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TMI Blog2016 (7) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... having been found guilty of contravention of Section 454 of the Act of 1956, the question of sentence remains. The respondents have been in default/ non compliant with the provisions of section 454 of the Act of 1956 for a period over 4380 days from the date of winding up order dated 17-10-2003. Section 454(5) of the Act of 1956 provides for a fine of ₹ 1000/- per day till the currency of the default. By a simple arithmetical calculation the amount of fine comes to ₹ 43,80,000/-. But that is the maximum fine. In the facts of the case, it is of the considered view that the ends of justice would be served in holding the respondents directors Pawan Kumar Lath and Bimal Kumar Lath of the company in liquidation being liable to a fine of ₹ 2 lacs, jointly/ severally as punishment for the reckless contravention of Section 454(3) of the Act of 1956. The said amount ₹ 2 lacs fine be deposited in the Common Pool Fund with the Official Liquidator within a period of six months from today. However, in the event of non payment of the amount of fine as aforesaid, the respondents directors of the company in liquidation shall be liable, in the alternative, to serve simple i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing statement of affairs by the directors of the company in liquidation expired on 7-11-2003. No application for extension of time was filed nor was any application filed for dispensing with the filing of statement of affairs filed under Rule 133 of the Company (Court) Rules, 1959 (hereinafter the Rules of 1959). The Official Liquidator has stated that as per the last annual return filed on 30-9-1997 by the company before the Registrar of Companies prior to order of winding up, the respondents No.1 and 2 Mr. Pawan Kumar Lath and Bimal Kumar Lath were the promoter directors of the company in liquidation and continued to be so till the date of winding up order on 17-10-2003. Following the winding up order, notice was sent to respondents No.1 and 2 on 28-11-2003 under Rule 124 of the Rules of 1959. The respondents vide their letter dated nil addressed to the Official Liquidator received in his office on 28-12-2005 stated that all records of the company in liquidation had been kept at the factory premises. And possession of the factory premises were taken over by RIICO on 25-11- 2003 under Section 29 of the State Financial Corporation Act, 1951 (hereinafter the Act of 1951 ). And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted as per Section 454 of the Act of 1956 owing to the records and accounts of the company in liquidation being at the company s factory at SP-9B Kukhera Industrial Area District Alwar which was taken possession of by RIICO on 25-11-2003 by resort to Section 29 of the Act of 1951. It has been submitted that the further cause for non filing of the statement of affairs of the company in liquidation till January, 2015 lay in the fact that the ex-directors of the company in liquidation had a dispute with the Chartered Accountants of the Company, who were connected with the petitioner in winding up petition. The Chartered Accountant, consequently did not cooperate with the respondents for reason of which the statement of affairs of the company after the order of the winding up on 17-10-2003 could not be filed. It has been submitted that the circumstances aforesaid constitute a reasonable cause for the respondents not being able to comply with the provisions of Section 454 of the Act of 1956-no offence is thus made out and the application be dismissed. Heard. Considered. From the facts on record it is evident that the two respondents were promoter directors of the company in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any in liquidation on 25-11-2003. I am further of the considered view that in terms of scheme of the Act of 1956 the directors of a company (in liquidation or otherwise) have an obligation to control and preserve the records/ accounts of the company as they work as trustees in a fiduciary capacity and except for reasons beyond their control are obliged to comply with the various statutory provisions of the Act of 1956 including section 454 of the Act of 1956 following an order of winding up. In the instant case, it is the case of respondents themselves that the commercial production of the company at SP-9B Kukhera Industrial Area District Alwar was closed on 1-10-1998. And admittedly when RIICO took possession of assets of the company in liquidation SP-9B Kukhera Industrial Area District Alwar on 25-11-2003, a period of over five years had elapsed. It is incomprehensible as to how and why records and books of account would have been kept unattended in a closed factory by the respondents for about five years. The defences of the respondents are thus one way or the other incapable of any credence. In the circumstances, I find that the respondents, the ex-directors of the company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 454 of the Act of 1956, the question of sentence remains. Section 454(5) of the Act of 1956 provides that where there is no reasonable excuse for default in compliance with the requirement of Section 454, the defaulters would be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to one thousand rupees for every day during which the default continues or with both. Sentencing the respondents to imprisonment, in the first instance, would be harsh in the facts of the case. A sentence of fine would suffice. However the respondents have been in default/ non compliant with the provisions of section 454 of the Act of 1956 for a period over 4380 days from the date of winding up order dated 17-10-2003. Section 454(5) of the Act of 1956 provides for a fine of ₹ 1000/- per day till the currency of the default. By a simple arithmetical calculation the amount of fine comes to ₹ 43,80,000/-. But that is the maximum fine. In the facts of the case, I am of the considered view that the ends of justice would be served in holding the respondents directors Pawan Kumar Lath and Bimal Kumar Lath of the company in liquidation being liable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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