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TMI Blog1974 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... sed and punish them according to law. During the pendency of this complaint before the learned single judge question arose as to on whom the burden lies to show that there was no reasonable excuse for the respondent for not filing the statement of affairs of the company with -in the prescribed time. Rangarajan J. considered that the matter was of great importance which was not only raised in a number of prosecutions which are pending but rather also likely to be raised in future in this court and referred the following question to the Chief Justice for being referred to the larger Bench "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 in respect of which he is being prosecuted lies upon the prosecution? " This is how the matter has come up before us. As the complaint is still pending and as this Bench is only called upon to answer the question referred it is unnecessary to deal with other facts as they are not relevant. Section 454(1) provides that where the court has made a winding-up order or appointed the official liquidator as provisional liquidator, unless the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is apparent that the best persons to depose the information about the assets, debts and liabilities of the company would be the persons dealing with it at the relevant time and the legislature advisedly thought of making it their statutory duty to submit the statement of affairs rather than leave it to the official liquidator to ferret out this information on his own with all the limitations. A similar provision like section 454 was to be found in the English Act known as Companies (Winding up) Act, 1890. In In re New Par Consols Ltd. [1898] 1 Q.B. 573, 576 (Q.B.) Lord Russell of Killowen C.J., referring to section 7 which provides for statements of affairs to be made out and verified and submitted to the official receiver, observed: "It is perfectly clear that that is an essential part of the proceedings in the winding-up an essential part without which the whole machinery of the winding up must be most certainly imperfect...... It is clear, upon looking at this section, that the object is to get at the persons who have the information which the court requires for the purposes of the winding-up". Rules 124 to 133 of the Companies (Court) Rules, 1959 (hereinafter cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blished. Now what are the ingredients of offence under section 454(5) ? The ingredients may be said to be satisfied if it is shown that any person,-- ( a )without reasonable excuse, ( b )makes default in complying with any of the requirements of this section. It will be seen that a mere making of default in complying with any of the requirements of section 454 does not constitute an offence because if that were so, the words "without reasonable excuse" would be redundant. It is apparent that qualification of a default being without reasonable excuse is a necessary constituent of an offence. So far there was not much of difference between two opposite counsel. The dispute arises on the question on whom is the onus to prove that a director has made a default without reasonable excuse. Mr. Luthra, learned counsel for the accused, maintains that it is on the prosecution, while Mr. Andley, appearing for the official liquidator, maintains that this onus is on the accused to show that he had a reasonable excuse for making default. Rangarajan J. in his referring order has accepted the contention of Mr. Andley and expressed his view that the burden of proving reasonable excuse for not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of the absence of the use of the word "knowingly or wilfully" and also because the object of the statute was such that legislature must have intended to rule out mens rea and to have created absolute liability. The present is a case where the finding of default being "without reasonable excuse" would have to be given by the court before holding a person guilty; the real question being as to on whom does the onus lie ? It was not suggested nor indeed could it be that there is any statutory presumption under the Act, nor has the Act in so many words placed burden of proof on the accused to show that he had reasonable excuse to make a default. The language of section 454(5) also does not make a mere default an offence. Now, when sub-section (5A) requires the court to take cognizance of an offence under sub-section (5) it is obvious that the court will have to consider whether the various ingredients of an offence under subsection (5) of section 454 of the Act have been made out or not. The court cannot come to a finding of guilt unless it comes to the conclusion that a person has made the default without a reasonable excuse. Rangarajan J., however, has expressed his view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han by providing a proviso to the main part of the section and in that case section 454(5) should have read as : "if any person makes a default in complying with any of the requirements of this section he shall be punishable; Provided that if there was a reasonable excuse for making default in complying with any of the requirements of this section no offence would be deemed to have been committed". Had the sub-section been framed as above, it could legitimately have been argued that all that the official liquidator has to prove is that the default has been committed in complying with the requirements of section 454, and thereafter, if a director pleads any exception to bring his case within the proviso the burden to prove that would be on him. But the phraseology of the sub-section (5), in our opinion, however, does not support this contention which was accepted by Rangarajan J. One of the reasons which seems to have weighed with Rangarajan J. to take this view appears to be the apparent difficulty which may be faced by the official liquidator if he was called upon to show the absence of reasonable excuse. It appears to us that the very provisions which were referred to by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out that section 106 is an exception to section 101 which lays down that whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist and referred to illustration ( a ) which says that if A desires a court to give judgment that B shall be punished for a crime which A says B has committed, A must prove that B has committed the crime and went on to observe: "That section 106 of the Evidence Act does not abrogate the well-established rule of criminal law that except in very exceptional classes of cases the burden that lies on the prosecution to prove its case never shifts and section 106 is not intended to relieve the prosecution of that burden. On the contrary, it seeks to meet certain exceptional cases where it is impossible, or disproportionately difficult, for the prosecution to establish facts which are especially within the knowledge of the accused and which can be proved by him without difficulty or inconvenience. But when knowledge of such facts is equally available to the prosecution if it chooses to exercise due diligence, they cannot be said to be especially with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that the returned candidate did not believe the statement to be true or which he believed it to be false, the onus should be on him because those facts would be within his special knowledge, and the election-petitioner should not be asked to prove the negative, i.e. , the absence of belief of the returned candidate. The Supreme Court, however, in T. K. Gangi Reddy v. M. C. Anjaneya Reddy [1960] 22 E.L.R. 261, 267 (S.C.) did not accept this approach and observed : "Burden of proof has two distinct meanings, viz ., ( i ) the burden of proof as a matter of law and pleadings, and ( ii ) the burden of proof as a matter of adducing evidence. Section 101 deals with the former and section 102 with the latter. The first remains constant and the second shifts. In the present case, the burden of proof, in the first sense, certainly lies on the first respondent, but he has examined himself and has specifically stated in the evidence that he has neither committed the murder nor has he been guilty of any violent acts in his political career. He also placed before the court the circumstances, namely, the situation created by the murder of Narayanaswamy and the possible impact of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was without just cause. In other words, even if the wife, where she is the deserting spouse, does not prove just cause for her living apart, the petitioner-husband has still to satisfy the court that the desertion was without just cause". Their Lordships in the above case accepted that the law in India was the same as laid down in Dunn v. Dunn [1949] P. 98; [1948] 2 All E.R. 822 (C.A.), where in dealing with a petition for divorce on the ground of wife's desertion without just cause, Denning L.J. said : "The fallacy lies in a failure to distinguish between a legal burden of proof laid down by law and a provisional burden raised by the state of evidence. The burden he (counsel for the husband) said was on her to prove just cause (for living apart). The argument contains a fallacy which has been put forward from time to time in many branches of the law. The fallacy lies in a failure to distinguish between a legal burden of proof laid down by law and a provisional burden raised by the state of evidence...... The legal burden throughout this case is on the husband, as petitioner, to prove that his wife deserted him without cause. To discharge that burden, he relies on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prescribed time and that no extension has been granted, and that facility for preparation of statement was available, the same would, if accepted by the court, shift the onus on to the accused to satisfy the court that in spite of these circumstances he had a reasonable excuse for making the default, and to show the circumstances justifying his default. It appears to us that if the distinction between a burden of proof as a matter of law and burden of proof as a matter of evidence, as pointed out in T. K. Gangi Reddi v. M. C. Anjaneya Reddy [1960] 22 ELR 261 (SC) was kept in view, the question of onus of proof in prosecution under section 454(5) would really present no difficulty and would be automatically resolved on the facts of each case. We thus do not envisage any practical much less insuperable difficulty in the way of the prosecution if the question of onus of proof in a prosecution under section 454(5) of the Act is dealt with on the lines indicated above. Rangarajan J. made a reference to the judgment of Prakash Narain J. in Official Liquidator, Globle Associates (P.) Ltd. v. F.C. Mehta (Cr. 0. No. 17/ 69 decided on September 7, 1970). In that case his L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l thus be seen that that case was decided on its own facts and no question of onus of proof arose. One of the reasons for departing from the well-established rule of interpretation that the burden in a criminal case is always on the prosecution is stated to be the object of the Act which is to force a person concerned to file the statement as to affairs of the company with a view to facilitate the work of the official liquidator to be able to manage the company's affairs well and to realise the amount due and safeguard the assets of the company. No doubt, the object is a laudable one. But that by itself is not decisive of the question more especially when the legislature has not specifically placed the burden on the accused or created a statutory presumption and it would not be correct to read this by implication. In Nathulal v. State of Madhya Pradesh A.I.R. 1966 S.C. 43 , it was observed : ".....but it is a sound rule of construction adopted in England and also accepted in India to construe a statutory provision creating an offence in conformity with the common law rather than against it unless the statute expressly or by necessary implication excluded mens rea . The me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds were seized. (2) This section shall apply to gold, gold manufactures, diamonds and other precious stones, cigarettes and cosmetics and any other goods which the Central Government may, by notification in the Official Gazette, specify in this behalf. (3) Every notification issued under sub-section (2) shall be laid before both Houses of Parliament as soon as may be after it is issued". If therefore, Parliament wanted that mere making of default would be an offence and that onus was on the accused to show that he had a reasonable excuse for the same, section 454(5) of the Act would have been differently worded. Admittedly, the legislature has not so provided and we do not find any compelling reasons to imply and place that onus on the accused. As a result we hold that in a prosecution under section 454(5) and (5A) the burden of proving that the accused without reasonable excuse made a default is on the complainant in the first instance. The question of onus will have to be decided by keeping the distinction between legal burden of proof laid down by law and a provisional burden raised by the state of evidence as explained by us in detail above. The question is answered acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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