True and correct statement of affairs duty enforced despite delayed filing and resignation plea

A company officer's statutory duty to file a true and correct statement of affairs was examined where the filing was delayed and found incomplete and unreliable. The court treated the unexplained treatment of a major transaction as evidence of non-compliance, and a plea of resignation did not absolve liability because the accused were directly involved in the relevant transactions. Liability under section 454(5) of the Companies Act, 1956 was therefore affirmed, while wider allegations of fund siphoning were left to the pending criminal trial.

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Issues: Whether the accused failed to file a true and correct statement of affairs in compliance with the statutory requirements, and whether they were liable for default under section 454(5) of the Companies Act, 1956.

Analysis: The statement of affairs was filed belatedly and was found to be incomplete and unreliable, particularly in relation to the Rs. 50,00,000 transaction that was not properly reflected in the books or explained to the satisfaction of the official liquidator. The Court held that the plea of resignation was not sufficient to absolve liability, since the accused were found to be directly involved in the relevant transactions and had not discharged their statutory obligation to furnish a true and correct statement of affairs. Questions concerning the larger transaction and the alleged siphoning of funds were left to the pending criminal proceedings before the trial court.

Conclusion: The accused were held guilty for default under section 454(5) of the Companies Act, 1956, and were fined Rs. 10,000 each, with a default sentence of one month's imprisonment.

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