation, making it the absolute owner. The company could not transfer the machinery without the Corporation's consent. Letters (Exhibits D-15 and D-16) from the buyer indicated that the sale was pending the Corporation's approval, confirming that the transaction was not complete. The amount received from the buyer was shown as a suspense item in the balance-sheet, and the directors' report mentioned awaiting the Corporation's sanction. 3. The Applicability of Mens Rea under Section 628 of the Companies Act: The court discussed whether mens rea (guilty mind) is necessary for an offence under Section 628. The complainant argued that false statements were made knowingly and with dishonest intent. The court referred to various judgments, including the Supreme Court decision in Nathulal v. State of M.P., which emphasized that mens rea is an essential ingredient of a criminal offence unless explicitly excluded by statute. The court concluded that the prosecution must prove that the false statements were made with dishonest intent. In this case, the evidence did not support such an intention, and the accused were found to have acted without any dishonest motive. Conclusion: The court upheld the acquittal of the accused, affirming that the sale of machinery was not complete due to the pending approval from the Kerala Financial Corporation. The balance-sheet accurately reflected the company's position under the circumstances. The prosecution failed to prove any dishonest intent or material omission by the accused. Consequently, the appeal was dismissed, and the order of acquittal was confirmed.
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