1983 (10) TMI 224 - HC - Companies Law

Directors acquitted in Companies Act case due to lack of evidence and valid directorship claims

The court acquitted both accused individuals in a case under section 454(5) of the Companies Act, 1956. The complaint against them, regarding the failure ... Winding up – Statement of affairs to be made to official liquidator Issues:Complaint under section 454(5) of the Companies Act, 1956 for failure to file statement of affairs by directors of a company in liquidation.Analysis:The judgment pertains to a complaint under section 454(5) of the Companies Act, 1956, filed by the official liquidator against two individuals, alleging their failure to file the statement of affairs of a company in liquidation within the prescribed period. The company, C. R. E. Wood Co. Pvt. Ltd., was ordered to be wound up, and the statement of affairs was required to be submitted within 21 days of the winding-up order. The accused, as directors of the company, were obligated to file the statement but failed to do so, leading to the complaint.During the trial, the accused denied being directors of the company at the time of the winding-up order. The court found no evidence to establish their directorship status at that time. The company's records were reported to have been spoiled when removed by the landlord, and no official from the Registrar of Companies was examined to confirm the directorship status. Consequently, the court held that the complaint lacked substantiation of the accused's directorship at the relevant time, leading to their acquittal.One of the accused, Ranjit Singh, was shown not to have been validly elected as a director as per the requirements of the Companies Act. The judgment highlighted that being the son of a former director did not automatically confer directorship unless proper selection and consent procedures were followed.Regarding the other accused, Iqbal Singh, his claim of being a technical director and subsequent resignation from the directorship were discussed. The court emphasized that his liability under section 454(5) hinged on his directorship status at the time of the winding-up order, which remained unproven due to lack of evidence from the company's records or Registrar of Companies.The judgment also addressed the requirement of reasonable excuse for default under section 454(5) of the Companies Act. It noted that the spoiled company records and subsequent unhelpful statement of affairs filed by one of the accused provided a reasonable excuse for non-compliance. The court concluded that no conviction could be made under the said section due to the circumstances surrounding the unavailability of relevant records and the director's reasonable excuse for not filing the statement of affairs.Ultimately, the court acquitted both accused individuals and dismissed the complaint due to the failure to establish their directorship at the crucial time and the presence of a reasonable excuse for non-compliance with filing requirements under the Companies Act.