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TMI Blog1984 (4) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... Winding-up Petition No. 37 of 1977. By an order dated October 11, 1978, the company was ordered to be wound up and the official liquidator attached to this court was appointed the liquidator of the company. At all times material to this complaint, the accused were on the board of directors of the company, accused No. 2 being the managing director. On the appointment of the official liquidator as the liquidator of the company under the winding up order of October 11, 1978, a notice dated November 4, 1978, was issued to the accused calling upon them to submit a statement of affairs of the company in the prescribed form, verified by an affidavit, as required by sub-section. (1) of section 454 of the Act read with rule 124 of the Companies (Court) Rules, 1959 (hereinafter referred to as "the Rules"), framed under sub-sections (1) and (2) of section 543 of the Act. After the service of the notice, accused No. 1, by letter dated November 16, 1978, requested for extension of time of three months for submitting the statement of affairs. The liquidator extended the time from time to time up to January 31, 1979, but the accused failed to submit the statement of affairs of the company. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry") Sub-section (5) provides the punishment in case of default while sub-section (5A) confers jurisdiction oh the winding-up court to try the offence as per the procedure laid down for the trial of summons cases by magistrates under the Cr. PC, 1898. The Cr. PC, 1898, came to be repealed by section 484 of the Cr. PC, 1973. Chapter XX of the new Code comprising sections 251 to 259 lays down the procedure to be followed by magistrates in the trial of summons cases. Rules 124 to 134 concern the filing of the statement of affairs of the company by the persons mentioned in sub-section (2) of section 454 of the Act. Rule 124 provides that a notice by the official liquidator requiring any of the persons mentioned in sub-section (2) of section 454 to submit and verify a statement of affairs of the company shall be in Form No. 55 and shall be served by the official liquidator as soon as may be after the order of winding-up or the order appointing the official liquidator as provisional liquidator is made. Rule 127 provides that the statement as to the affairs of the company shall be submitted in Form No. 57 to the official liquidator within the prescribed time or within such extended time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdered to be separated by my order dated February 13, 1984. On accused Nos. 1, 2 and 4 entering a plea of guilty, they are liable to be convicted under section 252 of the Code. However, since accused No. 3 claimed to be tried, the prosecution was directed to lead evidence. The official liquidator, Shri R. R. Gupta, P.W. 1, deposed that after the company was ordered to be wound up on October 11, 1978, his pre-decessor-in-office had sent registered notices to all the accused persons for filing their statements of affairs of the company in the prescribed form the notices were served on accused Nos. 1 to 3 while the notice on accused No. 4 was returned unserved. He further deposed that he had received a telegram from accused No. 3 stating that he had not attended any of the meetings of the board of directors for the last three years and had no know-edge regarding the affairs of the company. Under cross-examination, the) official liquidator admitted that the minute book disclosed that the accused No. 3 had remained absent at the board meetings, from June 30, 1974. He, however, stated that on each occasion leave of absence was recorded but he was not able to state whether leave of abse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingredients, namely, absence of reasonable excuse and the factum of default in complying with the requirements of the section within the prescribed time must be established to sustain a conviction under sub-section (5) of section 454 of the Act. Mere default in complying with the requirements of sub-section (1) of section 454 is not punishable under sub-section (5) of that section. If such a view is taken, the words, "without reasonable excuse" would be rendered redundant. It is well-settled that a penal provision must be strictly construed and if two constructions are reasonably possible, the one favourable to the accused must be adopted. The court must always see that the person to be penalised comes fairly and squarely within the language of the statute which makes his act an offence. The language of sub-section (5) of section 454 clearly states that a person who without reasonable excuse makes a default in complying with any of the requirements of the section shall be liable to punishment thereunder. Therefore, the prosecution must prove ( i ) that the accused is one of the persons who is statutorily liable to submit a statement of affairs; ( ii ) that he was called upon to com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of reasonable excuse is cast on the official liquidator, it will throw an onerous and insuperable burden on the official liquidator, the Full Bench observed at page 506 as under : "It appears to us that the official liquidator need only prove that notice was sent to the concerned director to submit a statement of affairs, that the prescribed time has lapsed and that no extension has been sought for from him or from the court and that the necessary books of the company were available for inspection by the concerned director. These are facts which are conveniently available to the official liquidator and if he shows these facts prima facie he would have proved that the director has, without reasonable excuse, made the default in complying with the requirements of section 454. In such a case it would obviously be for the concerned director to prove circumstances to justify his conduct and to show that he had a reasonable excuse in making the default." The last sentence refers to the shifting of onus, once the balance has titled in favour of the prosecution on proof of the primary facts indicated by the court. Once the primary facts are proved by the prosecution, the onus shif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r directors suo motu without any such request on the part of accused No. 3. Immediately after accused No. 3 was served with a notice to submit a statement of affairs as required under section 454 of the Act, he informed the official liquidator that he had not attended any of the meetings of the board of directors during the last three years and had no knowledge regarding the assets and affairs of the company. Notwithstanding this telegram, the official liquidator did not seek any orders from the court specifically to prosecute the said accused along with the other directors of the company for non-compliance with the requirements of that provision. The accused has in his statement recorded under section 313 of the Code stated that except for the first initial meetings of the board of directors held in Bombay he had not attended any of the later meetings. In addition to the said statement, he has also filed a detailed written statement dated March 26, 1984, wherein he says that he hardly attended six meetings in 1973-74 and, thereafter, he remained absent without seeking leave of absence throughout. He also states that he had submitted his resignation from the directorship of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier, the prosecution must prove both the ingredients of sub-section (5) of section 454 of the Act to sustain a conviction. There is no doubt that accused No. 3 has not submitted the statement of affairs of the company within the prescribed period. The question is whether he defaulted in filing the statement of affairs without reasonable excuse. The expression "reasonable excuse" means an excuse which a reasonable person considers just and acceptable in the circumstances of the case, that is, which appeals to the reason of a reasonable man. In other words, the excuse must be such as may appear to be probable in the facts and circumstances of the case to a prudent, and not to a gullible person The evidence on record clearly shows that he did not attend any of the board meetings after March 28, 1974. That was his stand from the very beginning as is evidenced from the telegram sent immediately on receipt of notice under rule 124 of the Rules. The statement of affairs of the company has to be filed in prescribed Form No. 57. A bare perusal of the form shows that only a person having intimate knowledge about the affairs of the company would be able to furnish the host of information r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hah, for the said accused on the question of sentence. Shri Shah submitted that the ends of justice would be met if a warning or admonition is administered to the accused. In the first place, the pendency of the appeal in which no stay was granted against the operation of the winding-up order did not entitle the accused to think that they were absolved of their statutory obligation under section 454 of the Act merely because they hoped to succeed in the appeal. There was no valid reason to wait after the extended time was over on January 31, 1979. The appeal was dismissed for default on February 16, 1981, and even thereafter no attempt was made for having it restored to file. This shows total indifference. The Federal Bank forfeited the sum of Rs. 25,000 because the accused were not able to honour their commitments. They had ample time to get the statement of affairs prepared even before Shri Vyas expired. The interim statement filed on Novermber 28, 1978, was under rule 130 of the rules and had nothing to do with the statement of affairs of the company. The payment of costs in court became necessary because the accused sought time on one pretext or the other for filing a stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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