Bombay High Court
The O. L. Of M/S. Geeta Marine Services ... vs 1 Shivkant V. Chaudhary on 1 October, 2025
2025:BHC-OS:17182
OLR Complaint 3-2013.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPLAINT NO.3 OF 2013
IN
COMPANY PETITION NO. 628 OF 2008
Mr. Dinesh Chandra Maingi. ...Petitioner.
AND
The Official Liquidator and the ]
Liquidator of M/s. Geeta Marine ]
Services P. Ltd (In Liqn), having ]
his office at Bank of India Building, ]
5th floor, M. G. road, ]
Fort, Mumbai 400023. ] ...Complainant.
Versus
1] Shivkant V. Chaudhary. ]
302, Nikita Apartments, ]
Amrut Nager, Ghatkopar (West), ]
Bombay 400086. ]
]
2] Sudhir S. Chaudhary, ]
B/1104, Presidential Tower, ]
L.B.S. Marg, Mumbai - 400086. ]
]
3] Geeta S. Chaudhary ]
w/o Shivkant Chaudhary, ]
B/1104, Presidential Tower, ]
L.B.S. Marg, Mumbai - 86. ]
]
4] Seema Menon, ]
3/D, Century, Tower Six, ]
Barnbi Road, Kilpak, ]
Chennai - 600 010. ] ...Accused.
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Mr. Shanay Shah, Hamza Lakhani and Tejas Popat for the Official Liquidator.
Mr. Akshay Patil i/b Jayesh Gawde for accused nos. 1, 3 and 4.
Mr. Pradeep Bakhru, Piyush Kranti i/b Wadia Ghandy & Co., for accused no.2.
------------
Coram : Sharmila U. Deshmukh, J.
Reserved on : August 7, 2025
Pronounced on : October 1, 2025.
Judgment :
1. The Accused are charged with offence punishable under Section
454(5) of Companies Act, 1956 [for short "Companies Act"] with
imprisonment for term which may extend to two years, or with fine,
which may extend to one thousand rupees for every day during which
the default continues, or with both. By order of 8 th August 2013,
process was issued against the Accused.
2. Section 454 of the Companies Act provides for the statement of
affairs to be made to the Official Liquidator and Sub-Section (5) of
Section 454 reads as under:
"If any person, without reasonable excuse, makes default in
complying with any requirements of section, he shall be
punishable with imprisonment for a term which may extend
to two years or with fine which may extend to Rs.1,000/- for
every day during which the default continues or with both"
3. The complaint has been filed by the Official Liquidator of M/s.
Geeta Marine Services Pvt. Limited. against the Accused. It is stated in
the complaint that the Company was ordered to be wound up by order
of 19th March 2009 passed by this Court and the Official Liquidator was
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appointed as Liquidator. The Accused Nos.1 to 4 are the Directors of
the Company at the date of winding up order and as such under a
statutory obligation under Section 454(1) and (3) of Companies Act to
make out and submit to the official liquidator a statement as to the
affairs of the Company (in liqn) in the prescribed form duly verified by
an affidavit and containing the particulars specified in Sub-Section (1)
of Section 454 of the Companies Act, within 21 days from the relevant
date or within the time extended by the Court or by the Official
Liquidator.
4. The complaint states that notices calling for the meeting and to
file the statement of affairs under Section 454 of the Companies Act
were issued to the Ex-Directors on 18 th June 2009 and 21st July 2009.
By order of 15th July 2010, this Court directed the secured creditor and
Ex-Directors to furnish the required information in respect of the
assets and affairs of company in liquidation. By order of 12 th March
2012, this Court had directed the Ex-Directors to file the statement of
affairs of the Company and to hand over the books of accounts and
records of the company within one week from the date of order to
enable the Official Liquidator to proceed further in the winding up
proceedings and to inform about the whereabouts of three barges,
failing which action be taken under Section 454(5A) of the Companies
Act.
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5. On 20th March 2012, the Official Liquidator called upon the
accused to file the statement of affairs and to inform the whereabouts
of three barges taken on hire by the Company from the Petitioning
Creditor. The complaint states that by their covering letters dated 22 nd
March 2012 and 5th April 2012, the Accused submitted copies of
balance sheet for the period 2001-2009, vouchers, bank statements of
the Company, Central Excise Stock Register, Correspondence and
delivery challan.
6. The complaint states that the original documents, the statement
of affairs and the required affidavit giving details of whereabouts of
three barges have not been filed by the Accused and they have not
handed over the books of accounts or records of the company. The
copies of documents/records provided do not constitute books of
accounts.
7. The complaint in paragraph 8 states that the ex-directors of the
company (in liqn) have neither filed Statement of Affairs and the
required Affidavit giving the details of whereabouts of the subject
three vessels nor did they hand over the Books of Accounts and
records of the Company (in liqn) in terms of the order dated 12 th March,
2012 of this Hon'ble Court without any reasonable cause and the
default in filing the Statement of Affairs has rendered themselves
liable for punishment as per provisions of Section 454(5) of Companies
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Act, 1956.
8. The Accused pleaded not guilty and the complaint proceeded to
trial. On behalf of the prosecution, one Kajal Murlidhar Barve, Junior
Technical Assistant working in the office of Official Liquidator led
evidence on 16th January, 2019 by tendering the Affidavit in lieu of
examination in chief, which was taken on record along with the
documents, which were marked as Exhibit P-1 to P-17. In further
examination in chief, PW-1 has stated that the complaint is filed for
non filing of the statement of affairs within the time prescribed under
Section 454 of the Companies Act and she has knowledge about the
matter being section in-charge and is giving evidence on the basis of
documents that are maintained in the office of Official Liquidator.
9. On the adjourned date for cross examination, an objection was
taken to the evidence being recorded by way of affidavit in lieu of
examination in chief as the trial was summons trial. By order of 12 th
June 2019, this Court overruled the objection proceeding on the basis
that accused no.1 has consented to the fact that the Court need not
waste its time in recording evidence but accepts the affidavit in lieu of
examination in chief and for convenience, the affidavit of examination
in chief was marked as Exhibit P-18.
10. In cross examination, PW1 has admitted that she is not
personally aware about what happened in the meeting held on 4 th
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August 2009. She has stated that no statement of affairs was sent
separately and only documents mentioned in paragraph 2 of P-14 was
received. She has further admitted that accused no.1 has submitted
the statement of affairs but it was the opinion of Official Liquidator
that the statement of affairs was not in the prescribed form. She has
further stated that statement of affairs was submitted after filing of
complaint and produced two sets of documents which were marked as
Exhibit P-18 and P-19. She has stated that Exhibit P-18 and P-19 are
not in the prescribed form as every page has not been signed by the
Ex-directors, all columns have not been filled and there are no
supporting documents provided.
11. In cross examination by the Advocate for accused no.2, PW1 was
confronted with the certified copy of Form No.32 issued by the
Registrar of Companies of 5 th September 2018 which was marked as
"Exhibit A-1". It was put to PW-1 that accused no.2 had resigned on 1 st
February 2005. Insofar as other accused are concerned, the cross
examination on behalf of accused no.1 was adopted.
12. By order of 26th July 2019, the submission of Mr. Patil, learned
Counsel for accused was recorded that accused nos.3 and 4 are women,
one of whom is paralysed and one of them had been discharged from
the ICU of Hospital and that examination of accused nos. 3 and 4 under
the provisions of Section 313 of the Code of Criminal Procedure, 1973
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[for short "CrPC"] be dispensed with. Accordingly, the examination of
accused nos. 3 and 4 under Section 313 of CrPC was dispensed with
and the statement of accused nos. 1 and 2 under Section 313 of CrPC
was recorded.
SUBMISSIONS:
13. Mr. Shah, learned Counsel for the Official Liquidator submits
that upon taking inspection of the record in the office of ROC, the
Official Liquidator learnt about the Directors of company and the
assets which were hypothecated with the financial institutions. He
would submit that petitioning creditor has filed an affidavit stating
that Company in liquidation was holding three vessels belonging to the
petitioning creditor, which has not been disclosed by the Accused. He
points out the order dated 12th June 2019, passed by this Court
rejecting the objection taken by Mr. Patil about the evidence being
recorded by way of affidavit in lieu of examination in chief. He submits
that on 18th June 2009 and 21st July 2009, notices were issued to the
Ex-Directors to file statement of affairs and meeting was held on 4 th
August 2009. He has taken this Court through various orders passed by
this Court in the Company Petition and submits that by order of 12 th
March 2012, the Ex-Directors were directed to file three statements of
affairs and affidavit setting out the whereabouts of three barges. He
submits that on 20th March 2012, the Official Liquidator addressed a
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letter to the accused calling upon them to file the statement of affairs
under Section 454 of the Companies Act. He further points out Exhibit
P-14 which is the response by the advocate for accused no.1 to the
Official Liquidator and submits that the communication does not set
out any reasonable excuse for not having filed the statement of affairs
or handing over the books of accounts or records to the Official
Liquidator. He submits that after the complaint was filed, Exhibit P-18
and Exhibit P-19 were furnished by the accused. He points out to the
evidence of PW-1 and submits that PW-1 has specifically deposed that
the statement of affairs is not in prescribed form and has given reasons
for the same. He would further take this Court to Exhibit P-19 and
would submit that Form No.57 which was submitted by the accused
purporting to be the statement of affairs was incomplete and did not
contain necessary information. He would further submit that in the
Director's Report, the secured and unsecured loans were set out
whereas in the statement of affairs tendered on 11 th February 2015,
the liabilities are stated as NIL. He submits that the books of accounts
for the period 2010-2014 were not filed. He submits that the statutory
provisions do not mandate any notice to be issued to the Directors to
submit the statement of affairs. He submits that accused have failed
to submit the statement of affairs without any reasonable excuse. He
submits that there was no evidence led by the accused and the
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evidence led by the prosecution established the offence punishable
under Section 454(5) of the Companies Act. In support he relies upon
following decisions :
Official Liquidator of Security and Finance P. Ltd. v. B. K.
Bedi1
Ashwani Suri v. Ganga Automobiles Ltd.2
Prabha P. Shenai v. Official Liquidator of Crown Maritime
Co. Ltd.3
Official Liquidator, Trimurthy Agro-Chemical Ltd. v.
Niranjan Jayantilal Tolia4
State of Bihar v. Deokaran Nenshi5
Gajanan Manikrao Mandekar v. Deepashri Gajanan
Mandekar6
Virender Pal v. State of Haryana7
Atma Ram v State of Rajasthan8
S C Garg v. State of UP9
State of Punjab v. Naib Din10.
Official Liquidator v. Ravindra Kumar Saxena11
14. Mr. Patil, learned Counsel for accused no.1, 3 and 4 submits that
the complaint is barred by limitation. He submits that in the present
case, the winding up order was passed on 19 th March 2009 and Section
454(3) of the Companies Act provides that the statement shall be
1 1974 SCC OnLine Del 10.
2 2012 SCC OnLine Del 3649.
3 2018 SCC OnLine Bom 4898.
4 1984 SCC OnLine Guj 271.
5 (1972) 2 SCC 890.
6 Judgment of this court in CRA No. 91 of 2018 dated 12 th April 2023 (Nagpur).
7 2025 SCC OnLine SC 1118.
8 (2019) 20 SCC 481.
9 2025 SCC OnLine SC 791.
10 (2001) 8 SCC 578.
11 2010 SCC OnLine Raj 964.
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submitted within 21 days from the relevant date or within such
extended time not exceeding 3 months as the Official Liquidator or
Tribunal may for special reasons appoint. He submits that even taking
into account the extended period of 3 months, the offence took place
in the month of July / August 2009 and the present complaint has been
filed in the year 2013. Drawing support from the provisions of Section
468 of CrPC, he submits that in case of summons triable case, the
limitation is 3 years.
15. On merits, he submits that the complaint does not state that
there is default without a reasonable excuse but the averment is that
the default is without reasonable cause. He submits that the evidence
by way of affidavit in lieu of examination in chief cannot be accepted as
evidence as the procedure prescribed under Section 273 of CrPC has
not been followed. He would further submit that under Section 296 of
the CrPC, the evidence of formal character is permitted to be recorded
by way of affidavit of evidence. Without prejudice to the said
argument, he submits that PW-1 had no personal knowledge as she had
joined on 4th July 2016. He submits that in order to establish that the
accused without reasonable excuse had committed default, personal
knowledge was required. He would further submit that under Section
454(1) of the Companies Act r/w Rule 124 of the Company Court Rules,
extension of time was granted for filing statement of affairs.
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16. He has taken this Court through various orders passed in the
Company Petition and submits that in accordance with the
communication dated 20th March 2012-Exhibit P13,the documents
were furnished along with covering letter of 22 nd March 2012. He
submits that in the order of issuance of process, this Court has
recorded that 3 barges were taken on hire and were not owned by the
Company. He submits that there is no evidence that notices in Form
55, as mandated by Rule 124, were issued and as purported notices of
18th June 2009 and 21st July 2009 were not produced, adverse
inference is required to be drawn. He submits that the burden of proof
is upon the Official Liquidator to prove the default without reasonable
cause or reasonable excuse by showing the circumstances that
everything was available and despite thereof, default has occurred
which the evidence on record fails to establish. He submits that in the
examination under Section 313 of CrPC, the adverse circumstance is
required to be put to the Accused for explanation and that in the
examination there is no question put to the accused as regards the
reasonable excuse for default. In support he relies upon following
decisions :
Official Liquidator of M/S. R.S. Motors (P) Ltd. V. Jagjit
Singh Sawhney12
Official Liquidator of Security and Finance P. Ltd. V. B. K.
12 1973 SCC OnLine Del 208.
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Bedi13
O L of La-Bel Laminates Pvt Ltd. v. Ramniklal Chhaganlal
Patel14
P.V.R.S. Manikumar v. The Official Liquidator High Court,
Madras15
Vertex Stock & Shares Pvt. Ltd. V. Vemuri Venkatewara
Rao16
Anil Ambashankar Joshi v. Reena Anil Joshi17
17. Mr. Pradeep Bakhru, learned Counsel appearing for accused no.2
adopts the submissions of Mr. Patil and would supplement the same by
submitting that the accused no.2 has resigned in the year 2005 and was
therefore not a Ex-Director at the relevant time.
18. In rejoinder, as far as the issue of limitation is concerned,
pointing out Section 472 of CrPC, Mr. Shah submits that the offence
under Section 454 of the Companies Act is a continuing offence
considering that the punishment of fine extends for every day during
which the default continues. He submits that permission was taken by
way of Official Liquidator's Report in the year 2012, pursuant to which
the complaint came to be filed and therefore complaint is within
limitation.
19. He would further submit that insofar as the aspect of recording
of evidence by way of affidavit in lieu of examination in chief is
13 1974 SCC OnLine Del 12.
14 2010 SCC OnLine Guj 1765.
15 2013 SCC OnLine Mad 320.
16 2018 SCC OnLine Hyd 316.
17 2016 SCC Online Bom 9872.
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concerned, the decision in Anil Ambashankar Joshi v. Reena Anil Joshi
(supra) relied upon by Mr. Patil is per incuriam. He would further
submit that the objection raised at the initial stages by Mr. Patil was
rejected by this Court. He submits that as the objection has been
rejected, the principle of res judicata will apply. He submits that
recording of evidence by way of an affidavit would at the most
constitute an irregularity and drawing support from the provisions of
Sections 460 and 461 of the CrPC, he submits that the same is not
irregularity which would vitiate the proceedings. He would further
submit that under Section 283 of CrPC, every High Court is empowered
to prescribe the manner in which the evidence of witness and
examination of accused shall be taken down in cases before the Court
and points out to the provisions of Bombay High Court Appellate Side
Rules, 1960 and draws attention of this Court to Chapter XXVI of the
said Appellate Side Rules and the Bombay High Court (Original Side)
Rules, 1980 Rule No.976. He further submits that the initial burden
was upon the Official Liquidator to prove the default was without
reasonable excuse, which burden has been discharged.
20. In sur-rejoinder, Mr. Patil submits that Section 454 of Companies
Act does not state that offence is continuing offence and Sections 460
and 461 of CrPC deal with the irregularity and not illegality. He points
out to Sections 59, 69 and 135 of the Indian Evidence Act, 1872 [for
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short "Evidence Act"] to substantiate his contention as regards the
manner in which the evidence is required to be taken. He submits that
under Section 454(3) of the Companies Act, default is complete upon
expiry of the period within which statement of affairs is required to be
submitted and offence is not a continuing offence. He submits that
Rule 132 and 134 of the Company Court Rules, 1959 provides for the
Official Liquidator to report the default to the Court and provisions of
Section 454 of the Companies Act cannot be construed to mean that
report could not have been filed by the Official Liquidator. He submits
that by virtue of substantive provisions of law, liability can be
dispensed with which will not hamper the progress of the winding up
proceedings. He submits that the interpretation which would support
the accused should be accepted.
REASONS AND ANALYSIS :
21. Dealing first with the submission on limitation, the Accused is
charged with the offence of committing default in complying with the
requirements of Section 454 of the Companies Act as the Statement of
Affairs has not been filed with the official liquidator. The time
prescribed by Sub-Section (3) of Section 454 is 21 days from the
relevant date or within such extended time not exceeding three
months from that date. "Relevant date" means in case where the
provisional liquidator is appointed, the date of his appointment and in
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case where no such appointment is made, the date of winding up order.
22. The complaint does not mention whether provisional liquidator
was appointed and states that by an order dated 19 th March, 2009, the
Company was ordered to be wound up. The relevant date as per the
complaint would be the date of winding up order in the absence of any
submission to the contrary by Mr. Patil. Considering the relevant date
as 19th March, 2009, the extended period of three months would end in
June, 2009. The complaint has been filed in the year 2013. Section 468
of Cr.PC bars taking of cognizance after lapse of period of limitation
and provides for limitation of three years where offence is punishable
with imprisonment exceeding one year but not exceeding three years.
The offence in the present case is punishable with imprisonment for a
term which may extend to two years or with fine which may extend to
one thousand rupees for every day during which the default continues,
or with both. The offence under Section 454 of Companies Act is
summons triable case.
23. It would be relevant to note the provisions of Section 472 of
CrPC which provide that in case of a continuing offence, a fresh period
of limitation shall begin to run at every moment of time during which
the offence continues. The issue to be considered is whether an
offence under Section 454 of Companies Act constitutes "continuing
offence".
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24. In the case of State of Bihar v. Deokaran Nenshi (supra), the
Hon'ble Apex Court was considering the issue of limitation in case of
offence under Sections 66 and 79 of the Mines Act, 1952. Section 66 of
Mines Act, 1952 provided that upon any person omitting inter alia to
furnish return in the prescribed form or manner or at or within the
prescribed time required under the Act shall be punishable with fine
which may extend to Rs.1,000/-. Section 79 of the Mines Act, 1952
provided for the complaint to be made within 6 months of which the
offence was alleged to have been committed or comes to the
knowledge of inspector whichever is later. The Hon'ble Apex Court
held in paragraph no. 5 as under :
"5. A continuing offence is one which is susceptible of
continuance and is distinguishable from the one which is
committed once and for all. It is one of those offences which
arises out of a failure to obey or comply with a rule or its
requirement and which involves a penalty, the liability for
which continues until the rule or its requirement is obeyed or
complied with. On every occasion that such disobediance or
non-compliance occurs and reoccurs, there is the offence
committed. The distinction between the two kinds of offences
is between an act or omission which constitutes an offence
once and for all and an act or omission which continues, and
therefore, constitutes a fresh offence every time or occasion
on which it continues. In the case of a continuing offence,
there is thus the ingredient of continuance of the offence
which is absent in the case of an offence which takes place
when an act or omission is committed once and for all."
25. In Globe Associates P. Ltd v. F. C. Mehra 18 the Delhi High Court
18 (1987) 61 Comp Cas 814.
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while considering an identical issue of limitation, observed that the
object of requiring the filing of statement of affairs within 21 days or
within 3 months is to facilitate speedy action in winding up and to
enable the Official liquidator to get himself immediately acquainted
with all the relevant facts relating to the affairs of company. It held
that reading of the provisions of Section 454 of the Companies Act
would make it abundantly clear that non filing of statement of affairs
in time is a continuing offence and it terminates only upon the filing of
statement of affairs. It further held that the same is the reason why
punishment of fine is extended for every day during which the default
continued.
26. In the case of Maya Rani Punj v. Commissioner of Income Tax
Delhi19 one of the issues for consideration of the Hon'ble Apex Court
was whether the default of non-filing of return within the time
stipulated by law is a continuing offence under Section 271 of Income
Tax Act, 1961. Sub-Section (1)(b)(ii) of Section 271 of the Income Tax
Act, 1961 provides for payment of penalty of sum equal to 2% of the
assessed tax for every month during which the default continued. The
Hon'ble Apex Court held:
"17............. and in view of the language used in Section
271(1)(a) of 1961 Act, the position is beyond dispute that the
legislature intended to deem the non-filing of the return to be
a continuing default-the wrong for which penalty is to be
19 (1986) 1 SCC 445.
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visited, commences from the date of default and continues
month after month until compliance is made and the default
comes to an end. The rule of de die in diem is applicable not
on daily but on monthly basis.
"19. The imposition of penalty not confined to the first
default but with reference to the continued default is
obviously on the footing that non-compliance with the
obligation of making a return is an infraction as long as the
default continued. Without sanction of law no penalty is
imposable with reference to the defaulting conduct. The
position that penalty is imposable not only for the first default
but as long as the default continues and such penalty is to be
calculated at a prescribed rate on monthly basis is indicative of
the legislative intention in unmistakable terms that as long as
the assessee does not comply with the requirements of law he
continues to be guilty of the infraction and exposes himself to
the penalty provided by law."
27. Guided by the principles enunciated by the Hon'ble Apex Court, if
the provisions of Section 454 of Companies Act are considered, the
provision imposes an obligation on the Directors and Officers of the
Company to submit the statement of affairs of the company in
prescribed format. The Section casts an obligation to make over the
statement of affairs in order to enable the official liquidator to get all
information about the assets, debts and liabilities etc of the Company
(in liquidation), which information is crucial to enable the Official
Liquidator to proceed further towards the winding up of the Company.
Each day that default in filing of statement of affairs continues results
in commission of fresh offence. The use of the expression "for every
day during which the default continues" is indicative of the legislative
intent to make the default a continuing wrong for as long as the
default continues. Accepting the contention of Mr. Patil would result in
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releasing the Directors from their obligation of furnishing the
statement of affairs upon expiry of period of three months and face
criminal prosecution, stultifying the process of winding up, which runs
contrary to the legislative intent. Considering the legislative scheme of
winding up, the non fulfillment of obligation by the Ex-Director is
continuing breach and the provision of penalty co-terminus with the
default indicates that offence is a continuing wrong. In my view, the
failure to file the statement of affairs is a continuing offence and
terminates only upon the filing of the statement. The complaint cannot
be said to be barred by limitation.
28. In support of its case, the prosecution has examined the Junior
Technical Assistant working in the office of Official Liquidator who has
filed her affidavit in lieu of examination in chief. Mr. Patil would
contend that the evidence led by way of Affidavit is no evidence in law
in case of summons trial. The permissibility of leading evidence by way
of Affidavit in summons triable case is to be determined by considering
the relevant provisions of the Evidence Act, CrPC and the Companies
Act. Section 4 of CrPC provides for offences under the Indian Penal
Code to be tried according to the provisions contained in CrPC and Sub-
Section (2) provides that all offences under any other law shall be dealt
with according to the same provisions but subject to any enactment for
the time being in force regulating the manner or place of investigating,
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inquiring into, trying or otherwise dealing with such offences. In the
present case, Sub-Section (5A) of Section 454 of Companies Act
provides that the Court may take cognizance of the offence under Sub-
Section (5) upon receiving a complaint of facts constituting such an
offence and try the offence itself in accordance with the procedure laid
down in the Code of Criminal Procedure, 1898 for the trial of summons
cases by Magistrate. The procedure governing the trial of summons
case will therefore govern the trial of offence under Section 454 of the
Companies Act.
29. Chapter XXIII of CrPC providing for mode of taking and recording
evidence contains Section 273 which reads as under:
273. Evidence to be taken in presence of accused. -
Except as otherwise expressly provided, all evidence taken in
the course of the trial or other proceeding shall be taken in the
presence of the accused, or, when his personal attendance is
dispensed with, in the presence of his pleader:
Provided that where the evidence of a woman below
the age of eighteen years who is alleged to have been
subjected to rape or any other sexual offence, is to be
recorded, the court may take appropriate measures to ensure
that such woman is not confronted by the accused while at the
same time ensuring the right of cross-examination of the
accused.
30. Section 273 of CrPC, therefore, mandates for evidence to be
recorded in the presence of Accused. The exceptions to Section 273 of
CrPC can be found in Section 205, Section 317 and Section 299 of CrPC
providing for eventualities when the evidence can be recorded in
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absence of accused. None of these eventualities exist in the present
case. Under CrPC, the Affidavit of evidence is permitted to be given in
terms of Section 295 and 296 which reads as follows:-
"295. Affidavit in proof of conduct of public servants. - When
any application is made to any Court in the course of any
inquiry, trial or other proceeding under this Code, and
allegations are made therein respecting any public servant,
the applicant may give evidence of the facts alleged in the
application by affidavit, and the Court may, if it thinks fit,
order that evidence relating to such facts be so given.
296. Evidence of formal character on affidavit. - (1) The
evidence of any person whose evidence is of a formal
character may be given by affidavit and may, subject to all just
exceptions, be read in evidence in any inquiry, trial or other
proceeding under this Code.
(2) The Court may, if it thinks fit, and shall, on the application
of the prosecution or the accused, summon and examine any
such person as to the facts contained in his affidavit."
31. The prosecution evidence is in respect of facts of the case to
prove the commission of offence under Section 454 of Companies Act
and not in respect of any matter covered by Section 295 and 296 of
CrPC. In this context, it would also be apposite to refer to the Evidence
Act which defines "Evidence" under Section 3 as under:
"Evidence". - "Evidence" means and includes -
(1) all statements which the Court permits or requires to be
made before it by witnesses, in relation to matters of fact under
inquiry such statements are called oral evidence;
(2) all documents including electronic records produced for the
inspection of the court;
such documents are called documentary evidence.
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32. The Evidence Act categories the evidence into (a) oral evidence
that is statement of witnesses made before the Court and (b)
documentary evidence including electronic records which are produced
before the Court for its inspection. In order to constitute oral
evidence, the statement of witnesses is required to be made before
the Court. The Affidavit of a witness with regard to the facts in issue
cannot be treated as a statement of the deponent made before the
Court, unless the law permits otherwise, such as in the case of Section
145 of Negotiable Instruments Act, 1888, which permits the
complainant to adduce evidence by filing affidavit.
33. Upon conjoint reading of the above noted statutory provisions,
the legal position emerging is that while trying an offence under
Section 454 of Companies Act, which is summons triable case, the
evidence is required to be taken in the presence of Accused, which
requirement is not satisfied by filing of an Affidavit in lieu of
examination in chief. It will be worthwhile to note that the Hon'ble
Apex Court in State of Maharashtra v. Dr. Praful B Desai20 and Sujay
Mitra v. State of W.B.21 permitted the examination of witness via video
conferencing by prescribing the procedure to be followed.
20 (2003) 4 SCC 601.
21 (2015) 16 SCC 615.
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34. In A. T. Mydeen v. Assistant Commissioner of Customs
Department22 the Hon'ble Apex Court in paragraph 42 held as under :
"42. The provisions of law and the essence of case laws,
as discussed above, give a clear impression that in the matter
of a criminal trial against any accused, the distinctiveness of
evidence is paramount in light of accused's right to fair trial,
which encompasses two important facets along with others
i.e. firstly, the recording of evidence in the presence of
accused or his pleader and secondly, the right of accused to
cross-examine the witnesses. These facts are, of course,
subject to exceptions provided under law. In other words, the
culpability of any accused cannot be decided on the basis of
any evidence, which was not recorded in his presence or his
pleader's presence and for which he did not get an
opportunity of cross-examination, unless the case falls under
exceptions of law, as noted above."
35. The Hon'ble Apex Court has held that the culpability of any
accused cannot be decided on the basis of any evidence, which was not
recorded in the presence of Accused unless the case falls within the
exceptions of law. The Hon'ble Apex Court thus reiterated and re-
emphasized the accused's right to fair trial. The Hon'ble Apex Court
noted the opinion recorded in Jayendra Vishnu Thakur v. State of
Maharashtra23 which had held that right of the accused to watch the
prosecution witness deposing before a Court of law, indisputably, is a
valuable right.
36. Section 283 of CrPC provides for record in High Court and states
that every High Court may by general rule prescribe the manner in
which the evidence of witnesses and examination of accused shall be
22 (2022) 14 SCC 392.
23 2009 (7) SCC 104.
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taken. Accordingly, Rule 976 of the Bombay High Court (Original Side)
Rules, 1980 provides for mode of recording evidence and states that
the evidence of each witness, as his examination proceeds, shall be
taken in writing by the presiding judge or in his presence and hearing
and under his personal direction and superintendence.
37. Mr. Shah would press in service the provisions of Sections 460
and 461 of CrPC to contend that the filing of Affidavit in lieu of
examination in chief does not constitute an irregularity envisaged
under Section 461 of CrPC. The issue is not about irregularity vitiating
the trial but whether the Affidavit of prosecution witness would
constitute evidence for the purpose of deciding the culpability of
Accused. The recording of evidence by way of affidavit falls foul of the
statutory provisions and the rule framed by the High Court.
38. The decision of Gajanan Manikrao Mandekar v. Deepashree
Gajanan Mandekar (supra) arose out of judgment passed by the Family
Court, Akola in the context of Section 127 of CrPC. One of the
submissions canvassed was that the proceedings were vitiated as the
evidence was led by way of Affidavit which was not permissible under
Section 10 of Family Courts Act. The Learned Single Judge noted the
decision of Hon'ble Division Bench in Mr. K.V. More 3rd Joint Civil Judge
and JMFC, Baramati v. The State of Maharashtra (Criminal Reference
No 3/2007) holding that in matters which go to trial under Chapter IX
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of Cr.Pc, the evidence shall be taken by affidavit considering that the
applications under Chapter IX of CrPC are of civil nature and
consequently applied the provisions of Civil Procedure Code. Similarly,
the decision of Anil Ambashankar Joshi vs Reena Anil Joshi (supra)
arose out of identical provision that is Section 125 of CrPC. The
decisions are clearly distinguishable.
39. Despite the above discussion, in the present case, the failure on
part of the Accused to object to the mode of taking evidence at the
time of filing of Affidavit in lieu of evidence changes the complexion of
the issue. The objection of Mr. Patil is directed towards the mode of
proof of tendering evidence. The Affidavit of PW-1 was tendered by
the prosecution as evidence. In the context of considering the
objection to the admissibility of evidence, the Hon'ble Apex Court in
R.V.E Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P.
Temple24 held as under:
"20.............. Ordinarily an objection to the admissibility of
evidence should be taken when it is tendered and not
subsequently. The objections as to admissibility of documents in
evidence may be classified into two classes: (i) an objection that
the document which is sought to be proved is itself inadmissible
in evidence; and (ii) where the objection does not dispute the
admissibility of the document in evidence but is directed
towards the mode of proof alleging the same to be irregular or
insufficient. In the first case, merely because a document has
been marked as "an exhibit", an objection as to its admissibility is
not excluded and is available to be raised even at a later stage or
even in appeal or revision. In the latter case, the objection
should be taken when the evidence is tendered and once the
24 2003(8) SCC 752.
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document has been admitted in evidence and marked as an
exhibit, the objection that it should not have been admitted in
evidence or that the mode adopted for proving the document is
irregular cannot be allowed to be raised at any stage subsequent
to the marking of the document as an exhibit. The latter
proposition is a rule of fair play. The crucial test is whether an
objection, if taken at the appropriate point of time, would have
enabled the party tendering the evidence to cure the defect and
resort to such mode of proof as would be regular. The omission
to object becomes fatal because by his failure the party entitled
to object allows the party tendering the evidence to act on an
assumption that the opposite party is not serious about the
mode of proof. On the other hand, a prompt objection does not
prejudice the party tendering the evidence, for two reasons:
firstly, it enables the Court to apply its mind and pronounce its
decision on the question of admissibility then and there; and
secondly, in the event of finding of the Court on the mode of
proof sought to be adopted going against the party tendering
the evidence, the opportunity of seeking indulgence of the
Court for permitting a regular mode or method of proof and
thereby removing the objection raised by the opposite party, is
available to the party leading the evidence. Such practice and
procedure is fair to both the parties. Out of the two types of
objections, referred to hereinabove, in the later case, failure to
raise a prompt and timely objection amounts to waiver of the
necessity for insisting on formal proof of a document, the
document itself which is sought to be proved being admissible in
evidence. In the first case, acquiescence would be no bar to
raising the objection in superior Court."
40. The Affidavit in lieu of examination in chief was tendered on 16 th
January, 2019 without any objection being raised by the Accused and
further examination in chief was recorded. On the adjourned date of
cross examination, objection was raised by Accused, which objection
came to be overruled. It is nobody's case that the contents of the
Affidavit are inherently inadmissible but the objection is directed
towards the mode and manner of recording evidence. The objection
was, thus, required to be taken when the affidavit was tendered and
not subsequently. There was no challenge and the Accused proceeded
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to cross examine the PW-1 based on evidence recorded. In that view of
the matter, as the Affidavit in lieu of examination in chief was received
as evidence and further examination conducted, the objection as to its
admissibility cannot be permitted to be raised at the later stage. The
reason is obvious that if the objection would have been raised at the
time of tendering of affidavit, the prosecution would have had an
opportunity of leading oral evidence. Having failed to raise objection
at the time of tendering the affidavit and the objection having been
subsequently overruled, there is no prejudice demonstrated to vitiate
the trial.
41. There was considerable debate as to upon whom the burden of
proof lies to prove that the default in filing the statement of affairs
was without reasonable excuse. Section 101 of Evidence Act provides
that whoever desires any Court to give judgment as to any legal right
or liability dependent on the existence of facts which he asserts, must
prove that those facts exists. Illustration (a) to the Section 101 states
that if "A" desires a Court to give judgment that "B" shall be punished
for a crime which "A" says "B" has committed, "A" must prove that "B"
has committed the crime. Section 105 of Evidence Act provides that
burden of proving that case of Accused comes within exception is upon
the Accused. Section 106 of Evidence Act provides that when any fact is
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especially within the knowledge of any person, the burden of proving
that fact is upon him. Considering the provisions of Section 101 of
Evidence Act, the burden of proof is upon the prosecution to prove the
ingredient of wilful default in filing the statement of affairs. The
wordings of Section 454(5) of Companies Act does not make existence
of reasonable excuse an exception to the offence, in which case the
burden would have been upon the Accused to prove that his case falls
within the exception.
42. Section 106 of Evidence Act which is an exception to Section 101
of Evidence Act, places the burden of proving the fact which is
especially within the knowledge of that person upon that person. It
will have to be considered whether the fact of existence of reasonable
excuse is a fact which can be said to be especially within the knowledge
of the Accused placing the burden of proof upon the Accused by
applying Section 106 of Evidence Act. In P.V.R.S Manikumar v. The
Official Liquidator High Court (supra), the Hon'ble Division Bench of
Madras High Court held that it is the initial burden of prosecution to
prove that in spite of availability of relevant records, the accused failed
to submit the statement of affairs without reasonable excuse and
burden would shift to the accused only in case the complainant
discharges the primary requirement of the provision regarding absence
of reasonable excuse. In Vertex Stock and Shares Pvt Ltd v. Vemuri
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Venkatewara Road (supra), the Full Bench of Telangana High Court
took a view that initial onus to prove absence of reasonable excuse is
on the prosecution and it is only after it has adduced prima facie proof
of relevant facts which, if unrebutted, by the accused would raise a
presumption of existence of such fact in issue i.e. absence of
reasonable excuse, would the onus then shift to the accused to show
proof of reasonable excuse. In Official Liquidator of Security and
Finance Ltd v. B.K. Bedi (supra), the Full Bench of Delhi High Court held
that the Official Liquidator need only prove that notice was sent to the
concerned Director to submit the statement of affairs, that prescribed
time has lapsed and that no extention has been sought for from him or
the court and that the necessary books of the company were available
for inspection by the concerned director. It held that if these facts are
shown prima facie he would have proved that the default is without
reasonable excuse and then it would be for the concerned director to
prove the circumstances to justify his conduct and to show reasonable
excuse for the default. The Full Bench noted the decision of the
Hon'ble Apex Court in Shambu Nath Mehra v. The State of Ajmer25
cautioning against invoking Section 106 of Evidence Act so as to place
burden of proof on the accused. The Hon'ble Apex Court has held as
under:
25 (1956) 1 SCC 337.
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"That Section 106 of the Evidence Act does not abrogate the well
established rule of criminal law that except in very exceptional
classes of cases the burden that lies on the prosecution to prove its
case never shifts and Section 106 is not intended to relieve the
prosecution of that burden. On the contrary, it seeks to meet
certain exceptional cases where it is impossible or
disproportionately difficult, for the prosecution to establish facts
which are especially within the knowledge of the accused and
which can be proved by him without difficulty or inconvenience. But
when knowledge of such facts is equally available with the
prosecution if it chooses to exercise due diligence, they cannot be
said to be especially within the knowledge of the accused and the
section cannot apply."
43. The decision of the Hon'ble Apex Court as noted above clinches
the issue. Section 106 of Evidence Act does not relieve the burden
upon the prosecution in criminal case to prove its case and in
exceptional cases where it is impossible to prove the facts, Section 106
of Evidence Act comes into play. The view taken by the Hon'ble Madras
High Court, the Hon'ble Full Bench of Delhi High Court and Hon'ble
Telangana High Court is consistent that absence of reasonable excuse
can very well be proved by prosecution by leading evidence to
demonstrate that the Accused inspite of availability of relevant records
to facilitate the submission of statement of affairs, have failed to
submit the same. I find no reason to take a different view. The essential
constituent of the offence under Section 454(5) of Companies Act is
the absence of reasonable excuse for default in filing the statement of
affairs, the initial burden being upon the prosecution. Once the
primary facts are proved by prosecution, the onus shifts upon the
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defence to show that there was reasonable cause for not complying
with the requirements of Section 454 of Companies Act. [See Official
Liquidator, Trimurthy Agro-Chemical v. Niranjan Jayantilal Tolia (supra)].
44. One of the defences taken by Mr. Patil is that in absence of any
notice under Rule 124 of The Companies (Court) Rules, 1959, the
liability of Accused to submit the statement of affairs does not arise.
Rule 124 provides for notice in Form No.55 by the Official Liquidator to
the persons mentioned in Section 454(2) as soon as may be after the
order of winding up or order appointing the Official Liquidator as
Provisional Liquidator is made to submit and verify statement of
affairs. The substantive provision is Section 454 of Companies Act
which provides for statement of affairs to be submitted by the Official
Liquidator and prescribes the period of twenty one days from the
relevant date with maximum cap of three months. Conjoint reading of
Section 454 with Rule 124 does not indicate that issuance of notice in
Form No.55 is sine qua non for filing of statement of affairs. The
Directors are statutorily obliged to submit the statement of affairs
within the period prescribed under sub section (3) of Section 454,
which period commences from the relevant date i.e. date of
appointment of provisional liquidator and where there is no such
appointment from the date of winding up order. The absence of
issuance of notice in Form No.55, in my view, is irrelevant for
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determining the culpability of Accused under Section 454(5) of
Companies Act.
45. Dealing now with the issue of whether the prosecution has
proved the offence beyond reasonable doubt. The initial burden was
upon the Official Liquidator to prove the relevant facts to establish the
wilful default in filing the statement of affairs. The prosecution was,
therefore, required to lead evidence to demonstrate that all the
records necessary for filing the statement of affairs were available
with the accused and despite thereof there is default. The Official
Liquidator examined the Junior Technical Officer who deposed on the
basis of official records. PW-1 has deposed about the meeting held by
the Official Liquidator in which the Accused No.1 was present directing
the Ex-Directors to furnish the statement of affairs, the orders passed
by this Court in the Official Liquidator's Reports filed directing the
Accused to file the statement of affairs, the notices issued by Official
Liquidator calling upon the Ex-Directors to submit the statement of
affairs. PW-1 has produced the notices, the orders passed in the
winding up proceedings and the communications from the Accused
submitting certain documents. P-14 is communication dated 22 nd
March, 2012 by the Accused to the Official Liquidator stating that the
statement of affairs has been forwarded as well as the books of
account and the records available with the Accused i.e. balance sheets
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for the financial year 2001 to 2009, vouchers, bank statements, central
excise stock register, correspondence, delivery challan. P-15 is
communication by the Official Liquidator to the Accused in response to
P-14 informing the Accused that the statement of affairs is not
submitted in prescribed format duly verified by an Affidavit containing
the particulars required as per provisions of the section. The
communication states that the books of accounts and statutory
records including the minutes book, statutory books were not handed
over except a few documents even though paragraph 2 of the letter
dated 22nd March, 2012 states that the statement of affairs and books
of accounts have been forwarded. It was stated in the communication
that the Affidavit informing about the whereabouts of three barges of
the Petitioner has not been submitted.
46. In response to questions put up in cross examination, PW-1
produced two documents P-18 and P-19 i.e. Statement of Affairs in
Form No.57 affirmed before notary on 6 th May, 2014 and Statement of
Affairs affirmed on 11th February, 2015. P-18 and P-19 are the
statements of affairs which were submitted after the complaint was
filed on 6th February, 2013. In cross-examination, PW-1 has stated that
these documents are not statement of affairs as every page of P-18
and P-19 are not signed by Directors, all columns are not filled, most of
the columns are blank and no supporting documents have been filed.
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47. The evidence merely proves that the Accused were directed from
time to time to submit the statement of affairs. However, it is not the
default in filing of the statement of affairs which constitutes an
offence but wilful default i.e. default without reasonable excuse that
would constitute an offence under Section 454 of Companies Act. PW-
1 has not event deposed about the preliminary facts to prove the
availability of records with the accused sufficient to prepare the
statement of affairs which would have resulted in the onus shifting
upon the accused. Consequently, the initial burden has not been
discharged by the prosecution.
48. The prosecution has not only failed to prove wilful default, but
also failed to prove that there was default in filing statement of affairs.
P-14 speaks of submission of statement of affairs alongwith the
records available with the Accused. PW-1 has deposed that the letter
dated 22nd March, 2012, was misplaced in the office of Official
Liquidator and could not be traced and copy of the letter dated 22 nd
March, 2012 was placed on record. PW-1 has deposed on the basis of
official records and had no personal knowledge. PW-1 had, thus, no
knowledge about the documents which were submitted under P-14
and whether the statement of affairs submitted was in prescribed
format or not and the evidence in that regard cannot be accepted. PW-
1 has failed to prove the contents of P-15. In order to prove the
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contents of P-15, the prosecution was required to produce the
documents submitted alongwith P-14 to prove that the statement of
affairs was not in prescribed format. As P-14 speaks of submission of
statement of affairs along with records, it is doubtful whether there
was default on part of accused. In the absence of personal knowledge
about P-14 and absence of proof of contents of P-15, the prosecution
has failed to prove beyond reasonable doubt that the statement of
affairs and the documents submitted alongwith P-14 did not meet the
requirements of Section 454(1) of Companies Act. P-14 would prove
that the Accused based on the records available had submitted
statement of affairs to the Official Liquidator.
49. PW-1 has admitted that after filing of complaint, the statement
of affairs P-18 and P-19 have been furnished by the Accused in the year
2014 and 2015. The evidence of prosecution was filed on 1 st November
2018 by which time, the statement of affairs was on record of Official
Liquidator and despite thereof, the PW-1 has not deposed about the
filing of statement of affairs and the same was required to be brought
out in cross-examination. The submission of Mr. Shah is that the P-18
and P-19 are not in consonance with the books of accounts by pointing
out that Director's Report referred to the liabilities which did not find
place in the statement of affairs, which is not the deposition of PW-1.
The said aspect was required to be deposed, which would have given
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an opportunity to the Accused to cross-examine PW-1. It is not the
case of prosecution that the statement of affairs filed subsequently
did not satisfy the requisites of Section 454(1) of the Companies Act
and the deposition by PW-1 in the cross-examination is that there are
certain blanks in the statement of affairs at Exhibit P-18 and P-19 and
supporting documents have not been filed.
50. Even accepting that the statement of affairs was not in
prescribed format, the essential constituent of Section 454 is wilful
default in filing the statement of affairs. PW-1 has merely deposed
that there is default in filing the statement of affairs without any
further evidence to establish wilful default. The minimum requirement
was to demonstrate that books of accounts and records were still
available with the Ex-Directors and therefore they were in a position to
file the statement of affairs and despite thereof they have failed to do
so. The prosecution evidence does not establish that the Ex-Directors
were in possession of the records based on which the statement of
affairs could have been filed and on the contrary P-14 states that based
on the available records, the statement of affairs was filed.
51. In that context, the decision of Hon'ble Division Bench of Madras
High Court in P.V.R.S. Manikumar v. The Official Liquidator High
Court, Madras (supra) is relevant. In that case the Hon'ble Division
Bench was considering the question as to whom the burden of proof
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lies to prove that the default was without reasonable excuse. It held
that proper test in a case of this nature is to see as to who would fail in
case no evidence is led in order to prove the absence of reasonable
excuse. Since the default is qualified and the essential condition is that
the default must be without reasonable excuse, the burden of proof is
very much on the Official Liquidator and he should demonstrate that
the accused failed to submit the statement of affairs without
reasonable excuse.
52. In so far as the statement under Section 313 of Cr.Pc is
concerned, the purpose of recording the statement is to give an
opportunity to the Accused to explain the facts appearing against him
in the evidence. In the absence of any evidence led by the prosecution
to prove that the failure to file the statement of affairs was wilful,
there was no question of putting the said fact to the Accused. In any
event it cannot be said that any prejudice was caused to the Accused
for not putting the case of wilful default to the Accused.
53. In his statement under Section 313 of CrPC, Accused No.1 has
stated that he has submitted all documents as he could. Insofar as
accused No.2 is concerned, he has stated that he was not a director at
the time of passing of winding up order and there are no submissions
canvassed by Mr. Shah as regards the culpability of accused no.2 or
accused Nos. 3 and 4.
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54. In light of above discussion, in my view, the offence under
Section 454 of Companies Act constitutes a continuing office. The
offence being summons triable, the evidence was required to be taken
in presence of accused and in conformity with the rules framed by the
High Court. As no objection was raised by the accused at the time of
leading evidence by way of affidavit, the contents of Affidavit not
being inherently inadmissible, its admissibility on ground of mode of
proof cannot be raised subsequently. The initial burden to prove the
preliminary facts to establish wilful default on part of accused is upon
the prosecution, which upon being discharged, will shift the onus upon
the accused.
55. Upon cumulative appreciation of the evidence on record, in my
view, the prosecution has failed to prove beyond reasonable doubt
that the failure to file the statement of affairs by the Accused was
without reasonable excuse. The onus did not shift on the accused to
show that there was sufficient explanation for the default.
Consequently, all Accused are acquitted.
[Sharmila U. Deshmukh, J.]
Patil-SR (ch) 38 of 38
Signed by: Sanjay A. Mandawgad
Designation: PA To Honourable Judge
Date: 01/10/2025 19:31:40
