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TMI Blog2013 (1) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... ory period. 2. An order of winding up was passed by the Company Court on 25 February 1997 in C.P. No. 101 of 1994 in respect of M/s. Indag Products Limited and the Official Liquidator attached to the High Court was appointed as the Provisional Liquidator. The appellant and the other Ex-Directors were expected to submit the statement of affairs in form No. 57 of the Companies (Court) Rules, 1959 within twenty one days from the date of winding up or from the date of appointment of the Provisional Liquidator. However, the Ex-Directors failed to file the statement of affairs in spite of receipt of notice from the Official Liquidator on 19 April 1997. This made the Official Liquidator to file an application in A. No. 1081 of 2004 in C.P. No. 101 of 1994 along with a report under Section 454 of the Companies Act before the Company Court. The prayer in the application was to take the complaint on file and to punish the Ex-Directors for their failure to submit the statement of affairs within the statutory period. 3. The wife of the appellant was arrayed as fourth respondent in the application in C.A. No. 1081 of 2004 in C.P. No. 101 of 1994. The appellant was arrayed as fifth respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready been taken over by them. The learned Judge observed that it is doubtful as to whether the Official Liquidator has discharged his obligation of proving the offence. However, taking into account the admission made by the appellant during the course of his examination as R.W. 2 that he has taken over the management of the Company and negotiated the matter with the employees and the creditors, concluded that there was no reasonable cause for the failure to submit the statement of affairs within the statutory period. Accordingly, the appellant was convicted and sentenced to pay a fine of ₹ 25,000/-, failing which, he was directed to undergo Simple Imprisonment for a period of two months. The wife of the appellant as well as the second respondent were acquitted of all the charges framed against them. Feeling aggrieved, the appellant is before us. Rival Contentions: 8. The learned counsel for the appellant made extensive submissions both on facts and on law. The following are his principal submissions: (i) The appellant, though took over the management of the Company, was not aware of the pending liquidation proceedings. The appellant received only few documents fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second respondent to take over the Company by name M/s. Indag Products Limited. The appellant was taken as a Director of the Company so as to complete the transfer process. The agreement entered into between the appellant and the second respondent or the memorandum evidencing handing over of documents, does not contain any indication that liquidation proceedings were pending before the Court. Therefore, the contention taken by the appellant that he was not aware of the liquidation proceedings, prima facie appears to be correct. The second respondent handed over certain documents to the appellant as per memorandums dated 23 April 1996 and 29 April 1996 marked as Exs. R. 4 and R. 5. While the appellant claimed that he was not given the entire documents and has no access to records, the second respondent maintained that all the relevant records were handed over and he was in actual control of the affairs of the Company and as such, the liability was on him to submit the statutory statement. 11. The materials on record would show that Company Petition No. 101 of 1994 was filed by M/s. Wacker Chemie against M/s. Indag Products Ltd., on the ground that the Company failed to pay the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h may extend to two years, or with fine which may extend to one hundred rupees for every day during which the default continues, or with both. 14. Section 633 of the Companies Act conferred certain powers on the Court in respect of legal proceedings initiated under the provisions of the Companies Act. This provision empowers the Court to excuse a person from criminal liability having regard to all the circumstances of the case, in case he has acted honestly and reasonably. Whether default was without Reasonable Excuse: 15. The order passed by the learned Judge has to be tested in the light of Sections 454 (5) and 633 of the Companies Act. 16. There is no dispute that Section 454 of the Companies Act cast a duty on Ex-Directors, who were Directors at the relevant period to submit a statement of affairs of the Company in Liquidation in the prescribed form within a period of twenty one days. The said provision was inserted with a definite purpose of helping the Official Liquidator to verify the factual position of the Company including its financial background. The Official Liquidator would not be in a position to assess the factual situation in the absence of records. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Court in case of default to submit the statement by the concerned person, and the further steps to be taken by the Court. 19. The term reasonable excuse is not defined in the Companies Act. Similar expression is found in Section 9 of the Hindu Marriage Act. This expression cannot be reduced into a straight jacket formula. The reasonable excuse has to be considered in the facts and circumstances of a given case. 20. Sub-section (5) of Section 454 gives jurisdiction to the Court to punish only a person who makes default in complying with the requirements of Section 454 without reasonable excuse. There is nothing in the Act, more particularly in sub-section (5) of Section 454 indicating that the entire burden is on the accused to plead and prove the reasonable excuse. 21. Sub-section 5A of Section 454 mandates that a complaint, preferred by the Provisional Liquidator under Section 454 (5) shall be tried in accordance with the procedure laid down in the Code of Criminal Procedure as if it is a trial of summons case by a Magistrate. 22. Since the requirement of absence of reasonable excuse is an essential ingredient of an offence punishable under sub-section (5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden is on the accused to prove that he is innocent, necessarily, it is for the defence to prove the innocence and not for the prosecution to prove the guilt. Here, mere default in complying with Sub-section (5) of Section 454 is not made punishable. The default without reasonable excuse alone is made punishable. In case, the facts and circumstances are indicative of the reasonable excuse for not filing the statement within the statutory period, necessarily the benefit of doubt should be given to the accused. 26. Sub-section (5) of Section 454 has to be read in the light of Section 633 of the Companies Act. Section 633 of the Act permits the Court to consider over ail circumstances of the case and to arrive at a conclusion as to whether the accused has acted honestly and reasonably and the default was beyond his control. In case the Court is satisfied that the accused acted reasonably and there was no dishonesty on his part, necessarily, he should be relieved of the liability subject to reasonable terms. Sub-section (2) of Section 633 also makes the position very clear that the High Court shall have the power to relieve him, as if it had been a Court before which a proceeding ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential ingredient of an offence under sub-section (5) of Section 454 of the Companies Act. The prosecution, therefore, has to prove that the Directors or the officers of the Company have defaulted to submit the statement without reasonable excuse. Though the burden would shift depending upon the stages, the ultimate burden is on the prosecution to prove that the default was without reasonable excuse. 31. The case pleaded by the appellant necessarily has to be considered in the light of the statutory frame work. 32. The complaint preferred by the Official Liquidator in Application No. 1081 of 2004 in C.P. No. 101 of 1994 and the supporting affidavit proceeds that in spite of the direction to produce accounts, the appellant has failed to submit the statement of affairs to him and as such he was not in a position to proceed with the winding up of the affairs of the Company. The Official Liquidator was not before the Court. The Junior Technical Assistant attached to the office of the Official Liquidator was examined on his side as P.W. 1. The said witness was not in the know of things. He has given evidence on the basis of records. P.W. 1 has no case in his evidence that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of affairs was filed by him before the Official Liquidator. The Official Liquidator originally returned the records with a direction to re-submit it after compliance. It is also a matter of record that the second respondent thereafter complied with the defects and the statement was accepted by the Official Liquidator. It was only in such circumstances and more particularly, taking into account the submission of statement of affairs of the Company, the second respondent was acquitted by the learned Judge. The fact that the second respondent, immediately after issuance of warrant, submitted the statement of affairs is a clear pointer to show that he was in possession of documents. The said fact would also prove the correctness of the statement made by the appellant that he was not in possession of the material records and all the books of accounts were only in the possession of second respondent. This material fact would go to the root of the matter. 35. The learned Single Judge found merit in the contention taken by the appellant that he had actually no access to the records. The learned Judge also indicated a doubt as to whether the Official Liquidator has discharged his obl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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