Judgment:
ORDER
1. This Company Application is filed under sub-sections (5) and (5-A) of Section 454 of the Companies Act, 1956 (hereinafter referred to as 'the Act') for summoning the respondent herein i.e., Koganti Krishna Kumar and to punish him under sub-section (5) of Section 454 of the Act for non-compliance of the requirements of Section 454 of the Act and to direct him to file forthwith the statement of affairs as required by sub-sections (1), (2) and (3) of Section 454 of the Act.
2. In the affidavit filed in support of the Company Application, it is stated that this Court passed winding up order on 17-11-1989 in Company Petition No. 30 of 1985 directing the winding up of Chlorate India Limited and that the Official Liquidator has become the Liquidator of the Company under section 449 of the Act. It is further stated that notice was issued under sections 454 and 456 of the Act to the respondent herein on 16-1-1990 to submit the statement of affairs and also to deliver possession of the assets, books and papers of the Company and that in spite of that notice, the statement of affairs has not been filed by the respondent herein. It is further stated that under letter dated 8-1-1990 (sic) the respondent informed that he had resigned as Director of the Company with effect from 19-9-1981. It is asserted that under section 454 of the Act, the erstwhile Directors of the Company are officers of the Company 'and therefore he is duty bound to file statement of affairs with the Official Liquidator within 21 days from the date of winding up of the Company'. It is stated that the respondent herein did not comply with the requirements of Section 454 of the Act and that therefore he had committed default in complying with the statutory requirements of sub-sections (1), (2) and (3) of Section 454 of the Act though sufficient time and opportunity has been given, and, therefore, he is punishable under sub-section (5) of Section 454 of the Act and this Court can take cognizance of the offence in view of sub-section (5-A) of Section 454 of the Act.
3. Even without summons being ordered and served on the respondent, Mr. V. S. Raju filed his vakalat for him on 12-7-1991 and on the same day also filed his counter-affidavit dated 10-7-1991. Therein the respondent states that he submitted his resignation from the Board of Directors of the Company with effect from 19-9-1981 by his letter of the same date addressed to the Managing Director of the Company and also communicated the said fact to the Registrar of Companies, Andhra Pradesh, Hyderabad by letter dated 21-9-1981 which was acknowledged by him on 26-9-1981. He also states that he submitted Form No. 32 as required under sub-section (2) of Section 303 of the Act as regards his resignation to the directorship of the Company and that he informed the Official Liquidator about his resignation as Director. To establish that he had nothing to do with the Company ever since his resignation as Director in September, 1981, he refers to the fact that the Company had not been sending any notices of its Board meetings and that he had not been attending any Board meeting since then. He submits that he had neither intimate knowledge of the affairs of the Company nor the possession of any assets, books of accounts, papers etc., of the Company for submitting statement of affairs or to deliver the books, records etc., of the Company. He, therefore, prays that he should be relieved from filing the statement of affairs of the Company.
4. No reply affidavit has been filed by the Official Liquidator controverting the averments in the counter-affidavit of the respondent that he ceased to be a Director of the Company with effect from 19-9-1981 i.e., more than 8 years prior to the date of the winding up order and that he did not have any assets, books or papers of the Company.
5. After hearing the learned counsel for the Official Liquidator and also the learned counsel for the respondent and in view of the uncontroverted fact that the respondent ceased to be a Director of the Company several years prior to the date of winding up order and the fact that he did not have books or papers of the Company or knowledge of the affairs of the Company, I am satisfied that no case whatsoever is made out against the respondent for requiring him to file statement of affairs of the Company.
6. In the affidavit of the Official Liquidator filed in support of the present Company Application it is not categorically stated that the respondent was a Director of the Company on the relevant date i.e., on 17-11-1989. On the other hand, the Official Liquidator seems to accept, and at any rate does not dispute, the statement of the respondent that he ceased to be a Director of the Company from September, 1981. In the circumstances, the Official Liquidator is not right in stating that the respondent was duty bound to file the statement of affairs of the Company within 21 days from the date of winding up of the Company. A reading of sub-sections (2) and (3) of Section 454 makes this clear. The said sub-sections are as follows :-
'(2) The statement shall 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, or by such of the persons hereinafter in this sub-section mentioned, as the Official Liquidator, subject to the direction of the Court, may require to submit and verify the statement, that is to say, persons -
(a) who are or have been officers of the company;
(b) who have taken part in the formation of the company at any time within one year before the relevant date;
(c) who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the Official Liquidator, capable of giving the information required;
(d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates.
(3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Court may, for special reasons, appoint.'
Under the said sub-section (2) the duty to submit and verify the statement is cast on two categories of persons. The first category consists of only those persons who are officers of the Company as specified in the said sub-section at 'the relevant date' which is defined in sub-section (8) of Section 454 as meaning 'in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appointment is made, the date of the winding-up order'. The officers specified are the Directors of the Company and the manager, secretary or other chief officer of the Company. The second category of persons are those specified in Clauses (a), (b), (c) and (d) of the said sub-section (2) in respect of whom 'the Official Liquidator, subject to the direction of the Court, may require to submit and verify the statement'. Clause (a) of sub-section (2) might give rise to some confusion because it says 'who are or have been officers of the company' and thereby includes not merely those who have been the officers of the Company but also who are the officers of the Company, that is to say, Directors of the Company and the manager, secretary or other chief officer of the Company on the relevant date who form part of the first category mentioned above and on whom a duty to submit and verify a statement has already been imposed. I am of the view that in the case of those persons falling under the first category mentioned above, the duty to submit and verify a statement does not depend upon any direction of the Court or a notice from the Official Liquidator requiring them to submit and verify the statement. In the case of all others falling under the second category mentioned above, the duty to submit and verify the statement arises only when there is a direction of the Court or when the Official Liquidator issues notice requiring them to submit and verify the statement. I am also of the view that the time limit specified in sub-section (3) can have application only to officers of the Company falling under the first category mentioned above i.e., those who are Directors of the Company on the relevant date and manager, secretary or other chief officer of the Company on the relevant date, because their obligation to submit and verify the statement springs into existence from the relevant date and does not depend upon any direction of the Court or notice from the Official Liquidator. I am supported in this view by the judgment of a Division Bench of the Kerala High Court in P. M. A. Nambudiripad v. Official Liquidator, (1979) 49 Com Cas 81 : (1979 Tax LR 1640) wherein the learned Judges observed as follows (at p. 1643 of Tax LR) :-
'We need only point out that sub-section (3) proceeds on the basis that the obligation to file the statement arises on the relevant date, which is so only so far as those persons mentioned in the earlier part of Section 454 who are bound to submit the statement even without any requisition by the official liquidator are concerned. Sub-section (3) would, therefore, govern only those whose obligation to submit the statement arises on the relevant date, and not those who become bound to do so only on the official liquidator requiring them to do so.'
Therefore, unless the Official Liquidator establishes that the respondent was a Director of the Company on the relevant date i.e., on 17-11-1989 in this case, he would not be bound to submit the statement of affairs within the time specified in or appointed under sub-section (3) of Section 454. As already pointed out earlier, in the affidavit filed in support of the present application, the Official Liquidator has not stated that the respondent was a Director of the Company on the relevant date.
7. Even though the respondent was not a Director on the relevant date, he was a Director of the Company earlier and therefore, I am of the view that he would be attracted by Clause (a) of sub-section (2) of Section 454 which refers to persons who 'have been officers of the Company' also under sub-section (30) of Section 2 of the Act the expression 'officer' includes among others any Director. Therefore, the respondent can be required to submit and verify the statement. The Official Liquidator can require the respondent by himself or obtain the directions of the Court in that regard. Rules 124 and 125 of the Companies (Court) Rules, 1959 (hereinafter referred to as 'the Rules') provide for notice by the Official Liquidator and for application by the Official Liquidator to the Court for direction respectively to persons mentioned in sub-section (2) of Section 454 and they are as follows :-
'124. Notice to submit statement :- A notice by the Official Liquidator requiring any of the persons mentioned in sub-section (2) of Section 454 to submit and verify a statement of affairs of the company shall be in Form No. 55 and shall be served by the Official Liquidator as soon as may be after the order for winding-up or the order appointing the Official Liquidator as Provisional Liquidator is made.
125. Application by Official Liquidator under section 454 :- The Official Liquidator may apply by summons to the Court for an order directing any person who, in his opinion, is liable to furnish a statement of affairs under section 454, to prepare and submit such a statement or concur in making the same. Notice of the application shall be served on the person against whom the order is sought. Where the Court makes the order, such order shall be in Form No. 56 with such variations as may be necessary.'
Form No. 56 referred to in Rule 125 provides for the manner in which the order of the Court is to be communicated by the Court to the person to whom the direction is given. The time within which the person to whom the direction for submitting and verifying etc., of a statement of affairs of the company is to submit the same, has to be mentioned. The said order may also require the person to attend on the Official Liquidator at his office at such times as the Official Liquidator may appoint and give him all the information that he required as to the affairs of the Company. When a notice to submit a statement is issued to a person by the Official Liquidator under Rule 124 or when an order is issued in Form No. 56 to a person under Rule 125, such a person is bound to comply with the same and failure to do so would attract him to sub-section (5) of Section 454.
8. The question that then arises is whether the respondent can be directed to submit and verify a statement as to the affairs of the Company either by the Official Liquidator or by the Court on an application by the Official Liquidator. The respondent contends that he cannot be so directed for three reasons : (i) because he was not a Director of the Company within one year before the relevant date; (ii) because he ceased to be a Director of the Company more than 8 years before the relevant date; and (iii) because he neither has intimate knowledge of the affairs of the Company nor has in his possession any assets, books of accounts, papers etc., of the Company and therefore he does not have the wherewithal to submit and verify the statement of affairs of the Company.
9. The respondent is not right in contending that he cannot be called to submit and verify the statement because he was not a Director of the Company within one year before the relevant date. Clause (a) of sub-section (2) of Section 454 does not specify that those who have been officers of the Company should have been officers within one year before the relevant date; such a limitation is found only in Clauses (b), (c) and (d) of the said sub-section (2) in respect of persons specified in the said Clauses and the said limitation cannot be extended to persons covered by Clause (a) by any interpretative process. In P. M. A. Nambudiripad's case, (1979) 49 Com Cas 81 : (1979 Tax LR 1640) (Kerala) referred to earlier, an argument was advanced that the use of the present perfect tense 'have been' would indicate that unless a person was an 'officer' on the relevant date or one immediately preceding that date, he could not be said to 'have been an officer', and since persons who were directors on the relevant date were obliged to submit the statement even without the Official Liquidator asking for it, Clause (a) should so far as directors were concerned, be confined to such of them who were directors just before the relevant date. The Division Bench of the Kerala High Court in that case rejected that argument relying on the decision of the Supreme Court in State of Bombay v. Vishnu Ramchandra, : 1961CriLJ450 and held as follows (1979 Tax LR 1640 at p. 1642) (Kerala) :-
'While Clauses (b) to (d) of sub-section (2) of Section 454 mention a period of one year preceding the relevant date as the period during which the persons referred to therein shall have fulfilled the requirements stated therein. Clause (a) does not specify any such period nor does it refer to any date. There can be no doubt that Clause (a) is comprehensive enough to rope in any person who at any time was an officer of the company'.
In Lakhshman Narayan Arora v. Registrar of Companies, (1980) 50 Com Cas 536 (Patna) also a similar contention was advanced before a Division Bench of the Patna High Court. It was contended that Section 454(a) and (b) were inartistically drafted and the expression 'at any time within one year of the relevant date' as was mentioned in the last part of Clause (b) must also govern Clause (a) and that if the words 'at any time within one year of the relevant date' were not imported into clause (a), it would result in montrosity.' That contention was rejected by the Patna High Court holding as follows :-
'It is not possible to accept the submissions made. As pointed out earlier, apart from the directors, manager, secretary or other chief officer of the company who are in those offices at the relevant date, other classes of persons who may be called upon to file the statement have been categorised in sub-section (2). They have, however, been categorised under different heads. Parliament in categorising classes of persons under Clauses (b) to (d) has specifically provided that those persons must have been in the employment of the company concerned within one year before the relevant date. But, for those mentioned under Clause (a), this period has not been provided. This clearly demonstrates the intention of the legislature that the direction of the court in calling upon persons who are mentioned in Clause (a) is not confined only to those who have been in the employment of the company within one year from the relevant date.'
10. The submission that it would lead to monstrosity has also to be rejected inasmuch as in the first sub-section itself it is provided that the court in asking for a statement of affairs from a person shall do so in its discretion. It, therefore, follows that if, in certain circumstances, the court finds that an officer of the company who had been in the employment of the company will not be able to submit the statement as required, it will not call upon such a person to do so.
11. Similarly, the submission that in construing the plain words of a section, punctuations could not be relied upon is of no assistance in the present case. Firstly, as I have pointed out, it is not a question of punctuation when Clauses (a), (b), (c) and (d) of S. 454 are to be construed. As pointed out earlier, different classes of persons have been grouped under different clauses and, in the absence of any other good reason, the provision with regard to one class cannot be imported into the provision with regard to the other class. The words used in Clause (a) are very distinct and clear and, in the absence of any restriction with regard to the period as provided in Clauses (b), (c) and (d), it is not possible to import those restrictions in Clause (a).'
12. A similar view has been taken by a Division Bench of the Delhi High Court in Devinder Kishore Mehra v. Official Liquidator (1980) 50 Com Cas 699. Significantly, in that case, it was contended that all the Directors of the Company resigned long before the winding up order was passed and it appeared that there was nobody who could be called upon to file the statement of affairs as none was a Director on the relevant date. The Division Bench of the Delhi High Court has held as follows upholding the view of the learned single Judge :
'Analysing S. 454 of the Companies Act, the learned Judge, therefore, came to the conclusion that it could not be envisaged that nobody could be called upon in such a situation to file a statement of affairs of the company and so, the ex-directors of a company who resigned even more than one year before the winding up order could be directed to submit a statement of affairs. We are in agreement with the approach of the learned Judge that sub-section (2) of S. 454 speaks of two categories of persons - first, persons who are, on the relevant date, the directors or other officers of the company and, second, such persons other than the first category whom the official liquidator, subject to the directions of the court, may call upon to submit and verify the statement of affairs. The second category is comprised of persons, inter alia, mentioned in Clause (a).
... ... ... ... ...
Therefore, ex-directors of the company who resigned even more than one year before the winding-up order could, in appropriate cases, be directed to submit a statement of affairs.'
The facts in Devinder Kishore Mehra's case (1980) 50 Com Cas 699 (Delhi) indicate the myraid of situations which an Official Liquidator or a Company Court might encounter while dealing with matters relating to statement of affairs under S. 454 and that it is not possible to postulate categorically that a person who ceased to be a Director of a Company several years before the relevant date in respect of that Company cannot be called upon to submit and verify statement of affairs of that Company.
13. The question that remains is, when and under what circumstances a person who ceased to be a Director some time before the relevant date can be required to submit and verify statement of affairs. This question has arisen before other High Courts and I have ample guidance in that regard. In Devinder Kishore Mehra's case (1980) 50 Com Cas 699, the Division Bench of the Delhi High Court has held as follows :-
'The next contention on behalf of the appellant is that the official liquidator can only require such other persons to submit a statement of affairs, subject to the directions of the court, as are in a position to give relevant information. This postulates that the Court would apply its mind and decide in each case whether such direction should be given. It is not contemplated that the court would give direction to the official liquidator to require any and every person to file a statement of affairs merely as an academic exercise. The purpose of getting the statement of affairs is to enable effective and proper winding up of the company. The court is not required to give a direction which in effect would be infructuous. We are in entire agreement with this submission. Indeed, our learned brother has noticed that the appellant was not in a position to know anything about the affairs of the company ever since he was ousted from the management, way back in December, 1966. He had ceased to have approach or access to the books and papers of the company. He did not take part in its management. He even refused to sign the provisional balance-sheet for being submitted to the Punjab National Bank in December, 1966. In this view of the matter, asking such a person to file a statement of affairs is an exercise in futility and we see no reason why a mere academic order should be passed.'
xxx xxx xxx xxx
It has been urged that even past officers may be able to give valuable information and S. 454 in terms talks of past officers. So, the date of resignation of the appellant is immaterial. There is some force in this contention but in the circumstances of this case we do not see how any useful information or rather any information at all can be furnished by the appellant. As has been held by D. K. Kapur J. in Official Liquidator of R.S. Motors P. Ltd. v. Jagjit Singh Sawhney , if the books of the company are not available to a director who is required to file a statement under S. 454, then it will be a reasonable excuse for him in not submitting the statement of affairs of the company ordered to be wound up in a prosecution launched against him for failure to file the statement of affairs. The appellant, as we have already noticed, has been held not to be in a position to have access to the books of the company ever since he was ousted from the management. In these circumstances, calling upon him to file the statement of affairs cannot be justified. Indeed, it cannot be justified for any of the persons unless a clear-cut finding is given that any one of the persons concerned is in a position to or capable of filing the statement of affairs. Such an enquiry is an imperative prerequisite for giving directions under S. 454 on a motion by the official liquidator. We cannot agree with the contention that pleading reasonable excuse is available at the stage of prosecution only. Putting a person in jeopardy of that type without an earlier investigation when it is so required to be made is not called for.'
In that case, the Delhi High Court has held also that mere pleading by a party that he is not in a position to file statement of affairs was neither here nor there and that the statement of affairs is to be filed by persons in a position to do so and not by persons who are or were directors or officers in name or have never had opportunity to know the affairs of the company. A learned single Judge of the Karnataka High Court in Kothari (Madras) Ltd. v. Myleaf Tobacco Dev. Co. (1985) 57 Com Cas 690 : (1984 Tax LR 2168) referred to Devinder Kishore Mehra's case (1980) 50 Com Cas 699 (Delhi) and also to the decision of the Calcutta High Court in Sarkar Estates (P.) Ltd. v. Gostho Behari Sarkar (ILR (1967) 1 Cal 360) and agreed with the views expressed therein. In Official Liquidator, Trimurthy Agro-Chemical Ltd. v. Niranjan Jayantilal Tolia (1984) 56 Com Cas 380, A. M. Ahmadi, J. of the Gujarat High Court (as he then was) has observed that :
'A mere perusal of Form No. 57 is sufficient to show that the person required to file the statement of affairs must have intimate knowledge about the host of information sought under this form which runs into several pages'.
The learned Judge has also held as follows :-
'The expression 'reasonable excuse' means an excuse which a reasonable person considers just and acceptable in the circumstances of the case, that is, which appeals to the reason of a reasonable man. In other words, the excuse must be such as may appear to be probable in the facts and circumstances of the case to a prudent, and not to a gullible person. The evidence on record clearly shows that he did not attend any of the board meetings after March 28, 1974. That was his stand from the very beginning as is evidenced from the telegram sent immediately on receipt of notice under R. 124 of the Rules. The statement of affairs of the company has to be filed in prescribed form No. 57. A bare perusal of the form shows that only a person having intimate knowledge about the affairs of the company would be able to furnish the host of information required thereunder. It is true that the accused could have inspected and did inspect the account books of the company but a mere perusal of the accounts would not enable him to supply the particulars demanded thereunder. I am, therefore, of the opinion that even if accused No. 3 continued to be one of the directors of the company, he was not in position to submit the statement of affairs in the prescribed form as he had no intimate knowledge regarding the affairs of the company since 1974-75. In these circumstances, I am not inclined to think that the prosecution has proved that accused No. 3 committed a default in complying with the requirements of S. 454 of the Act without reasonable excuse.'
14. In the present case, the Official Liquidator has not placed any material whatsoever to establish even prima facie that the respondent is in a position to file the statement of affairs. He has not obtained any directions from this Court by making an application under R. 125 of the Rules for an order directing the respondent to submit a statement of affairs under S. 454 or concur in making the same, especially when the respondent replied to the notice issued by the Official Liquidator under R. 124 of the Rules by stating that he ceased to be a Director of the Company more than 8 years prior to the relevant date and did not have any material whatsoever based on which he could submit a statement of affairs. Even assuming that such a direction can be given now in the present application, the Official Liquidator has not placed any material before me to disbelieve the averments made by the respondent in his counter-affidavit dated 10-7-1991 or to establish that the respondent is having the material and information necessary for the purpose of filing the statement of affairs.
15. In the light of the above discussion, I am satisfied that the facts alleged against the respondent do not constitute an offence under sub-section (5) of S. 454 of the Act as it is not alleged that the respondent committed default in complying with the requirements of S. 454 'without reasonable excuse' and at any rate, nothing is shown to establish that he did not have reasonable excuse for not filing the statement when he has clearly stated in his reply to the notice of the Official Liquidator that he ceased to be a Director eight years prior to the relevant date and he did not have any material whatsoever to submit the statement of affairs of the Company. The Company Application is therefore dismissed.
Order
(On being mentioned on 13-10-1993 pursuant to the order of High Court 5-10-93.)
16. It is made clear that this Order does not preclude the Official Liquidator from requiring the respondent herein, i.e., Sri Koganti Krishna Kumar to appear before him, to give such assistance as is necessary in the winding up of the Company. The learned counsel for the respondent states that the respondent will give all assistance necessary if and when Official Liquidator requires the same of him.
17. Application dismissed.