9911796707
TMI Blog2010 (2) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... play in these proceedings. Even otherwise, in the facts of the present case the complainant having failed to establish the default cannot become entitled to any costs. Prayer clause 9(ii) also is not required to be granted. In the result, the burden of proving the commission of offence has remained undischarged both in facts and in law and the accused cannot be proceeded against. The accused is accordingly discharged from the offence alleged. - CRIMINAL CASE NO. 1 OF 2008 IN COMPANY PETITION NO. 55 OF 2007 - - - Dated:- 23-2-2010 - D.A. MEHTA, J. Nitin K. Mehta for the Official Liquidator . Varun K. Patel for the Respondents. JUDGMENT D.A. Mehta, J. This case has been preferred under section 454(5) of the Companies Act, 1956 ("the Act") by the Official Liquidator of M/s. La-Bel Laminates P. Ltd. (in provisional liquidation) with the following prayers : "9. In the facts and circumstances stated above, the complainant being the official liquidator prays as under : ( i )That this hon'ble High Court be pleased to take cognizance of the default committed under section 454(5) of the Companies Act, 1956 and to issue process against accused Nos. 1 and 2 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. A copy of the said letter dated December 17, 2007, is annexed herewith and marked as annexure C. 6. That representatives of accused No. 1 Shri Raju R. Ashara and Shri Anish Patel were present at the time of handing over possession of the registered office/factory of the said company to the official of the official liquidator. The said accused have also failed to comply with the requirement of law for recording statement as required under rule 130 of the Companies (Court) Rules, 1959. 7. That, in the circumstances narrated above, it becomes clear that accused Nos. 1 and 2 have willfully and deliberately neglected to file the statement of affairs with the official liquidator and they have committed default under section 454(5) of the Companies Act, 1956, for non filing of the statement of affairs. In absence thereof the complainant is in complete dark about the assets, liabilities and records of the said company and winding up proceedings are unnecessarily being delayed and the recovery of the book debts are likely to get time barred. 8. That, accused Nos. 1 and 2 have also failed and neglected to attend the meeting under rule 130 of the Companies (Court) Rules, 1959." 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure C." 6. Thereupon vide order dated November 10, 2008, the court issued further direction to the liquidator to grant inspection again for the purpose of completing the inspection of records. After such inspection was granted, the statement of affairs has been filed on December 16, 2008. The learned advocate therefore contended that there was no default within the meaning of the provisions of section 454 of the Act. 7. On behalf of the official liquidator it was submitted that once the statutory period of 21 days from the relevant date as laid down in sub-sections (3) and (8) of section 454 of the Act read together had expired, a default envisaged by section 454(5) of the Act was committed by the accused and the court was required to take cognizance of an offence and try the same. That in the present case vide order dated November 29, 2007, made in Company Petition No. 55 of 2007, the High Court had directed to provisionally wind up the company and the official liquidator was appointed as provisional liquidator. Therefore, from the said date, i.e. , November 29, 2007, the accused was required to submit a statement of affairs within a period of 21 days and having fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to non filing of the statement of affairs at least the accused had committed default of not filing proper statement of affairs as required by law and thus the accused was required to be punished for such default. 10. It was further submitted on behalf of the official liquidator that rule 130 of the Companies (Court) Rules, 1959, (the Companies (Court) Rules), was also required to be read in conjunction with the provisions of section 454 of the Act and the statement of affairs could be treated to have been properly filed only after the person filing such statement of affairs in response to the notice to appear at the personal interview that the official liquidator may hold for the purpose of investigating the affairs of the company appear and tender explanation. Hence, any non compliance with the requirement of rule 130 of the Companies (Court) Rules, 1959, would itself entail a default under the provisions of section 454(5) of the Act. 11. In this connection, it was submitted that after the statement of affairs was filed, the official liquidator was required to scrutinise the same to ascertain whether the affairs of the company in liquidation had been properly conducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54, it becomes clear that right from section 448 which deals with appointment of the official liquidator up to section 463 which talks about control of the Central Government over the liquidators, most of the provisions relate to the powers of appointment, maintenance of books, etc., by the liquidator. It is in this backdrop that section 454 of the Act will have to be read and interpreted. The said section reads as under : "454. Statement of affairs to be made to official liquidator.-(1) Where the Tribunal has made a winding up order or appointed the official liquidator as provisional liquidator, unless the Tribunal in its discretion otherwise orders, there shall be made out and submitted to the official liquidator a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely : ( a )the assets of the company, stating separately the cash balance in hand and at the bank, if any, and the negotiable securities, if any, held by the company ; ( b )its debts and liabilities ; ( c )the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts ; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very day during which the default continues, or with both. (5A) The Tribunal by which the winding up order is made or the provisional liquidator is appointed, may take cognizance 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 (5 of 1898), for the trial of summons cases by magistrates. (6) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of his section, and to a copy thereof or extract therefrom. (7) Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Indian Penal Code (45 of 1860) ; and shall, on the application of the official liquidator, be punishable accordingly. (8) In this section, the expression the relevant date means, in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, as on the relevant date, who are liable to file the statement as laid down in sub-section (2), and also for the purpose of filing the statement within the prescribed period from the relevant date as laid down in sub-section (3). The applicability of sub-section (8) cannot therefore be confined only for computing the period specified in sub-section (3) of section 454 of the Act. 20. For the present, it is not necessary to refer to and deal with sub-section (4) which relates to a person being paid/allowed to claim all costs and expenses incurred in and about the preparation and making of the statement. 21. Sub-sections (5) and (5A) of section 454 of the Act have to be read in conjunction. It is necessary to note that for the purpose of appreciating the import of the said provisions, there is a fine distinction between the use of the term "default" appearing in sub-section (5) and "offence" appearing in sub-section (5A) of section 454 of the Act. Though at first blush, it might appear that both the terms have been used by the Legislature as being interchangeable but on a closer scrutiny the same does not stand to reason. 22. Sub-section (5) of section 454 of the Act sti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the accused under sub-section (5) of section 454 of the Act, the prosecution must prove that the person required to comply with the requirements of that sub-section has, without reasonable excuse, committed a default in doing so. Therefore, besides the factum of default in submitting the statement of affairs within the prescribed time, the prosecution must also prove that the default is without reasonable excuse. Both the 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under (page 503) : 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.' Dealing with the argument that if the burden of proving absence 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 requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... official liquidator that thereafter the court can only try the accused before discharging him does not merit acceptance. If the said submission is accepted, the phrase "without reasonable excuse" would become redundant as already held by this High Court and it is not possible to read the provision by rendering part of the provision as otiose. 27. If upon issuance of notice the other side appears and points out prima facie that burden has not been discharged by the liquidator, the court is then not required to conduct a full fledged trial as contended by learned advocate for the official liquidator. The official liquidator shall then have to establish by discharging the burden which rests on him to show that the default is without reasonable excuse. It may be, that in a given case, the necessary bundle of facts constituting reasonable excuse may be within the special knowledge of the person accused of the default, but once such a person appears and points out to such facts the liquidator will be required to establish by pointing out cogent evidence that the said facts would not constitute a reasonable excuse. 28. In the facts of the present case, the records reveal, the liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l liquidator was duty bound to deal with the application made by the accused, either by granting the application for extension or by refusing to grant the extension. In the event of refusal, the accused would have remedy of approaching the court for extension. However, in a case where no action is taken by the official liquidator the accused would be rendered remediless. 31. In such an eventuality the law has made it clear, as per settled legal position that the extension is deemed to have been granted upon failure to deal with such an application. In the case of CIT v. Gordhanbhai Jethabhai [1983] 142 ITR 84, while dealing with almost similar situation under the Income-tax Act, 1961 a Division Bench of this High Court has recorded as under (page 87) : "The question of delay in filing the return which arises in the context of the assessee's obligation to file a return under section 139(1) of the Act. Proviso to section 139(1) lays down that on an application made in the prescribed manner, the ITO may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee any force in the Revenue's argument that the ITO could have ignored the applications made on behalf of the assessee. It was incumbent upon the ITO either to grant or reject the applications for valid reasons." 32. Therefore, on this limited count the complaint lacks substance. The official liquidator was thus statutorily bound to deal with the application for extension in a judicial exercise of his discretion. Having failed to do so, no default can be attributed to the accused. 33. Furthermore, in the facts of the present case there is one more aspect of the matter. As noted hereinbefore, the official liquidator was categorically informed about non availability of records which were in custody of the secured creditor initially and thereafter in custody of the official liquidator for which inspection had been sought but the liquidator chose not to respond to the said request also. It was in this context that when the present proceedings were brought before the court on May 8, 2008, the court directed the official liquidator to grant inspection of the records. But the woes of the accused did not end and only partial inspection was granted which came to be granted further b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisional liquidator is appointed, the relevant date, referred to in sub-section (3) is known and there was no obligation on the liquidator to issue any notice inviting filing of the statement. This contention does not merit acceptance considering the provisions of rule 124 of the Companies (Court) Rules, 1959, which prescribes the form in which the statement has to be submitted and verified as per sub-section (1) of section 454 of the Act, obliging the official liquidator to serve such a notice along with Form (or by referring to the Form) upon any of the persons mentioned in section 454(2) of the Act. Therefore, the contention that the obligation is absolute on the person concerned cannot be accepted. The period of limitation stipulated by sub-section (3) of section 454 of the Act has to be computed from the point of time it is shown that the person concerned had the knowledge about the order of winding up or about a provisional liquidator being appointed. The statutory duty does not begin to run at any point of time prior to such knowledge being available to the person concerned. Hence attribution of the knowledge to the person concerned will also have to be established by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
