Director liability for statutory default: prima facie allegations of knowing default were enough to continue prosecution, with defences left for trial.
A complaint alleging non-filing of a company's balance-sheet and profit and loss account disclosed a prima facie case against a director where it specifically pleaded that he was knowingly guilty of the default or knowingly authorised or permitted it. The High Court held that such averments were sufficient to proceed under section 220(3) of the Companies Act, 1956. The director's plea that compliance was prevented by circumstances beyond his control raised disputed facts requiring evidence and could not be accepted at the quashing stage. The revision petitions failed, and the prosecution was allowed to continue.
Issues: (i) Whether the complaint disclosed a prima facie case against the petitioner, a director, for prosecution under section 220(3) of the Companies Act, 1956. (ii) Whether the petitioner's plea that non-filing of the balance-sheet and profit and loss account was caused by circumstances beyond his control could defeat the proceedings at the threshold.
Issue (i): Whether the complaint disclosed a prima facie case against the petitioner, a director, for prosecution under section 220(3) of the Companies Act, 1956.
Analysis: Section 220(1) required filing of the prescribed accounts and sub-section (3) made the company and every officer in default liable for non-compliance. The complaint specifically alleged that the petitioner, being a director, was knowingly guilty of the default and had failed to file the accounts. The expression officer in default was read with the statutory definition to include a director knowingly guilty of, or knowingly authorising or permitting, the default. On the face of the complaint, these averments were sufficient to proceed.
Conclusion: A prima facie case was made out against the petitioner, and the challenge on this ground failed.
Issue (ii): Whether the petitioner's plea that non-filing of the balance-sheet and profit and loss account was caused by circumstances beyond his control could defeat the proceedings at the threshold.
Analysis: The asserted inability to prepare accounts, obtain books of account, or convene the annual general meeting raised disputed facts. Such matters required evidence and could not be finally assessed in revisional proceedings or at the stage of quashing. The defence, even if potentially relevant, was not a ground to terminate the complaint without trial.
Conclusion: The plea was not available for acceptance at that stage and did not justify quashing of the proceedings.
Final Conclusion: The revision petitions failed, and the prosecution under section 220(3) was permitted to continue against the petitioner.
Ratio Decidendi: In a complaint alleging statutory default by a company, a director can be proceeded against where the pleading specifically asserts that he was knowingly guilty of, or knowingly authorised or permitted, the default; disputed defences based on absence of control or inability to comply are matters for trial and not for quashing at the threshold.