Prima facie test at charge stage: directors faced charges for alleged deposit contravention and officer-in-default liability.

At the stage of framing charge under sections 245(1) and 246(1) of the Code of Criminal Procedure, the court applies the prima facie test: it asks whether the materials, if unrebutted, disclose grounds to presume the offence, not whether guilt is proved beyond reasonable doubt. On the recorded material, including the company's balance-sheets, auditors' reports, notice and reply, and the admitted deposits, a prima facie contravention of the Companies Act, 1956 was shown. The petitioners were also prima facie shown to be officers in default through their directorship and participation in the company's affairs. The challenge to the framing of charge therefore failed.

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Issues: (i) Whether, on the evidence recorded at the stage of inquiry, a prima facie case was made out against the petitioners for framing of charge under section 58A(3)(c) read with section 58A(5) of the Companies Act, 1956. (ii) Whether the petitioners were shown, prima facie, to be officers in default so as to attract liability for the alleged contravention.

Issue (i): The relevant standard at the stage of sections 245(1) and 246(1) of the Code of Criminal Procedure, 1973 is not proof beyond reasonable doubt but whether the material, if unrebutted, discloses grounds for presuming the commission of the offence. The evidence of the company's financial position, the balance-sheets, the auditors' reports, the notice and reply, and the admitted position regarding deposits were sufficient to show, prima facie, that deposits had been accepted in contravention of the applicable directions and that repayment had not been made within the statutory time.

Conclusion: A prima facie case for framing of charge was made out against the petitioners for the offence alleged.

Issue (ii): Section 5 of the Companies Act, 1956 makes an officer liable if he is knowingly guilty of, or knowingly and wilfully authorises or permits, the default. On the material before the trial court, the petitioners were shown to be directors at the relevant time, with documentary support indicating their participation in the company's affairs and in the approval/signing of balance-sheets reflecting the disputed deposits. The question whether they would finally be proved to be officers in default was one for trial and not for discharge at the preliminary stage.

Conclusion: The petitioners were prima facie liable as officers in default, and the charge could properly be framed.

Final Conclusion: The challenge to the order framing charge failed, and the proceedings were allowed to continue.

Ratio Decidendi: At the stage of framing charge under sections 245(1) and 246(1) of the Code of Criminal Procedure, 1973, the court need only determine whether the materials disclose a prima facie case and not finally assess the truth or sufficiency of the defence.

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