1970 (6) TMI 42 - DSC - Companies Law

Issues Involved:
1. Fraudulent trading under section 332(3) of the Companies Act, 1948.
2. False written statement of account under section 84 of the Larceny Act, 1861.
3. Attempt to fraudulently induce persons to subscribe for securities under section 13(1)(a) of the Prevention of Fraud (Investments) Act, 1958.
4. Admissibility of answers given under section 167(2) of the Companies Act, 1948, in subsequent criminal proceedings.

Issue-wise Detailed Analysis:

1. Fraudulent Trading under Section 332(3) of the Companies Act, 1948:
The first count alleged that the defendants, as directors of Rolls Razor Ltd., were knowingly parties to carrying on the business of Bylock Electric Ltd. with intent to defraud its creditors between May 6, 1963, and July 1, 1964. The trial concluded with the acquittal of both defendants on this charge.

2. False Written Statement of Account under Section 84 of the Larceny Act, 1861:
The second and third counts alleged that the first and second defendants, respectively, as directors of a public company, concurred in making a false written statement of account. Specifically, the balance sheet of Rolls Razor Ltd. as of December 31, 1963, falsely stated the value of subsidiary companies in excess of lb213,000. Both defendants were acquitted on these charges as well.

3. Attempt to Fraudulently Induce Persons to Subscribe for Securities under Section 13(1)(a) of the Prevention of Fraud (Investments) Act, 1958:
The fourth count alleged that both defendants attempted to fraudulently induce persons to offer to enter into agreements for subscribing for non-voting "A" ordinary shares of 1s. each in Bylock Electric Ltd. The trial concluded with the acquittal of both defendants on this charge.

4. Admissibility of Answers Given under Section 167(2) of the Companies Act, 1948, in Subsequent Criminal Proceedings:
The central issue reported in the judgment was whether the answers given by the first defendant during an examination under section 167(2) of the Companies Act, 1948, were admissible in subsequent criminal proceedings. The judge granted leave to admit these answers, reserving the statement of reasons until June 9, 1970.

The judge began by outlining the statutory provisions, particularly section 167(2), which allows inspectors to examine officers and agents of a company on oath but does not specify the use of such answers in subsequent proceedings. Historical context was provided, citing the lack of uniform practice and authoritative rulings on this issue before 1967.

In 1967, section 50 of the Companies Act, 1967, explicitly allowed answers given under section 167 to be used in evidence against the person. The defense argued that answers given before the 1967 Act were inadmissible and that the Act did not apply retrospectively. The prosecution contended that the answers were admissible under the unamended Act and that the 1967 Act applied to all trials held after its enactment.

The judge sided with the prosecution, stating that statutory provisions like those in the Companies Act have historically been interpreted to allow answers from lawful examinations to be used in evidence, as seen in the precedent set by Reg. v. Scott [1856] and other cases. The judge found no sufficient reason to exclude the evidence in the exercise of discretion.

The judge also addressed the argument that section 167(4), which explicitly allows the use of examination notes in evidence, implied that section 167(2) did not. The judge rejected this argument, stating that the history of the provisions and judicial interpretations supported the admissibility of such evidence.

In conclusion, the judge held that the answers were admissible under the unamended Act and, alternatively, under the 1967 Act, even though the examination occurred before the Act was passed. The judge emphasized that changes in procedural law and evidence rules apply retrospectively, citing Lord Blackburn's authority in Gardner v. Lucas [1878].

The judge dismissed the defense's argument that the evidence should be excluded in the exercise of discretion, noting that the acquittal of the defendant rendered this point moot.

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