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TMI Blog1973 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... upon them to submit a statement of affairs. The directors replied to say that all the books of the company had been removed in October, 1967, by the C.I.D., Crime Branch, and the books of other associated companies, viz ., M/s. B. Dharam Singh Co., (P.) Ltd., and M/s. B. Dharam Singh Ram Singh, were also removed. The directors prayed for extension of time being granted. The extension was accordingly granted up to 7th January, 1970, which was the maximum period permitted by law. No statement of affairs was filed and the present complaint dated 20th March, 1970, was instituted by the official liquidator. The complaint has remained pending for a number of years. In support of the prosecution case, the official liquidator examined only one witness, Shri Ram Nath, an assistant in his own office, and the defence has examined only one witness, one Shri R. C. Garg, an employee of Shri Jagjit Singh Sawhney. Shri Ram Nath stated that the company was ordered to be wound up on 7th October, 1969, and the company had only two directors, namely, Shri Jagjit Singh Sawhney and Shri Gurcharan Singh Sawhney (accused in this case). Some of the records of the company were with the Crime Branch, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Criminal Procedure Code, but a statement of Shri R. C. Garg, the only defence witness, was recorded on 27th August, 1971, It was stated by this witness that he was working as an accountant of the firm, M/s. Dharam Singh Ram Singh since 1964 and he went to the office of the C.I.D., Crime Branch, Delhi, to inspect the books of this firm also. He had taken notes but there was not enough time to complete the work. The books were returned to the official liquidator on 17th July, 1971, and thereafter, he went to the official liquidator regularly. He explained that the complete inspection was not even now completed because reconciliation of the bank accounts with the entries in the account books was not complete. Another company, M/s. B. Dharam Singh Co. (P.) Ltd., had gone into liquidation under the orders of the Allahabad High Court and there were three partnership firms, M/s. B. Dharam Singh Ram Singh, D. S. Ram Singh and Co. (P) Ltd., and D. R. Motors. The entries in the accounts had also to be reconciled with the accounts of those firms. He said that at least five to six months were necessary to complete this work. In cross-examination, he stated that he had gone to the office of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1959 up to March, 1967. These books are still in the possession of the C.I.D., Crime Branch, since October, 1967. (2) While the C.I.D., Crime Branch, raided this company they removed the books of other associate companies also, i.e. , B. Dharam Singh and Co. Private Ltd., and B. Dharam Singh Ram Singh. These books are still in the possession of the C.I.D., Crime Branch, since October, 1967. Apart from the books of this company, which are needed for making the statement of affairs, the books mentioned in this paragraph are also required for the reasons that these books have inter-connecting entries with the books of this company (under liquidation). (3) After these books were removed by the C.I.D., Crime Branch, we had made a petition before the S.D.M., Darya Ganj, requesting him to allow us to inspect these books off and on for taking out required information for the purpose of income-tax, sales-tax and for the various suits pending in courts. The learned Magistrate had allowed us permission for the inspection of the record only for once a week and that too was granted with the clear directive that we have to give one day's advance notice to the C.I.D., Crime Branch, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of affairs would not have been delayed in the present case. It is not for me to comment on the procedure adopted as I have only to determine whether the accused had a reasonable excuse for not submitting the statement of affairs in time. The provisions of section 454(5A) of the Companies Act, 1956, run as follows : "The court by which the winding-up order is made or the provisional liquidator is appointed, may take cognisance of an offence under sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure, 1898, for the trial of summons cases by Magistrates". In order to determine what the requirements of the section are, it is necessary to refer to what the directors must do, the default of which is made an offence by sub-section (5A). Under sub-section (1) of section 454, a statement of affairs of the company has to be made and submitted to the official liquidator. The statement is required to set out the assets of the company, i.e. , cash balance, the debts and liabilities of the company, the names, residences and occupations of its creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the Crime Branch. Thus, even the official liquidator was unable to proceed against the debtors and found that the claims had become time-barred. It is not understandable how the accused persons could have got these books at an earlier date. I thus find that there is no material at all to come to the conclusion that the excuse of the accused is not reasonable. What is a "reasonable excuse"? I would think that any excuse that would reasonably suggest that the accused could not comply with the provisions of law is a "reasonable excuse". If the books of the company were in a state of disorder and a number of records and files were with the police, it would be most difficult for the accused persons to prepare a statement of affairs. The law does not impose an impossible liability on the directors. What one has to see in such a case is whether a reasonable person placed in the same situation as the directors would be able to complete the statement of affairs without reference to the books with the police. I am unable to find any material to show that the statement of affairs could have been completed without reference to those books. Indeed, the official liquidator has made no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the seizure of the papers by the Police and asked for forms as hereinbefore stated". The case was, therefore, decided on its own peculiar facts, namely, that the accused did not inform the official liquidator of the seizure of some necessary papers for a considerable period. Eventually, the court found extenuating circumstances and imposed a fine of only Rs. 100 on the director concerned. I do not think that the present is at all a parallel case. There is nothing in the report of the case referred to, to show that the account books had been seized. The court, therefore, proceeded on the basis that there was only a handicap in preparing the statement of affairs. I am dealing with a case where the accused found it impossible to prepare the statement because of the seizure of the entire records of the company. In such a situation, it was impossible for the accused to prepare the statement. The reasonableness of the excuse of the accused for not furnishing the statement of affairs would vary from case to case, and would depend entirely on the kind of situation that the directors found themselves when called upon to submit the statement. In one case there may be difficulty and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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