Continuing offence and burden of proof in statement-of-affairs default under company law, with acquittal on failure to prove wilful default

Non-filing of the statement of affairs under Section 454 of the Companies Act, 1956 was treated as a continuing offence, so the limitation plea failed. The Court also held that the prosecution witness's affidavit evidence did not vitiate the trial because the objection to the mode of proof was not raised when tendered and was therefore waived. On the merits, the prosecution had to prove foundational facts showing wilful default without reasonable excuse, including the accused's ability to comply and the absence of a valid explanation. As that burden was not discharged, the Court found the essential ingredient unproved and the accused were entitled to acquittal.

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Issues: (i) Whether failure to file the statement of affairs under Section 454 of the Companies Act, 1956 was a continuing offence so as to defeat the plea of limitation. (ii) Whether recording the prosecution witness's evidence by affidavit vitiated the trial. (iii) Whether the prosecution proved beyond reasonable doubt that the accused committed wilful default without reasonable excuse in filing the statement of affairs.

Issue (i): Whether failure to file the statement of affairs under Section 454 of the Companies Act, 1956 was a continuing offence so as to defeat the plea of limitation.

Analysis: The statutory scheme required the directors to submit the statement of affairs within the prescribed period, and the provision also contemplated punishment extending for every day during which the default continued. The Court applied the settled distinction between a default committed once and for all and a default that persists until compliance. On that basis, non-filing of the statement of affairs was treated as a continuing wrong, because the omission to comply remained capable of being cured at every moment until the statement was actually filed.

Conclusion: The plea of limitation failed; the offence was held to be a continuing offence.

Issue (ii): Whether recording the prosecution witness's evidence by affidavit vitiated the trial.

Analysis: In a summons-triable prosecution, evidence was required to be taken in the presence of the accused, subject to recognised statutory exceptions. The Court held that the affidavit of the prosecution witness did not fall within those exceptions. However, the objection went only to the mode of proof and was not raised when the affidavit was tendered. Applying the rule that a timely objection to mode of proof is necessary, the Court held that the objection was waived and could not later be used to invalidate the evidence.

Conclusion: The affidavit evidence was not treated as vitiating the trial.

Issue (iii): Whether the prosecution proved beyond reasonable doubt that the accused committed wilful default without reasonable excuse in filing the statement of affairs.

Analysis: The offence under Section 454(5) required proof of default without reasonable excuse. The Court held that the initial burden lay on the prosecution to establish the primary facts showing the accused's ability to file the statement of affairs and the absence of a reasonable excuse, after which any rebuttal burden could shift to the defence. On the evidence, the prosecution did not prove that relevant records were available with the accused so as to demonstrate wilful default. The evidence also did not satisfactorily prove that the materials furnished were insufficient to constitute compliance. In the absence of proof of the foundational facts, the onus never shifted to the accused.

Conclusion: The prosecution failed to prove wilful default without reasonable excuse; the accused were entitled to acquittal.

Final Conclusion: The proceedings ended in acquittal because the prosecution did not establish the essential ingredient of wilful default without reasonable excuse, even though the limitation plea and challenge to the nature of the offence were rejected.

Ratio Decidendi: For an offence under Section 454(5) of the Companies Act, 1956, the prosecution must first prove the foundational facts showing default without reasonable excuse; the absence of reasonable excuse is not presumed, and the burden shifts to the accused only after that primary burden is discharged. Non-filing of the statement of affairs is a continuing offence until compliance.

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