Back
2013 Supreme(Mad) 599
HIGH COURT OF JUDICATURE AT MADRAS
R. BANUMATHI & K.K. SASIDHARAN, JJ.
P.V.R.S. Manikumar
Versus
The Official Liquidator High Court, Madras as the Official Liquidator of M/s. Indag Products Limited & Others
O.S.A. No. 92 of 2009 & M.P.No.1 of 2009
Decided on : 28-01-2013
For the Appellant:V. Ramakrishnan for C. Seethapathy, Advocates.
For the Respondents:R1 - S.R. Sundar, R2 – Aryaraj, R4 - M. Devaraj, Advocates, R3, R5 & R6 – Served, No Appearance.
Headnote:A. COMPANIES ACT, 1956 - Sections 454 (5) & 633 - Allegation on company asto failure to submit affairs of the company - Burden of proof and reasonable excuse - Criterion - Held, Since the requirement of absence of reasonable excuse is an essential ingredient of an offence punishable under sub-section (5) of 454 of the Act, the initial burden is on the Official Liquidator to prove the said fact. The burden of proof would shift to the accused only in case the complainant discharges the primary requirement of the provision regarding absence of reasonable excuse. The liability being one of criminal in nature, the onus is on the complainant to prove the case. Therefore, it is the duty of the prosecution to prove that in spite of the availability of relevant records, the accused failed to submit the statement of affairs and there was no reasonable excuse for the default. (Para 23)
B. COMPANIES ACT, 1956 - Sections 454 - Reasonable excuse - Considerations - Proper test - Held, proper test in a case of this nature is to see as to who would fail in case no evidence is let in to prove the absence of reasonable excuse. Since the default is qualified and the essential condition is that the default must be without reasonable excuse, the burden of proof is very much on the Official Liquidator and he should demonstrate that the accused failed to submit the statement of affairs without reasonable excuse.(Para 25).
C. COMPANIES ACT, 1956 - Sections 454 (5) - Wilful default when arises - Held, There is no statutory presumption under Sub-Section (5) of 454 of the Companies Act that the default in complying with the requirements of the Act and more particularly, in submitting the statement of affairs of the Company, would be treated as wilful default unless reasonable excuse is pleaded and proved by the accused. In case the entire burden 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. (Para 26)
D. COMPANIES ACT, 1956 - Sections 454 (5) - Failure to submit returns - Reasonable excuse - On facts, held there are no materials either in the complaint or in the evidence of P.W.1 to indicate that the appellant has failed to submit the returns without any reasonable excuse. The question of discharging the burden by the appellant by producing materials to prove that there were reasons which actually stood in the way of submitting the statement and as such-it was not a case of default without reasonable excuse would arise, only in case the Official Liquidator has discharged the initial burden. The fact remains that even the Official Liquidator has no case that the default was wilful. In fact, the learned Judge also entertained a doubt as to whether the materials produced by the complainant would be sufficient to convict the accused.
E. CONCLUSION - Failure on the part of the appellant to submit the statement of affairs of the Company was not wilful and the Official Liquidator miserably failed to prove that the default was without reasonable excuse - Order in CP set aside - Appellant acquitted. (Para 33)
Result : OSA allowed.
K.K. SASIDHARAN, J.
1. This appeal at the instance of the Ex-Director of a Company in Liquidation raises a moot question, that in spite of entertaining a doubt as to whether the Official Liquidator discharged his obligation of proving that the failure to submit the statement of affairs of the company in the statutory format was without reasonable excuse as provided under Sub-section (2) of Section 454 of the Companies Act, the Court was justified in punishing the accused.
The facts in nutshell
2. The Liquidator appointed by the Company Court for M/s. Indag Products Limited filed a complaint against the appellant and others alleging commission of offence under Subsection (5) of Section 454 of the Companies Act on account of their failure to file the statement of affairs within the statutory period.
3. 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.
4. 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 respondent. Mr. Samuel James Fredrick, former Managing Director was arrayed as first respondent.
5. Before the learned Single Judge, the appellant filed a detailed counter affidavit contending that he was not given possession of the accounts and other relevant documents by the second respondent and that was the reason for his failure to file the statement of affairs within the statutory period of twenty one days. The appellant admitted that he contacted the secured creditors and others to whom the Company owed money. The said attempt was made with a view to revive the Company. However, he has not participated in the management of the Company. In short, the failure on the part of the second respondent to hand over the entire documents was projected as the reason for the failure to submit the statement of affairs before the Official Liquidator. Accordingly the appellant prayed for absolving him from liability.
6. The second respondent filed a separate counter affidavit accusing the appellant. According to the second respondent, he has already handed over all the documents in respect of the Company to the appellant and as such it was his responsibility to furnish the statement of affairs to the Official Liquidator. The second respondent while concluding his defence stated that pursuant to the order dated 25 August 2006, he has filed the statement of affairs in the prescribed form and as such he was not liable for prosecution.
7. The Junior Technical Assistant attached to the office of the Official Liquidator was examined as P.W.1. The second respondent in the present appeal, was examined as R.W.1. The appellant was examined as R.W.2. The appellant in his evidence, very clearly stated that except the documents indicated in Exs. R.4 and R.5, no other documents were given to him by the erstwhile Managing Director (second respondent) during the time of execution of agreement to take over the industry and that was the reason for his failure to submit the statement of affairs.
8. The le
