2010 (2) TMI 596 - HC - Companies Law

Accused Discharged in Companies Act Offence

The accused were discharged from the alleged offence of default in filing the statement of affairs under Section 454(5) of the Companies Act, 1956. The ... Proving the commission of offence - Held that:- A plain reading of rule 130 indicates that the said rule permits the official liquidator to hold personal interviews with any of the enumerated persons, mentioned in section 454(2) of the Act for the purpose of investigating the affairs of the company and every such person is duty bound to attend before the official liquidator at the specified time and place and all information that may be required and answer all such questions as may be put by the official liquidator. However, the same is not part and parcel of the requirement of the provisions of section 454 of the Act and therefore cannot be clubbed along with the proceedings of complaint on the basis of alleged default under section 454(5) of the Act. Therefore, no direction as prayed for in prayer clause 9(iv) can be given. Similarly prayer clause 9( v) seeking costs and charges incidental to the proceedings under section 626 of the Act also cannot be granted because admittedly the said section would have no role to play in these proceedings. Even otherwise, in the facts of the present case the complainant having failed to establish the default cannot become entitled to any costs. Prayer clause 9(ii) also is not required to be granted. In the result, the burden of proving the commission of offence has remained undischarged both in facts and in law and the accused cannot be proceeded against. The accused is accordingly discharged from the offence alleged. Issues Involved:1. Default in filing the statement of affairs under Section 454(5) of the Companies Act, 1956.2. Extension of time for submitting the statement of affairs.3. Compliance with Rule 130 of the Companies (Court) Rules, 1959.4. Costs and charges incidental to the proceedings under Section 626 of the Companies Act, 1956.Detailed Analysis:1. Default in Filing the Statement of Affairs:The primary issue was whether the accused committed a default under Section 454(5) of the Companies Act, 1956, by failing to file the statement of affairs within the stipulated time. The Official Liquidator argued that the accused were required to submit the statement within 21 days from the winding-up order dated November 29, 2007, and their failure constituted a default punishable under the Act. The accused contended that they sought an extension due to the records being in the custody of the Official Liquidator and the secured creditor, which prevented them from filing the statement on time. The court held that the accused had a reasonable excuse for the delay and thus did not commit a default warranting prosecution and penalty.2. Extension of Time for Submitting the Statement of Affairs:The accused requested an extension of time to file the statement of affairs, citing the non-availability of records. The Official Liquidator did not respond to the extension request. The court noted that under Rule 128 of the Companies (Court) Rules, 1959, the Official Liquidator is required to either grant or refuse the extension request. The failure to respond to the request was deemed as a failure to exercise judicial discretion, leading to the conclusion that no default could be attributed to the accused.3. Compliance with Rule 130 of the Companies (Court) Rules, 1959:The Official Liquidator sought a direction for the accused to attend the office for recording statements under Rule 130. The court clarified that Rule 130, which allows the Official Liquidator to hold personal interviews for investigating the affairs of the company, is separate from the requirements of Section 454. Therefore, this request could not be clubbed with the default proceedings under Section 454(5).4. Costs and Charges Incidental to the Proceedings:The Official Liquidator also sought costs and charges incidental to the proceedings under Section 626 of the Companies Act, 1956. The court held that Section 626 had no role in these proceedings and, given that the Official Liquidator failed to establish the default, no costs could be awarded.Conclusion:The court concluded that the accused had a reasonable excuse for not filing the statement of affairs within the stipulated time due to the non-availability of records and the Official Liquidator's failure to respond to the extension request. Consequently, the accused were discharged from the alleged offence, and no costs were awarded to the Official Liquidator. The case was disposed of with no order as to costs.