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2001 Supreme(P&H) 382
PUNJAB AND HARYANA HIGH COURT
J.S. Khehar, J.
M/s Altos India Limited - Petitioner
Versus
Shri Dadan Bhai and others - Respondents
Company Application No. 332 of 1999 & 636 of 1999 & 730 of 2000.
Decided On : 22 March, 2001
For the Official Liquidator :Mr. Amit Sethi, Advocate.
For the Respondent No. 3:A.P. Jagga, Advocate.
For the Respondent Nos. 4 and 5:Ms. Jaishree Thakur, Advocate.
The main legal point established in the judgment is that the burden of proof to establish the absence of a reasonable excuse for not filing the statement of affairs under Section 454 of the Companies Act lies with the prosecution, and accused directors can only be required to submit the statement of affairs if they were associated with the company on the relevant date.
Headnote:
Companies Act - Winding up order - Statement of affairs - Accused directors' liability - Court's interpretation of Section 454 - Accused directors' association with the company - Burden of proof on prosecution - Reasonable excuse for not filing statement of affairs - Court's decision to strike off accused directors' names from the array of accused in the case
Fact of the Case:
M/s. Bharti Telecom Limited filed for winding up of M/s. Altos India Limited and for appointing a provisional liquidator. The official liquidator was appointed as provisional liquidator and directed to take over the company's assets and management. The accused directors were called upon to submit a statement of affairs under Section 454 of the Companies Act for failing to comply with the requirement. The accused directors filed petitions seeking the deletion of their names from the array of accused.
Finding of the Court:
The court found that the accused directors had ceased to have any connection with the company before the appointment of the provisional liquidator, and thus could not be called upon to furnish the statement of affairs. The court also concluded that the burden of proof to establish the absence of a reasonable excuse for not filing the statement of affairs lay with the prosecution, and as such, the accused directors could not be prosecuted without evidence of this essential ingredient.
Issues: The issues revolved around the accused directors' liability to furnish the statement of affairs under Section 454 of the Companies Act and the burden of proof on the prosecution to establish the absence of a reasonable excuse for not filing the statement of affairs.
Ratio Decidendi: The court interpreted Section 454 of the Companies Act, emphasizing that the accused directors could only be required to submit the statement of affairs if they were associated with the company on the relevant date. The court also clarified that the burden of proof to establish the absence of a reasonable excuse for not filing the statement of affairs lay with the prosecution.
Final Decision: The court allowed the petitions and directed the names of the accused directors to be struck off from the array of accused in the case.
J.S. Khehar, J. - C.A. Nos. 332 of 1999, 636 of 1999 and 730 of 2000, in C.P. No. 95 of 1999, are being decided by this common order.
2. C.P. No. 196 of 1997 was filed by M/s. Bharti Telecom Limited praying for winding up of M/s. Altos India Limited. C.A. No. 442 of 1997 was also filed by the petitioner-company for appointing a provisional liquidator. This Court allowed C.A. No. 442 of 1997 on 11.6.1998 by appointing the official liquidator as provisional liquidator of M/s. Altos India Limited. A direction was issued to the provisional liquidator to take over all assets as well as the complete management of M/s. Altos India Limited without any delay. The winding up order in this case was passed on 12.8.1999.
3. A copy of the order dated 11.6.1998, whereby the official liquidator was appointed provisional liquidator, was received by the official liquidator on 3.7.1998. In compliance with the aforesaid order one of the units of M/s. Altos India Limited, 278, Udyog Vihar, Phase II, Gurgaon, was sealed on 7.7.1998; another unit located at 300, Udyog Vihar, Gurgaon, was taken over on 7.7.1998; a third unit located at B-312, Okhla Industrial Area, Phase-I, New Delhi, was sealed on 8.7.1998; another unit of M/s. Altos India Limited located at B-64, Okhla, Industrial Area, Phase I, New Delhi, could not be sealed as the same had been vacated by the Company on 16.5.1998. On inspection of the said premises the provisional liquidator found some machines/equipments belonging to M/s. Altos India Limited, the said machines/equipments were given on supurdari to the owner of the premises (1B-64, Okhla, Industrial Area, New Delhi) on 15.7.1998. The registered office of M/s. Altos India Limited situated at Agarsen Chowk, Narnaul, was sealed on 12.7.1998.
4. In terms of the provisions of Section 454 of the Companies Act, 1956, where an official liquidator is appointed as provisional liquidator, statement of affairs in the prescribed form, duly verified by an affidavit, is required to be submitted within 21 days from the date of appointment of the provisional liquidator (unless the aforesaid date is extended by the Court). Since no statement of affairs was filed in terms of Section 454 of the Companies Act, the official liquidator addressed a communication dated 26.11.1998 calling upon 5 of the directors of the respondent-company, namely, Sarvshri Dadan Bhai, Stephen Aranha, N.S. Parulekar, N.R. Srinivasan and Smt. Hema Chand to submit the statement of affairs in duplicate duly verified by an affidavit, as on the date of appointment of the provisional liquidator. The aforesaid communication which was dispatched through registered acknowledgement due post, was received back undelivered from two of the directors, namely, Sarvshri Dadan Bhai and Stephen Aranha. The letters addressed to Shri N.S. Parulekar and Smt. Hema Chand were not received back. Even the acknowledgment due cards were not received back. The letter addressed to Shri N.R. Srinivasan was received by him; and he addressed a response thereto dated 5.12.1998.
5. Since the statement of affairs was not being filed, C.P. No. 95 of 1999 was filed by the provisional liquidator under Section 454 (5-A) of the Companies Act for taking cognizance against the accused directors for having failed to comply with the requirement of Section 454 by not furnishing the statement of affairs.
6. C.A. No. 332 of 1999 was filed by accused No. 5 Shri N.R. Srinivasan with a prayer for the deletion of his name from the array of accused in C.P. No. 95 of 1999. A similar prayer was made in C.A. No. 636 of 1999 at the behest of accused No. 4 Shri Stephen Aranha. Likewise C.A. No. 730 of 2000 was filed by accused No. 3 Smt. Hema Chand again seeking the same relief.
7. Insofar as C.A. No. 332 of 1999 is concerned, it has been brought to the notice of this Court that accused No. 5 Shri N.R. Srinivasan was no longer in the service of M/s. Altos India Limited, as he had resigned from its employment on 5.1.1998.
