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TMI Blog2007 (12) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... herein. It is stated that as per the information gathered from the Registrar of Companies (RoC), Hyderabad, accused are Officers/Directors of the company on the date of order of winding up, that Accused Nos. 1 and 2 are on the Board since the date of incorporation dated 12-10-1988, and that Accused Nos. 3 and 4 were appointed as Directors of the company with effect from 3-11-1992 and 21-11-1997 respectively. The notice under section 454 of the Act dated 12-5-2005 sent by OL, was returned unserved with remarks 'not claimed' in respect of Accused Nos. 1, 2 and 3, and 'addressee left' in respect of Accused No. 4. It is stated that Accused Nos. 1 to 4 are required to file Statement of Affairs (SoA) within twenty-one (21) days from 5-4-2005, i.e., the date of winding up order and the last date for filing statement expired on 26-4-2005 and the default is continuing as such. Therefore, the accused are liable to be punished under section 454(5) of the Act. 3. Initially the case is filed against four accused. As the summons were served on Accused Nos. 3 and 4 and the summons sent to Accused Nos. 1 and 2 were not served, this Court directed OL to file application to split up the case agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to this, Accused Nos. 3 and 4 are shown as Directors. The former was appointed on 3-11-1992 and the latter was appointed on 21-8-1997. Ex. A.3 is Form No. 32 dated 22-9-1998 and obviously it does not contain the names of Accused Nos. 3 and 4 in column No. 1 thereof. It contains the names of four Directors, from the date of incorporation. Ex. A.4 dated 3-5-2005 is the notice issued by OL to the accused calling upon them to explain as to why action should not be taken against them under sub-sections (5) and (5A) of section 454 of the Act. As per Ex. A.2, Accused No. 3 is resident of Plot No. 90, Jawahar Colony, KPHB, Kukatpally, Hyderabad, whereas in the subsequent Form No. 32 dated 3-9-1993, Accused No. 3 is shown to be resident of D3, Shilpa Apartments, Gurunanak Marg, Patamata, Vijayawada. Curiously the notice Ex. A.4 was sent to the address mentioned in Ex. A.2 as seen from Ex. A.7 returned postal cover, and not to Vijayawada address. In Ex. A.2, Accused No. 4 is shown to be resident of Flat No. 141, Kalyan Nagar, Hyderabad. 7. It is the case of Accused No. 3 that he resigned as Director of company with effect from 31-3-2001 and it is the case of Accused No. 4 that he res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were acting under the dictates of Accused Nos. 3 and 4. Hence, Accused Nos. 3 and 4 do not fall under category of 'officer' of company in liquidation. (iii) Whether Accused Nos. 3 and 4 took part in formation of company or employees of company at any time within one year before relevant date - The company was incorporated on 12-10-1988. Exs. A2, X3 and X4, annual report/balance sheet would confirm this. Therefore, Accused Nos. 3 and 4 cannot be said to have taken part in formation of company or employees of the company within one year before relevant date. Hence, Accused Nos. 3 and 4 are not liable even under this category. (iv) Whether Accused Nos. 3 and 4 are liable to file SoA - It is now settled law that two categories of persons are required to file SoA. Sub-section (2) of section 454 of the Act describes one category of persons. These are Directors, Managers, Secretaries and Chief Officers of the company on relevant date. The second category of persons are those enumerated in clauses (a) to (d) in sub-section (2) to section 454 of Companies Act. The second category of persons are not as such required to file SoA within 21 days from the date of winding up order. They are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed as, 'notice to submit SoA under section 454 of the Act', curiously it is a show-cause notice sent to all the accused including Accused Nos. 3 and 4 calling upon them to explain within seven days from the date of receipt of the said letter as to why OL should not initiate necessary action against them under the Act. It can always be argued that there was no letter of request/advice by OL asking Accused Nos. 3 and 4 to submit and verify SoA. Such an argument would be valid because section 454(2) of the Act enables OL to require second category of Directors/officers/persons to submit SoA and does not require to issue show-cause notice of prosecution. On this ground alone the prosecution must fail. 10. Assuming that Ex. A.4 is a letter requiring Accused Nos. 3 and 4 to file SoA, does it help the prosecution? Sub-section (1) of section 454 of the Act stipulates that SoA should contain the following particulars: assets of the company (cash balance in hand/bank), negotiable securities, debts and liabilities, a list of creditors, debts due to the company and such other information as may be required by OL. Can a person falling in second category who is not capable of giving informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spected and did inspect the account books of the company but a mere perusal of the accounts would not enable him to supply the particulars demanded thereunder. I am, therefore, of the opinion that even if accused No. 3 continued to be one of the directors of the company, he was not in a position to submit the statement of affairs in the prescribed form as he had no intimate knowledge regarding the affairs of the company since 1974-75. In these circumstances, I am not inclined to think that the prosecution has proved that accused No. 3 committed a default in complying with the requirements of section 454 of the Act without reasonable excuse." [Emphasis supplied] (p. 390) 12. In this case, no material is placed before this Court to show that Accused Nos. 3 and 4 had intimate knowledge or in possession of the books of account and papers of the company and that they had reasonable excuse for not filing SoA. The burden was on the prosecution to prove this, but they failed. Indeed as admitted by P.W.1, the complaint was filed only based on Ex. A2 - annual report for 1999, and subsequent annual reports were not verified by OL. 13. In the result, for the above reasons, this Court is sati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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