Completed sale and mens rea for false balance-sheet statements were not proved, so criminal liability failed.

A sale of machinery was not complete where title and possession remained subject to Kerala Financial Corporation's concurrence and the purchaser treated the transaction as pending sanction; the amount could therefore be shown as a suspense item and the machinery retained as an asset. Liability under section 628 of the Indian Companies Act also failed because the prosecution did not prove a false statement or wilful omission made with dishonest intent. The evidence did not establish mens rea, and the disputed balance-sheet entry reflected the asset's legal position. The acquittal was upheld.

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Issues: (i) Whether the sale of the machinery was complete so as to require its exclusion from the company's balance-sheet. (ii) Whether the accused made a false statement or wilful omission in the balance-sheet so as to attract liability under section 628 of the Indian Companies Act.

Issue (i): Whether the sale of the machinery was complete so as to require its exclusion from the company's balance-sheet.

Analysis: The machinery was subject to the rights of the Kerala Financial Corporation, and the company could not transfer legal possession or title without the Corporation's concurrence. Under the Sale of Goods Act, property in specific goods passes according to the intention of the parties, and where the goods are in the possession of a third person, delivery is not complete until that person acknowledges holding the goods on the buyer's behalf. The correspondence showed that even the purchaser treated the transaction as incomplete pending sanction. The amount received was therefore properly shown as a suspense item and the machinery as an asset.

Conclusion: The sale was not complete, and the balance-sheet treatment was justified.

Issue (ii): Whether the accused made a false statement or wilful omission in the balance-sheet so as to attract liability under section 628 of the Indian Companies Act.

Analysis: Liability under section 628 requires a false statement or wilful omission made with the necessary guilty intention. The evidence did not establish that the directors acted dishonestly or with intent to deceive. The disputed entry reflected the legal position of the asset, and the prosecution failed to prove mens rea. In the absence of proof of a guilty mind, criminal liability could not be fastened.

Conclusion: No offence under section 628 was proved.

Final Conclusion: The acquittal was upheld because the transaction had not become a completed sale and the prosecution failed to establish a wilful false statement or dishonest omission.

Ratio Decidendi: In prosecutions for false statements in company accounts, mens rea is required unless clearly excluded by statute, and where title in goods remains subject to third-party control, the parties' intention governs whether the sale is complete.

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