AI Structured Summary
Not yet generated for this judgment
Judgment
R. Rajendra Babu, J.—The official Liquidator filed this criminal complaint against three accused, the managing director and two directors of the company under liquidation M/s. Melrose Chemicals Pvt. Ltd., alleging the commission of an offence punishable u/s 454(5) of the Companies Act.
According to the complainant this court passed an order appointing the Official Liquidator as the provisional liquidator of the company by order dt. 22.7.97 and the accused, who were the directors of the company at the time of the order appointing the provisional liquidator, failed to file the statement of affairs of the company and the liquidator issued notice in Form No. 55 requiring the accused to furnish the statement of affairs within 21 days and though accused 1 and 3 accepted the above notice, they did not file the statement of affairs and hence they committed the offence u/s 454(5) and are liable to be convicted for the said offence. The 2nd accused was reported dead.
When accused 1 and 3 entered appearance, the substance of the accusation was read and explained to them. They pleaded not guilty, T.K.M. Unnithan who was a senior clerk attached to the Official Liquidator''s office and who was dealing with the affairs of the above company under liquidation was examined as P.W. 1. The accused were questioned u/s 313 and Cr.P.C. and the incriminating evidence was brought to their notice. D.Ws. 1 to 3 were examined on the side of the accused and Exts. D1 to D9 were marked. Both counsel were heard.
The points for consideration are:
(1) Whether the accused failed to submit the statement of affairs before the Official Liquidation without any reasonable excuse?
and
(2) What is the sentence, if the accused are found guilty?
P.W. 1 was the senior clerk attached to the Official Liquidator''s Office who was dealing with the affairs of the company under liquidation M/s. Melrose Chemicals Pvt. Ltd. He had given evidence that the Official Liquidator was appointed in the above case as the provisional liquidator on 22.7.97 and the accused were the directors of the company and they failed to submit the statement of affairs as contemplated by law and the Official Liquidator had issued a notice requiring the accused to file the statement of affairs and, though the accused accepted the notice, they failed to furnish the statement of affairs. Though P.W. 1 was cross-examined, nothing could be brought out to discredit his version. In fact the accused had no case that they filed any statement of affairs before the Official Liquidator. According to them the company was taken over by the KFC in 1992 and all the records including the account books and registers of the company were also taken over by the KFC and those were in the custody of the KFC and as the company was not holding any of the records or books of accounts of the company, they could not file any statement of affairs and there was no wilful latches on their part in filing the statement of affairs. Three witnesses were also examined to substantiate their contentions.
D.W. 1 Velayudhan Nair was an employee of the company under liquidation. He had given evidence that the company and the assets of the company had been taken over by the KFC on 8.1.92. According to him the registers, books of accounts and all records of the company were kept in the almirahs in the company and when the KFC took over possession of the company, those almirahs wit the records were also taken over by the KFC. The evidence of D.W.1 would indicate that till 1999 the company had not taken any steps for getting back the records of the company. If the registers and the books of accounts of the company were with the KFC, in the ordinary course they should have requested the KFC or taken proper steps for getting back the records of the company as the KFC could not seize or take possession of the books of accounts or the records of the company, though they would be entitled to take over possession of the assets of the company including the registered office of the company. In fact the directors were duty bound to send periodical statement before the Registrar of Companies and for that purpose they should have taken appropriate steps for getting back the books of accounts, the registers and the records of the company, if those were with the KFC.
D.W. 2 was working as the Deputy Tahsildar (RR) of KFC during 1999. He stated that the KFC had attached the properties of the company and the official Liquidator had demanded the KFC to furnish an inventory of the assets of the company. He opened the factory premises, but he did not open the almirahs and tables kept in the office as he was not having the keys of those furniture. The Official Liquidator in fact had addressed the KFC to handover the records of the company and the KFC had informed the Official Liquidator that the KFC had not seized or taken possession of any of the records of the company. There was, in fact, no evidence to show that the company had taken possession of the records of the company including the registers and account books. Ext.D3 is the notice issued by the KFC regarding the sale of the movable properties attached in 1992 and the sale was proposed to be held on 15.2.92 at 2.30 p.m.. The list of the articles attached also had been annexed with the notice. Most of the items as per the list are machineries. Items 31, 32 and 36 are the almirah, table and a cupboard. Those items were also notified for sale. Ext.D3 was a communication addressed to the company. When the furniture viz. the table, the almirah and the cupboard were proposed to be sold and if the registers and books of accounts of the company were kept inside those furniture, naturally the company should have approached the KFC and made a request for return of those records. No attempt had been made by the company or the directors to get back the registers though the KFC had issued a notice proposing the sale of those articles. The approach made by the company and its directors is not taking any steps for getting back the records of the company, if those were taken over by the KFC, could not be justified on any account. The above circumstances also would probabilise the case of the KFC that they had not taken possession of the registers or the books of accounts of the company.
D.W. 3 P. Sasidharan was a watchman employed by the company. According to him he was there when the KFC took over the company and he signed as an attestor in the mahazar which was prepared by the KFC at the time of taking over the company. According to him there were tables and alimirahs of the company and those were not opened at the time of the taking over. Later those were sold in auction. He further stated that at the time of sale of those furniture, there were certain papers partly eaten by white ants and those papers were thrown off. Though D.W. 1 had given such a version, his evidence would not reveal that the above papers alleged to have been kept in the almirahs were the books of accounts of the company. In fact the evidence of D.W. 3 also is of no significance in establishing the case of the accused.
The main argument advanced by the learned counsel for the accused was that the prosecution had failed to prove that the accused had failed to file the statement of affairs without any reasonable excuse and as such the accused are entitled to be acquitted. It was further argued that there was evidence to show that the books of accounts and the other records of the company were taken over by the KFC as early as in 1992 and the statement of affairs could not be filed as the directors of the company were not in possession of the records of the company. It was further argued that a mere default in filing the statement of affairs will not constitute the offence u/s 454(5) of the Companies Act. Reliance was placed on the decision of this court in Official Liquidator v. Smt. K. Indira and Ors. [Vol. 54 (1983) Company Cases 644). There it was held:
"It is clear from the express words of Sub-section (5) of Section 454 of the Companies Act, 1956, that a mere default in complying with any of the requirements of the section is not an offence punishable under that sub-section. It is only when it is made out that the default was without reasonable excuse that Sub-section (5) can be invoked. The word "default" in Sub-section (5) of Section 454 is qualified and the qualification is that the default must be without reasonable excuse. There is nothing in Sub-section (5) or in Section 454 which shows that there is any burden cast on the accused, at the stage, of proving that the accused had reasonable excuse. Therefore, unless, on the evidence available, the court is, in a position to come to the conclusion that the default was without reasonable excuse, the accused cannot be convicted.
It is true that the statement of affairs can be filed only if the registers and books of accounts of the company are available. But the evidence in the case did not disclose that the books of accounts and the records of the company were with the KFC though the KFC took over possession of the assets of the company in 1992. The Official Liquidator had addressed the KFC and demanded the return of the books of accounts and registers of the company. But the KFC informed the Official Liquidator that they had not taken possession of the records of the company. The directors of the company in fact were bound to file the returns before the Registrar of Companies in accordance with the provisions of the Companies Act. As such they should have taken appropriate steps to get back the records from the KFC even if the KFC had taken possession of the books of accounts also. When they had not taken any steps for getting back the records, and that too when the KFC had intimated that they had not taken possession of the books of accounts along with the assets of the company, the only inference that can be drawn was that the company was in possession of the books of accounts. Placing reliance on the decision of the Delhi High Court in Official Liquidator of R.S. Motors (P) Ltd. (In Liquidation) Vs. Jagjit Singh Sawhney and Another, the learned counsel for the accused argued that any excuse that would reasonably suggest that the accused could not comply with the provisions of law is a reasonable excuse within the meaning of Section 454(5) of the Companies Act. Probably this decision can be of avail to the 3rd accused, but the 1st accused is not entitled to seek protection on the above decision. The 1st accused should have taken steps to get back the records, even if those were with the KFC. There was no reasonable excuse so far as the managing director of the company, the 1st accused was concerned, for not filing the statement of affairs in accordance with law. Hence the 1st accused committed the offence u/s 454(5) of the Companies Act. So far as the 3rd accused is concerned, in the circumstances, he might not have been in a position to know whether the books of accounts were with the company or not. Hence the 3rd accused cannot be held guilty and he has to be acquitted of the alleged offence.
In the result the 1st accused is found guilty of the offence u/s 454(5) of the Companies Act and he is convicted thereunder. The 3rd accused is found not guilty and he is acquitted.
Point No. 2.
The learned counsel for the 1st accused was heard. Being a technical offence and considering the peculiar circumstances of the case, I do not think it necessary to impose a sentence of imprisonment, but the imposition of a fine amount of Rs. 15000/- will meet the ends of justice.
The 1st accused is sentenced to pay a fine amount of Rs. 15000/- and, in default of payment of fine, to undergo simple imprisonment for a period of three months. Fifty percent of the fine amount shall be disbursed to the Official Liquidator towards cost of the proceedings u/s 626 of the Companies Act.
COMPLAINANT''S EXHIBITS - NIL
EXHIBITS OF THE ACCUSED:
Ext.D1: Copy of the intimation in Form No. 18 under the Company''s Act regarding the change of address of the company dated 17.3.1986.
Ext.D2: Communication dated 2.7.1986 of the Registrar of Companies, Kerala to the Company calling for rectification of the Mistakes in the annual returns.
Ext.D3: Notice dated 9.1.1992 of the Deputy Tahsildar, R.R., K.F.C., Trivandrum served on the Ist Accused.
Ext.D4: Authorisation letter dated 4.7.1999 authorising Sri. V. Velayudhan Nair for verifying the records kept in the office of the Factory.
Ext.D5(a) to D5(e): Visitors pass issued from the Trivandrum office of the K.F.C. (5 in number).
Ext.D6: Letter dated 3.8.1999 submitted before the Official Liquidator.
Ext.D7: Authorisation letter dated 6.10.99 authorising Sri. V.Velayudhan Nair after the order of the Honourable High Court of Kerala dated 23.9.1999.
Ext.D8(a) to D8(c): Copy of the letter dated 18.10.1999 served on the K.F.C. and Official Liquidator and the customers receipt 2 (numbers) issued by the postal authorities.
Ext.D9: Letter sent on behalf of the company to the Official Liquidator dated 25.6.2001.
COMPLAINANTS WITNESS T.K.M. Unnithan. PW1
WITNESS OF THE ACCUSED 1. V. Velayudhan Nair DW1 2. S. Raveendran Nair DW2 3. P. Sasidharan DW3
COSTS PAYABLE TO THE OFFICIAL LIQUIDATOR IS 7,500/- FROM THE FINE AMOUNT DEPOSITED.