Official Liquidator Vs. Sanjay Jain - Court Judgment

Excerpt:
- - they were bona fide prosecuting both these remedies and having all hope of their success therein, this delay is occurred in filing of the statement of affairs.orders.k. keshote, j.1. the official liquidator of m/s. san india electrochem private limited (in liquidation) has filed this application under section 454 of the companies act, 1956.2. the facts of the case are that m/s. san india electrochem private limited (in liquidation) having its registered office at c-2, bhagwan das road, c-scheme, jaipur and worked at plot no. k-1921, road no. 1, jaitpura industrial area, jaipur, was ordered to be wound up on 20-3-1997 in s.b. company petition no. 24/96, titled design fabrication & consultant engineers v. san india electrochem private limited.3. the official liquidator, as required by section 454(1) of the companies act, 1956, sent a registered ad notice in form 55 under rule 124, to the non-applicants, informing them of the order passed by this court and calling upon them to submit within 21 days from the date of the winding up order, a statement of affairs of the aforesaid company ordered to be wound up. they were also directed to obtain the necessary forms and instructions from the office of the official liquidator. the non-applicants were served him the above notice, but statement of affairs as statutorily required to be submitted were not filed. a letter dated 30-4-1997 addressed to the official liquidator was received on 1-5-1997 from the non-applicants informing that an application to recall the winding up order dated 20-3-1997 has been filed in the court.4. referring to the contents of para no. 5 of the application of the non-applicants for recalling of the order dated 20-3-1997 the official liquidator stated that shri sanjay jain, non-applicant no. 1, has referred that the possession of the assets of the company is taken by the riico on 3-9-1996. it is stated that the riico has taken over the possession of the fixed assets of the company (in liquidation) situated at plot k-1921, road no. 1, jaitpura industrial area, jaipur.5. the official liquidator submitted that the non-applicants nowhere stated or mentioned that the record relating to accounts and other books of the company, usually maintained at the registered office of the company, were also taken over by the riico or that the possession of the registered office was also taken. in these factual back drop this application under section 454 of the companies act, 1956 has been filed and following prayer has been made :'it is therefore the prayer of the humble applicant that the non-applicants who are the ex-directors of the company under liquidation, while being statutorily liable to submit the statement of affairs of the company, despite having been called upon to do so, even though they were in a position to do so, did not do so within the period prescribed, (nor have they clone so till date) be summoned and tried according to law. it is also prayed that they be meted out the punishment fit for the offence, which entails imprisonment for up to 2 years and fine of up to rupees one hundred for each day the default continues.it is further prayed that the non -applicants may also be directed to file the statement of affairs under section 454 of the companies act, 1956.'6. the non-applicants submitted their reply to this application. their case is that on 3rd of september, 1996 the riico had already taken the possession of all the assets including the land and building, plant and machinery of the company (in liquidation). on 20-3-1997 ex parte winding up order has been passed by the learned company judge without serving the notice on the non-applicants. they have admitted that notices were sent to them by the official liquidator on 3-9-1997. it is their case that on receipt of that notice the non-applicants came to know first time about the ex parte winding up orders. on 30th of april, 1997 an application came to be filed for recalling the ex parte winding up order. the non-applicants submitted that on 30th of april, 1997 they informed to the official liquidator that the land and building, plant and machinery have already been taken into possession by the riico on 3rd of september, 1996 and the non-applicants have filed application for recalling of the ex, parte winding up order. in addition to this, as per their case, on 24th of may, 1.997 the non-applicants filed d.b. special appeal no. 21/98 against the order of the company court ordering for winding up of the company (in liquidation). that appeal was pending. it is not in dispute that on 28th of september, 2001 the statement of affairs have been filed by the non-applicants.7. when this matter came up for consideration the court observed that unless the appeal and the application filed by the non-applicants for recalling/setting aside of the order of winding up of the company (in liquidation), are not decided, the court may not consider it. it is not in dispute that those two proceedings have already been withdrawn by the non-applicants.8. the order of the winding up of the company, thus, attained finality. the requirement of section 454(2) of the companies act, 1956 is that the statement of affairs are to be submitted and verified by one or more of the persons who are, at the relevant date, the directors and by the person who is at that date, the manager, secretary or other chief officer of the company (in liquidation). the statement of affairs have to be made and submitted by the above persons from their own record whether or not the official liquidator call upon them to do so. this is an independent duty and also an obligation under the statute. the official liquidator has given out the delay in days made in filing of the statement of affairs which is of 1630 days.9. the learned counsel for the official liquidator highlighted during the course of argument the conduct of the non-applicants. it is urged that the attendance of the non-applicants could have been procured only by the bailable warrants. only after service thereof they put their appearance in the matter.10. it has next been contended that the non-applicants have not submitted the explanation for this inordinate delay made in submitting the statement of affairs of the company (in liquidation).11. shri r.p. garg, the learned counsel for the non-applicants, on his turn, stated that the non-applicants have acted bona fide in the matter. they have not made delay deliberately, wilfully or purposely, in making the statement of affairs. immediately after the winding up order of the company (in liquidation) has been passed the non-applicants filed an application for setting aside the same as it is passed without notice to them. not only this they have also filed an appeal. they were bona fide prosecuting both these remedies and having all hope of their success therein, this delay is occurred in filing of the statement of affairs.12. ultimately, on court's suggestion, both these two proceedings, the application for setting aside of the ex parte order and appeal against the original order of the winding up, step has been taken for withdrawal thereof.13. learned counsel for the parties are in agreement that the order of the winding up of the company (in liquidation) was not stayed by the company judge in the application filed by the non-applicants for recalling the same or in the appeal by the division bench. thus, the non-applicants have to file the statement of affairs.14. sub-section (5) of section 454 of the companies act, 1956 provides that 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 extend to one hundred rupees for every day during which the default continues, or with both. the words 'one hundred' in sub-section (5) of section 454 of the companies act, 1956 has been substituted by 'one thousand' by the companies (amendment) act, 2000 with effect from 13-12-2000. the question falls for consideration of the court is whether it is a reasonable excuse not to file the statement of affairs in time that the application for recalling the winding up order or the appeal were filed by the non-applicants. the winding up proceedings or the order of the winding up, at the cost of repetition it is to be stated, were not stayed either by the company judge in the application for recalling it or in appeal filed against the same by the division bench. merely on filing of this application for setting that order or the appeal against that order, does not automatically stay thereof. the non-applicants are to file the statement of affairs and the explanation furnished for non-filing thereof cannot be said to be a reasonable excuse which relieves them from their legal duty to file the statements of affairs of the company (in liquidation),15. what it is stated and put as a defence by the non-applicants for justifying their inaction or omission of non-filing of the statement of affairs within a reasonable time, is accepted, it will give a tool in hands of the directors or the persons concerned not to file the statement of affairs in almost all the cases of winding up. the statement of affairs are not filed in time in almost all the cases of this category. even the ex-directors made it difficult for the official liquidator to get them served with notices of the application under section 454(5) of the act, 1956.16. taking into consideration this aspect of the matter from any angle or approach on this ground as projected and presented in the reply to the application it cannot be taken a reasonable excuse for non-filing of the statement of affairs and thus the non-applicants have committed an offence which makes them liable for penalty as provided under subsection (5) of section 454 of the companies act, 1956.17. the next question falls for consideration is what penalty is to be ordered against the non-applicants.18. sub-section (5) of section 454 of the companies act, 1956 provides two penalties, first - imprisonment for a term which may extend to two years or, second - fine which may extend to one hundred and now one thousand rupees for every day during which the default continues or with both.19. in the facts of this case i do not consider it to be a fit case where non-applicants are to be sentenced to undergo imprisonment. the non-applicants have filed their application for recalling of the winding up order and the appeal against it and the possession of the assets of the company (in liquidation) was taken way back on 3-9-1996 by the riico, the interest of justice will be met where the alternate punishment provided of fine is to be ordered against each of them of rs. 10 for every day during which the default continued.20. the learned counsel for the parties are in agreement that this default continued for 1630 days. thus, each non-applicants shall deposit rs. 16,300 (1630 days x 10 rupees) with the official liquidator.21. the learned counsel for the non-applicants submits that the factory has been closed long back and the non-applicants are facing serious financial constraint and, as such, they are not in a position to make the payment of this amount of fine at one time. he prayed that the non-applicants may be permitted to pay amount of fine in reasonable monthly instalments. this prayer is not seriously opposed by the learned counsel for the official liquidator.22. accordingly, the non-applicants are extended this benefit to pay this amount of 'fine' in six equal monthly instalments; first instalment is to be paid on 1st of june, 2003. in case the default is made in payment of two consecutive instalments of this amount of fine the official liquidator shall be free to proceed against the non-applicants in accordance with the law to recover this amount.23. the application accordingly stands disposed of.

Judgment:
ORDER

S.K. Keshote, J.

1. The Official Liquidator of M/s. San India Electrochem Private Limited (In liquidation) has filed this application under Section 454 of the Companies Act, 1956.

2. The facts of the case are that M/s. San India Electrochem Private Limited (In liquidation) having its registered office at C-2, Bhagwan Das Road, C-Scheme, Jaipur and worked at Plot No. K-1921, Road No. 1, Jaitpura Industrial Area, Jaipur, was ordered to be wound up on 20-3-1997 in S.B. Company Petition No. 24/96, titled Design Fabrication & Consultant Engineers v. San India Electrochem Private Limited.

3. The Official Liquidator, as required by Section 454(1) of the Companies Act, 1956, sent a registered AD notice in Form 55 under Rule 124, to the non-applicants, informing them of the order passed by this Court and calling upon them to submit within 21 days from the date of the winding up order, a statement of affairs of the aforesaid company ordered to be wound up. They were also directed to obtain the necessary forms and instructions from the office of the Official Liquidator. The non-applicants were served him the above notice, but statement of affairs as statutorily required to be submitted were not filed. A letter dated 30-4-1997 addressed to the Official Liquidator was received on 1-5-1997 from the non-applicants informing that an application to recall the winding up order dated 20-3-1997 has been filed in the Court.

4. Referring to the contents of Para No. 5 of the application of the non-applicants for recalling of the order dated 20-3-1997 the Official Liquidator stated that Shri Sanjay Jain, non-applicant No. 1, has referred that the possession of the assets of the company is taken by the RIICO on 3-9-1996. It is stated that the RIICO has taken over the possession of the fixed assets of the company (in liquidation) situated at Plot K-1921, Road No. 1, Jaitpura Industrial Area, Jaipur.

5. The Official Liquidator submitted that the non-applicants nowhere stated or mentioned that the record relating to accounts and other books of the company, usually maintained at the registered office of the company, were also taken over by the RIICO or that the possession of the registered office was also taken. In these factual back drop this application under Section 454 of the Companies Act, 1956 has been filed and following prayer has been made :

'It is therefore the prayer of the humble applicant that the non-applicants who are the ex-directors of the company under liquidation, while being statutorily liable to submit the statement of affairs of the company, despite having been called upon to do so, even though they were in a position to do so, did not do so within the period prescribed, (nor have they clone so till date) be summoned and tried according to law. It is also prayed that they be meted out the punishment fit for the offence, which entails imprisonment for up to 2 years and fine of up to Rupees one hundred for each day the default continues.

It is further prayed that the Non -Applicants may also be directed to file the statement of affairs under Section 454 of the Companies Act, 1956.'

6. The non-applicants submitted their reply to this application. Their case is that on 3rd of September, 1996 the RIICO had already taken the possession of all the assets including the land and building, plant and machinery of the company (in liquidation). On 20-3-1997 ex parte winding up order has been passed by the learned Company Judge without serving the notice on the non-applicants. They have admitted that notices were sent to them by the Official Liquidator on 3-9-1997. It is their case that on receipt of that notice the non-applicants came to know first time about the ex parte winding up orders. On 30th of April, 1997 an application came to be filed for recalling the ex parte winding up order. The non-applicants submitted that on 30th of April, 1997 they informed to the Official Liquidator that the land and building, plant and machinery have already been taken into possession by the RIICO on 3rd of September, 1996 and the non-applicants have filed application for recalling of the ex, parte winding up order. In addition to this, as per their case, on 24th of May, 1.997 the non-applicants filed D.B. Special Appeal No. 21/98 against the order of the Company Court ordering for winding up of the Company (in liquidation). That appeal was pending. It is not in dispute that on 28th of September, 2001 the statement of affairs have been filed by the non-applicants.

7. When this matter came up for consideration the court observed that unless the appeal and the application filed by the non-applicants for recalling/setting aside of the order of winding up of the company (in liquidation), are not decided, the court may not consider it. It is not in dispute that those two proceedings have already been withdrawn by the non-applicants.

8. The order of the winding up of the company, thus, attained finality. The requirement of Section 454(2) of the Companies Act, 1956 is that the statement of affairs are to be submitted and verified by one or more of the persons who are, at the relevant date, the Directors and by the person who is at that date, the Manager, Secretary or other Chief Officer of the Company (In liquidation). The statement of affairs have to be made and submitted by the above persons from their own record whether or not the Official Liquidator call upon them to do so. This is an independent duty and also an obligation under the statute. The Official Liquidator has given out the delay in days made in filing of the statement of affairs which is of 1630 days.

9. The learned counsel for the Official Liquidator highlighted during the course of argument the conduct of the non-applicants. It is urged that the attendance of the non-applicants could have been procured only by the bailable warrants. Only after service thereof they put their appearance in the matter.

10. It has next been contended that the non-applicants have not submitted the explanation for this inordinate delay made in submitting the statement of affairs of the company (in liquidation).

11. Shri R.P. Garg, the learned counsel for the non-applicants, on his turn, stated that the non-applicants have acted bona fide in the matter. They have not made delay deliberately, wilfully or purposely, in making the statement of affairs. Immediately after the winding up order of the Company (in liquidation) has been passed the non-applicants filed an application for setting aside the same as it is passed without notice to them. Not only this they have also filed an appeal. They were bona fide prosecuting both these remedies and having all hope of their success therein, this delay is occurred in filing of the statement of affairs.

12. Ultimately, on Court's suggestion, both these two proceedings, the application for setting aside of the ex parte order and appeal against the original order of the winding up, step has been taken for withdrawal thereof.

13. Learned counsel for the parties are in agreement that the order of the winding up of the company (in liquidation) was not stayed by the Company Judge in the application filed by the non-applicants for recalling the same or in the appeal by the Division Bench. Thus, the non-applicants have to file the statement of affairs.

14. Sub-section (5) of Section 454 of the Companies Act, 1956 provides that 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 extend to one hundred rupees for every day during which the default continues, or with both. The words 'one hundred' in Sub-section (5) of Section 454 of the Companies Act, 1956 has been substituted by 'one thousand' by the Companies (Amendment) Act, 2000 with effect from 13-12-2000. The question falls for consideration of the Court is whether it is a reasonable excuse not to file the statement of affairs in time that the application for recalling the winding up order or the appeal were filed by the non-applicants. The winding up proceedings or the order of the winding up, at the cost of repetition it is to be stated, were not stayed either by the Company Judge in the application for recalling it or in appeal filed against the same by the Division Bench. Merely on filing of this application for setting that order or the appeal against that order, does not automatically stay thereof. The non-applicants are to file the statement of affairs and the explanation furnished for non-filing thereof cannot be said to be a reasonable excuse which relieves them from their legal duty to file the statements of affairs of the Company (in liquidation),

15. What it is stated and put as a defence by the non-applicants for justifying their inaction or omission of non-filing of the statement of affairs within a reasonable time, is accepted, it will give a tool in hands of the Directors or the persons concerned not to file the statement of affairs in almost all the cases of winding up. The statement of affairs are not filed in time in almost all the cases of this category. Even the ex-directors made it difficult for the Official Liquidator to get them served with notices of the application under Section 454(5) of the Act, 1956.

16. Taking into consideration this aspect of the matter from any angle or approach on this ground as projected and presented in the reply to the application it cannot be taken a reasonable excuse for non-filing of the statement of affairs and thus the non-applicants have committed an offence which makes them liable for penalty as provided under subsection (5) of Section 454 of the Companies Act, 1956.

17. The next question falls for consideration is what penalty is to be ordered against the non-applicants.

18. Sub-section (5) of Section 454 of the Companies Act, 1956 provides two penalties, first - imprisonment for a term which may extend to two years or, second - fine which may extend to one hundred and now one thousand rupees for every day during which the default continues or with both.

19. In the facts of this case I do not consider it to be a fit case where non-applicants are to be sentenced to undergo imprisonment. The non-applicants have filed their application for recalling of the winding up order and the appeal against it and the possession of the assets of the company (in liquidation) was taken way back on 3-9-1996 by the RIICO, the interest of justice will be met where the alternate punishment provided of fine is to be ordered against each of them of Rs. 10 for every day during which the default continued.

20. The learned counsel for the parties are in agreement that this default continued for 1630 days. Thus, each non-applicants shall deposit Rs. 16,300 (1630 days X 10 rupees) with the Official Liquidator.

21. The learned counsel for the non-applicants submits that the factory has been closed long back and the non-applicants are facing serious financial constraint and, as such, they are not in a position to make the payment of this amount of fine at one time. He prayed that the non-applicants may be permitted to pay amount of fine in reasonable monthly instalments. This prayer is not seriously opposed by the learned counsel for the Official Liquidator.

22. Accordingly, the non-applicants are extended this benefit to pay this amount of 'fine' in six equal monthly instalments; first instalment is to be paid on 1st of June, 2003. In case the default is made in payment of two consecutive instalments of this amount of fine the Official Liquidator shall be free to proceed against the non-applicants in accordance with the law to recover this amount.

23. The application accordingly stands disposed of.