Failure to file affairs of Company under section 454 : Prosecution must prove that it was wilful

Bombay High Court Acquits Accused Directors in Companies Act Default Case Court Rules Prosecution Failed to Prove Wilful Default Beyond Reasonable Doubt Under Section 454(5) of Companies Act, 1956

In a significant ruling, the Bombay High Court has acquitted the directors of a company charged with failing to file the necessary statement of affairs as mandated under Section 454(5) of the Companies Act, 1956. The decision, rendered by Justice Sharmila U. Deshmukh, underscores the principle that the prosecution must establish a wilful default by the accused without reasonable excuse.

The case involved Mr. Dinesh Chandra Maingi and others, who were accused of not complying with the statutory obligations to submit a statement of affairs to the Official Liquidator following the winding up of M/s. Geeta Marine Services Pvt. Limited. The company was ordered to be wound up in March 2009, and the Official Liquidator subsequently filed a complaint against the directors for their alleged failure to file the requisite documents.

The prosecution argued that the directors, despite notices and opportunities provided, failed to submit the statement of affairs in the prescribed format and did not hand over the complete books of accounts. However, the defense countered that the complaint was barred by limitation and that the evidence presented by the prosecution did not meet the legal threshold to establish wilful default.

Justice Deshmukh highlighted the critical issue of whether the offence constituted a "continuing offence," which would affect the limitation period for filing the complaint. The court referred to precedents and concluded that non-filing of the statement of affairs indeed constitutes a continuing offence, terminating only upon compliance.

Furthermore, the court addressed the procedural aspects of the trial, particularly the admissibility of evidence presented through affidavits. It was noted that the defense's failure to object to the mode of proof at the initial stage resulted in a waiver of such objections.

Ultimately, the court found that the prosecution did not provide sufficient evidence to demonstrate that the directors wilfully defaulted without reasonable excuse. The burden of proof to establish the absence of a reasonable excuse was not met, and thus, the onus never shifted to the accused to prove otherwise.

The decision has significant implications for how compliance-related offences under the Companies Act are prosecuted, emphasizing the necessity for the prosecution to establish clear and convincing evidence of wilful default.

Bottom Line:

Prosecution failed to prove beyond reasonable doubt that the accused committed wilful default in filing the statement of affairs under Section 454(5) of the Companies Act, 1956. The burden of proof to establish wilful default lies initially with the prosecution, which, once discharged, shifts to the accused to demonstrate reasonable excuse for non-compliance.

Statutory provision(s): Companies Act, 1956 Section 454(5), Criminal Procedure Code, 1973 Sections 273, 296, 313

Mr. Dinesh Chandra Maingi v. Shivkant V. Chaudhary, (Bombay) : Law Finder Doc Id # 2787196