Statement of affairs liability under company law defeated by prior resignation and reasonable cause for non-filing.

A person who had resigned as director before the winding-up order was not liable for failure to file the statement of affairs under section 454 of the Companies Act, 1956, because he was no longer in charge of the company's affairs on the relevant date. The court also held that respondents who could not file within time established reasonable cause where the company's records were seized and sealed by the bank after the winding-up order, and they promptly sought access from the police, the bank and the Official Liquidator. On those facts, the prosecution application under section 454 was not sustained and the respondents were exonerated.

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Issues: (i) Whether respondent No. 4, who had resigned before the winding-up order, was liable for failure to file the statement of affairs under section 454 of the Companies Act, 1956. (ii) Whether respondents Nos. 1, 2 and 5 had shown reasonable cause for not filing the statement of affairs within time.

Issue (i): Whether respondent No. 4, who had resigned before the winding-up order, was liable for failure to file the statement of affairs under section 454 of the Companies Act, 1956.

Analysis: The material on record showed that respondent No. 4 had resigned from the company in 2001, long before the winding-up order dated 07.11.2005. The evidence also indicated that the board had received his resignation and relieved him of duties, responsibilities and liabilities. In those circumstances, he could not be treated as a person in charge of the company's affairs on the relevant date and was not the person bound to file the statement of affairs.

Conclusion: Respondent No. 4 was not liable.

Issue (ii): Whether respondents Nos. 1, 2 and 5 had shown reasonable cause for not filing the statement of affairs within time.

Analysis: The evidence showed that shortly after the winding-up order, the bank had seized and sealed the premises where the company's records were kept, and the records were not available to the respondents. The first respondent had promptly complained to the police and had also written to the bank and the Official Liquidator seeking access to the records. The delayed filing of the statement of affairs and the failure to rectify defects were attributed to the same continuing circumstance. On these facts, the respondents established a reasonable cause within the meaning of section 454(5).

Conclusion: Respondents Nos. 1, 2 and 5 were exonerated.

Final Conclusion: The application for prosecution under section 454 was not sustained, and all the respondents were exonerated from liability for the alleged non-compliance.

Ratio Decidendi: A person is not liable for non-filing of the statement of affairs under section 454 where he had ceased to be a director before the winding-up order, and default may be excused when the respondents establish reasonable cause preventing timely compliance.

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