1974 (1) TMI 46 - HC - Companies Law

Summary

Issues Involved:
1. Burden of proof in prosecution under Section 454(5) of the Companies Act, 1956.
2. Interpretation of "without reasonable excuse" in Section 454(5) of the Companies Act, 1956.
3. Application of mens rea in the context of Section 454(5) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Burden of Proof in Prosecution under Section 454(5) of the Companies Act, 1956:
The primary issue addressed in the judgment is whether in a prosecution under Section 454(5) of the Companies Act, 1956, the burden of proving that the accused had no reasonable excuse for making the default lies upon the prosecution. The court held that the burden of proving that the accused, without reasonable excuse, made a default is on the complainant in the first instance. The court emphasized that the initial onus is on the prosecution to prove the ingredients of the offence, which includes showing that the accused made the default without reasonable excuse. The court clarified that the prosecution must establish prima facie evidence that the statement of affairs was not filed within the prescribed time, no extension was sought or granted, and the necessary books of the company were available for inspection by the concerned director. Once these facts are established, the onus shifts to the accused to justify his conduct and show that he had a reasonable excuse for making the default.

2. Interpretation of "Without Reasonable Excuse" in Section 454(5) of the Companies Act, 1956:
The court analyzed the phrase "without reasonable excuse" as a necessary constituent of an offence under Section 454(5). The court noted that a mere making of default does not constitute an offence; it must be shown that the default was made without reasonable excuse. The court rejected the argument that the burden to prove the absence of reasonable excuse should be on the accused. The court reasoned that the legislature has not specifically placed the burden on the accused nor created a statutory presumption to that effect. The court further explained that the official liquidator need only prove that notice was sent to the concerned director, the prescribed time lapsed, no extension was sought, and the necessary books were available for inspection. These facts, conveniently available to the official liquidator, would prima facie prove that the director made the default without reasonable excuse.

3. Application of Mens Rea in the Context of Section 454(5) of the Companies Act, 1956:
The court addressed the relevance of mens rea (guilty mind) in the context of Section 454(5). The court held that mens rea is not excluded for contraventions of the provisions of the Companies Act, as the use of the words "knowingly" or "willfully" typically indicates the consideration of mens rea. However, the court clarified that Section 454(5) does not involve a guilty mind because the offence is not the mere making of default but making a default without reasonable excuse. The court emphasized that the language of Section 454(5) itself shows that mere default is not penal but one without reasonable excuse. Therefore, the court concluded that the question of mens rea has no relevance to the matter before it, as the finding of default being "without reasonable excuse" would have to be given by the court before holding a person guilty.

Conclusion:
The court concluded that in a prosecution under Section 454(5) and (5A) of the Companies Act, 1956, the burden of proving that the accused made a default without reasonable excuse lies on the complainant in the first instance. The question of onus will be decided by keeping the distinction between the legal burden of proof laid down by law and a provisional burden raised by the state of evidence. The matter was remanded back to the learned single judge for disposal in accordance with the law and on merits in light of the court's answer.