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Official Liquidator of Milan Chit Fund and Finance Pvt. Ltd. (In Liquidation) Vs. Ajit Singh BhasIn and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Appeal No. 26 of 1969
Judge
Reported in10(1974)DLT220
ActsCompanies Act, 1956 - Sections 454(2) and 454(5)
AppellantOfficial Liquidator of Milan Chit Fund and Finance Pvt. Ltd. (In Liquidation)
RespondentAjit Singh BhasIn and ors.
Advocates: Asha Goel,; Daljit Singh,; N.K. Jaggi,;
Excerpt:
.....wording of the section. the other three accused who seem to' have resigned at an earlier date have an even better case, because there was no order directing them to file a statement of affairs under section 454(2) of the act. infact, when i put 'this question to shri kartar singh narang under section 342 of the criminal prosedure code, he replied that he had filed the statement in accordance with the records of the company as made available to him and it was true to the best of his knowledge......file a statement because he had no books with him and. he pleaded not guilty. thus, three of the accused stated that they were not directors on the date of the winding up order and the 4th accused was the petitioner in that winding up case himself. (3) the first witness examined by the complainant was shri mahabir prashad, an assitant in the office of the registrar of companies. he stated that according to him, shri ajit singh bhasin, shri kartar singh narang, shri joginder singh kohli and shri om parkash kapoor were the directors of the company on 11th february, 1969, as per records available in the office of the registrar of companies. he also stated that on 21st april, 1965, shri 0m parkash kapoor had sent a form staling that he had resigned, but the date from which the resignation.....
Judgment:

D.K. Kapur, J.

(1) M/S. Milan Chit Fund and Finance (P) Ltd., is a company which was ordered to be wound up by this Court per order of S.K. Kapur J., dated 11th February, 1969. The Official Liquidator filed a complaint datpd 26th April, 1969, under Section 454(5) and 5(A) of the Companies Act, 1956, against Shri Ajit Singh Bhasin and three others, who were alleged to be directors of the company at the time it went into liquidation. The complainant states that the statement of affairs of the company had to be filed within 21 days of the passing of the winding up order, but no statement , filed. It was further stated that the complainant had given a notice dated 15th March, 1969, to the four accused, which had come back undelivered. The case of the Liquidator is that the accused have committed an offence under Section 454 of the Companies Act, 1956, which is a continuing one. The Court ordered summons to issue to the accused. On 27th January, 1970, the pleas of the accused were recorded under Section 242of the Criminal ProcedureCode,1898: The case was then adjourned on various grounds on several occasions either on account of the inability of the Official Liquidator to produce evidence or on account of the absence of the accused. On several occasions warrants had to-be issued to the accused to enforce their presence. On 10th July, 1972, P.N.Khanna J. ordered that a completed statement of affairs may now be filed within 4 weeks from to-day '. This date had been extended to 28th August, 1972, per orders of Rangarajan J. dated 14th August, 1972. On 4th September, 1972, it was stated in Court that the required statement of affairs had been handed over to the official Liquidator. The accused were directed to appear before the Official Liquidator. On 24th October, 1972, the accused were directed to file an affidavit of concurrence. Eventually, the evidence of the complainant was led on 24th May, 1973 and 25th September, 1973. Thereafter, the accused were examined under Section 342 of the Criminal Procedure Code, and finally the statement of Shri Om Parkash Kapoor, accused No. 2 was recordedin defense.

(2) Before dealing with the evidence led by the complainant, it is necessary to refer to the pleas of the accused. Shri Ajit Singh Bhasin, accused No I stated that he had resigned as a director of the company before the company was wound up on 11th February, 1969. He also stated thit he was unable to prepare the statement of affairs and he had approached the Official Liquidator in this respect and stated that the records were in the ssession of the police and he was not in a position to lay his hands on the records to prepare a statement. He pleaded not guilty as he had nothing to do with the accounts of the company at any si age. Shri 0m Parkash Kapoor, accused No. 2 slated that he had resigned from the directorship of the company in 1965, and had been relieved from the office of the director of the company. He stated that he could not submit the statement of affairs as he had already been relieved from the directorship of the company. He pleaded not guilty. Shri Joginder Singh Kohli, accused No. 3, stated that he was not connected with the accounts of the company and he was himself the petitioner in the winding up case. He denied receipt of the notice of the Official, Liquidator and pleaded not guilty. Shri Kartar Singh Narang, accused No. 4 also stated that he had resigned before the winding up of the company on 11th February, 1969, he also said that he could not file a statement because he had no books with him and. he pleaded not guilty. Thus, three of the accused stated that they were not directors on the date of the winding up order and the 4th accused was the petitioner in that winding up case himself.

(3) The first witness examined by the complainant was Shri Mahabir Prashad, an Assitant in the office of the Registrar of Companies. He stated that according to him, Shri Ajit Singh Bhasin, Shri Kartar Singh Narang, Shri Joginder Singh Kohli and Shri Om Parkash Kapoor were the directors of the company on 11th February, 1969, as per records available in the office of the Registrar of Companies. He also stated that on 21st April, 1965, Shri 0m Parkash Kapoor had sent a form staling that he had resigned, but the date from which the resignation was effective was not mentioned. This document was not considered by the Registrar of Companies, because of defects. He also stated that Form No. 32 had been received, singed by the Manager of the company showing that Shri 0m Parkash Kapoor had resigned. But this form was not signed by the Managing Director, and the Registrar of Companies had no intimation of the existence of a Manager. In continuation of his examination, he stated that the name of the Manager was not decipherable, but it was presented by Ganga Singh Narula, Manager. He also stated that there was a Form No. 32 sent by Shri Ajit Singh Bhasin; which was signed by him, but was not valid according to the rules. On cross-examination by Mr.R.C.Beri, counsel for accused Nos. 2 and 4, he referred to a number of letters which had been sent to the Registrar of Companies. He referred to a letterdated 13th May, 1965, from Shri Ajit Singh Bhasin, which was sent to the Registrar of Companies and also a notice received on 30th March, 1965. from Shri Gurcharan Singh Bawa, Advocate. He also referred to Form No. 32, dated 21st April, 1965, signed by Shri Ganga Singh Narula. He admitted that the letter dated 12th March, 1965, showed that Shri 0m Parkash Kapoor had resigned from the Managing Directorship and Directorship of the company with effect from 17th February, 1965, and the letter was sent to the Registrar of Companies with a copy to the company. However, a letter from Shri Ajit Singh Bhasin to Ganga Singh Narula (copy to the Registrar) showed that this resignation 'could not be accepted without a resolution of the Board of Directors. Some minutes of the meeting of the Board of Directors, dated 9th April. 1965, were also referred to. The counsel for the Official Liquidator objected to the production of these documents and learned counsel for the accused. Shri Ajit Singh Bhasin wanted copies of these documents to be placed on record. I only permitted the originals to be produced. Eventually, the original documents were ordered to be placed on record and marked 'A', 'B', 'C' and 'D' for identification. On cross-examination by Mr. Daijit Singh, counsel for Shri Ajit Singh Bhasin the witness stated that the Registered Office of the company was originally at 55, Gokhie Market Delhi, which was shifted: to K-45, West. Patel Nagar, New Delhi, in 1963. He also referred to Form No. 23, received in May, 1964, by which Shri Kartar Singh Narang, accused No. 4 became Director-in charge of accounts, at a remuneration of Rs. 150.00 per month. Later, the Registered Office of the company was transferred to N-5, Rajouri Garden. This intimation was sent by Shri 0m Parkash Kapoor. On the date of the winding up, the Registered Office of the company was at M-133, Connaught Circus, New Delhi.

(4) The next witness examined was Shri G. C. Gupta, an Assistant in the office of the Official Liquidator, who stated that Shri Ajit Singh Bhasin, Shri Om Parkash Kapoor, Shri Joginder Singh Kohli and Shri Kartar Siagh Narang, the four accused were directors of the company according to the record of the Official Liquidator, but they had not filed the statement of affairs. Eventually, a statement was filed, which was incomplete and defective. He further stated that the Official Liquidator learnt that the records of the company were lying with the C. I. D. Crime Branch, New Delhi, who had seized them and this information was received on 21st March, 1969. According to him, the statement of affairs filed was not a complete statement of affairs but was defective. On cross-examination, he admitted that the Official Liquidator knew on 21st March, 1969, that the records of the company were with the C. I. D. Crime Branch, and this information was supplied by Shri Ajit Singh Bhasin. He was asked what steps the Official Liquidator took to get back the records of the company, and. his answer was that a letter was written on 18th February, 1970, to the Station Officer, Police Station, Parliament Street, New Delhi, and another letter to the C. I. D. Crime Branch, Curzon Road, Ne.v Delhi, on 11th-February, 1970. But the complaint was filed on 26th April, 1969. On cross-examination by Mr. Beri, he admitted that Shri Kartar Singh Narang and other directors had attended the office of the Official Liquidator wice or thrice for preparing the Statement of affairs. This was the entire evidence of the complainant.

(5) The accused were examined under Section 342 of the Criminal Procedure. Shri Om Parkash Kapoor, accused No. 1, stated that he had resigned on 17th February, 1965, and had been relieved from the directorship at the meeting of the Board of Directors on 9th April, 1965. He also stated that he had gone to the office of the Official Liquidator and explained that he had resigned. When asked why he hdad not .taken steps to see the books which were recovered from the Crime Branch on 17th March. 1971, he stated that he did not do anything because he was not a director. He, however, admitted that he had concurred with the statement that was filed by Shri Kartar Singh Narang, accused No. 4. Shri Kartar Singh Narang, accused No. 4 also stated that he had resigned, that his resignation had not been accepted. and thereforee, he continued to be a director even on the date of the winding up. He stated that he was the Director-in charge Accounts up to August, 1964, but not later. When asked why he had not prepared the statement of affairs, he stated that he had gone to the office of the official Liquidator and stated that the books were not with him and so he could not file the statement. He was also asked why he did not prepare the statement after 17th Match, 1971, when the books had been recovered. He replied that he was unable to do so because he had been ill and he needed some persons to help him. He stated that he filed the statement in March or April, 1972. When asked why the statement was not complete, he' stated that the statement was complete to the best of his knowledge and in accordance with the available records. He stated that the records were with him only for three months, and as he had no financial resources, he had taken the least possible time to prepare the statement. Shri Ajit Singh Bhasin, accused No 1, stated that he had resigned on 23rd February, 1965, and he had visited the office of the Official Liquidator to say that the books were not in his possession and he could not file the statement of affairs. He stated that after the books were recovered from the C.I. D. Crime Branch on 17th March, 1971, he had visited the office of the Official Liquidator and when the statement was prepared by Shri Kartar Siagh Nsrang, he had concurred with the same. He stated that the statement was as complete as possible. If there was any deficiency, Shri Kartar Singh Narang could make up the deficiency. Shri Joginder Singh Kohli, accused No. 3, stated that he was only a nominal director of the company, because the company was opened in the premises belonging to him. He claims to have resigned in April, 1965. As regards the non-filing of the statement of affairs, he stated that he had gone to the Official Liquidator and told him that he knew nothing about the accounts and he himself had filed the application for winding up. He had tried his level best to get the accounts completed, but this could not be done, and that is why he applied 'for winding up. He stated that he was completely helpless in preparing the statement of affairs. When the statement was filed, he ha concurred with Shri Kartar Singh Narang. He wanted the winding up petition be linked up with this case so that his position could be better understood.

(6) The only witness examined in defense was Shri 0m Parkash Kapoor, who was alleged to be the Managing Director of the company when winding up was ordered. He referred to the Minutes Book of the Meetings of Directors and said that he had resigned from the directorship of the company which was considered at the meeting held on 20th February. 1965. He stated that his resignation had been accepted and he was relieved. Intimation had also been sent of this resignation. He stated that he was not a director at all when the company was wound up. On cross-examination by Mr. Daljit Singh counsel for accused No. 1, he stated that he did not hand over the records to 'anybody because he actually did not' have the records. On crossexamination by Mrs. Jain, counsel for the complainant, he stated that there were only four directors on 9th April, 1965, and he did not file the statement of affairs, because he was not a director on the date when the company was wound up. He stated that he had been to the Official Liquidator and stated his position. According to him, the books of the company were in the office of the company when it was wound up. He even stated that he had informed the Police and the Registrar of Companies about the books of the company aad in fact there were no accounts when he joined. He claimed to be the first complainant about this to the Registrar of Companies as well as to the police. He had informed the police that the books were not being properly maintained He, however, admitted that he was arrested by the Police, but bailed out. The rest of his cross-examination is not material, except that he stated in answer to a Court question that his resignation had been addressed to the Registrar of Companies and, thereforee, he had resigned.

(7) This is the entire evidence on record. The facts of the case show that the books of the company were with the police even before the complaint was filed and the Official Liquidator knew of this fact in March, 1969. In this connection, it is necessary to refer to a statement made by Mrs. Nijhawan, counsel for the Official Liquidator on 15th March, 1971. It was stated by her that the. books of the company would be available within a day or so in the-office of the official Liquidator as the Magistrate had passed orders for return of the books to the Official Liquidator. As a result of this statement, the accused were directed to file the statement of affairs. Later on, it appears that the period for filing the statement of affairs was extended from time to time and the statement was eventually filed. In order to see whether the accused are guilty of a default under Section 454, it is first necessary to be seen whether any of them' was obliged to file the statement. The evidence .clearly shows that at least three of these directors had resigned before the date when the winding up order was passed. The requirements of Section 454 of the Companies Act, 1956, are that under sub-section (2) a statement of affairs to be filed by persons who are directors or officers of the company at the relevant date. The 'relevant date' is specified by Section 454(8) to be the date of the winding up order. Other officers or directors can also be ordered to file the statement, but an order has to be obtained from the Court in this behalf. The procedure is provided in the Company Court Rules, 1959. The Official Liquidator could have got an order against the Directors who had resigned under this provision. However, there is no indication that the Official Liquidator applied to the Court for an order under Section 454(2) directing any of the accused to file a statement of affairs in accordance with law. This means that the only ex-director, who was obliged to file a statement of affairs was accused No. 4, Shri Kartar Singh Narang, as the other directors had resigned before the winding-up order was passed. It is necessary first to deal with the case of Shri Kartar Singh Narang alone.

(8) The evidence recorded shows that the statement of affairs was fifed after the records had been recovered from the police by the Official Liquidator and the only objection to that statement is that it is defective. As far as Shri Kartar Singh Narang is concerned, he was required under section 454 to file the statement within 21 days of the winding up order. He did not do so. The only question to be seen is. Whether an offence under Section 454(5) has been committed That sub-section reads as follows ;-

'If any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extent to one hundred rupees for every day during which the default continues, or with both.' It states that a failure to comply with the section is an offence, but an exception is provided by the wording of the section. The liability is not absolute ; if there is a reasonable excuse, the accused cannot be convicted. The question to be asked is: Did Shri Kartar Singh Narang have a reasonable excuse for not filling the statement of affairs within the time specified. by law The answer seems to be : Yes ; he did have such an excuse. This excuse is apparent from the evidence of the complainant. The evidence shows that the Official Liquidator learnt in March, 1969, that the books of the company were with the police. He got back these books some time in March, 1971. After that the statement of affairs was prepared and filed. There was, thereforee, a reasonable excuse for not filing the statement. The excuse being that the books were with the police. Even the 0fficial Liquidator took two years to get back the books. There seems to be no excuse for this long delay by the Official Liquidator in the matter of getting back the books from police. There is no evidence to show that any inspection facilrties were given by the police either to the accused' or to the Official Liquidator. This means that Shri Kartar Singh Narang did have a reasonable excuse for not filing the statement within the time prescribed by law. The other three accused who seem to' have resigned at an earlier date have an even better case, because there was no order directing them to file a statement of affairs under Section 454(2) of the Act.'

(9) After the books had been recovered by the Official Liquidator, the Court passed a direction to the effect that the accused should prepare a statement of .affairs. This can be taken to. be a direction under Section 454(2). This means that after this date the accused had to file a statement of affairs. However, the time for complying with this dirction was extended from time , time till the statement was eventually filed. The extension of time means that the statement of affails, cannot be held to be belated. There is, thereforee, no offence made out from the mere delay in the filing. of the statement of affairs, because the Court itself has been extending the period, for complying with the section. The delay moreover stands explained to be on account of the fact that Shri Kartar Singh. Narang alone had to prepare the statement of affairs, and he has explained why it took him some time. Even if there is any delay at this stage, I think it falls outside the province of the complaint which was filed in April, 1969. In fact, nothing has been said in the evidence of the complainant to show that Shri Kartar Singh Narang took an unreasonable time, for preparing the statement of affairs after the Court had directed him to file the same. Moreover, there are a series of orders by, various Judges of this Court extending. the time for filing the statement of affairs and, I am sure, that these orders must have been passed..on a due appreciation of the situation being faced by Shri Kartar Singh Narang and the other-accased. It is not for me to hold the accused guilty, when the Judges of this Court dealing with this case, extended the period for the complying-with the direction to submit a statement of affairs.

(10) One other point requires consideration. That is, whether the statement of affairs as eventually filed is defective. It is only in the statement of Shri G. S. Gupta, Assistant in the office of the Official Liquidator that we find any reference to the statement of affairs being defective. The witness made this allegation without producing the .so-called defective statement of affairs. It is not possible turn me to accept the evidence of the witness which is a matter of opinion only, without having the statement .of affairs on record before me. I am, thereforee, not able to .hold that the statement of affairs as eventually filed was defective. Infact, when I put 'this question to Shri Kartar Singh Narang under Section 342 of the Criminal Prosedure Code, he replied that he had filed the statement in accordance with the records of the company as made available to him and it was true to the best of his knowledge. I thereforee, hold that the accused cannot be held guilty of not complying with the directions of the Court in the matter of filling. the statement of affairs.

(11) The result wolud be that all the four accused have to be acquitted on the ground that threeof them were not directors on the date when the company .was. ordered to be wound up and the 4th accused, Shri Kartar. Singh Narang, had a reasonable excuse for not filing the statement of affairs within the time prescribed, because the; books were .with the police and were not recovered by the Official Liquidator till March, 1971. Thereafter, in accordance with the directions of the Court as recoded in various orders passed on the file of this case, the ex-directors had prepared a statement of affairs and filed the same. Although, they took some time in filing the same, the time was extended and, thereforee, cannot be treated as a default. No defect in the eventual statement of affairs has been proved on this record and, thereforee, I cannot hold that any offence under Section 454 of Companies Act, 1956, has been made out. The result is that all the four ccused are acquitted.


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