Shri R.C. Abrol And Anr. vs Rc Abrol & Co. (P) Ltd. Through ...
2002 Latest Caselaw 1197 Del

JUDGMENT

Mukul Mudgal, J.

1. This company appeal is against the Order of the learned Single Judge dated 24th September, 1981, dismissing the CA. No. 514 of 1981 in CP. No. 19-D of 1966, filed by the appellants under Section 446(3) of the Companies Act, 1956(hereinafter referred to as the "Act"). The appellants had sought the quashing of a complaint No. 13/A of 1977 filed by the OL before the Metropolitan Magistrate, Tis Hazari, Delhi under Section 538 and 541 of the Act.

2. The appellants have sought to impugn the order of the learned Single Judge dismissing the application under Section 443(3) of the Companies Act and it is contended that a complaint under Section 538 and 541 of the Act did not lie against the appellants as they had taken all steps to reconstruct the record as per the directions of the Hon'ble Company Judge and for that purpose has sought to rely upon the following observation of the learned Company Judge made in the Order dated 14.1.1980:

"To take steps at his costs for the reconstruction of the records insofar as it is possible and completion and audit of the accounts so that the statement of affairs already filed may be completed and the necessary record record may be reconstructed as required by the Official Liquidator."

The petitioner has sought to interpret these observations of the learned Company Judge made on 14.1.1980 to mean that after such compliance as stipulated in the Order dated 14.1.1980 was made, the proceedings against the appellants were bound to be dropped. Further reliance is placed for that purpose on the following other observations in the Order dated 14th January, 1990:

"If such steps are taken it may not be necessary to pursue the prosecution now pending in this Court and in the Court of the Magistrate."

3. It is the appellant's case that such observations implied that the prosecution of the appellants is bound to be dropped. The appellants submit that after expending considerable amount of money by them, the record had been got completed to some extent and the appellants could not have been held responsible for the non-completion of the balance record which related to postings which could not be made due to the sealing of the office of the company M/s R.C. Abrol & Company (P) Ltd. by the income-tax authorities and the desertion of the accounts staff of the company. The appellants have also sought to rely upon what according to them were ceratin oral observations made by the learned Single Judge. Section 446(3), 538(c) and 541 of the Act reads as under:

"446. Suits stayed on winding up order.

x x x x x

(3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court.

538. Offences by officers of companies in liquidation (1) If any person, being a past or present officer of a company, which, at the time of the commission of t he alleged offence, is being wound up, whether by or subject to the supervision of the court or voluntarily, or which is subsequently ordered to be wound up by the court or which subsequently passes a resolution for voluntary winding up,--"

x x x x x

(c) does not deliver up to the liquidator, or as he directs, all such books and papers of the company as are in his custody or under his control and which he is required by law to delivery up.

x x x x x

he shall be punishable, in the case of any of the offences mentioned in Clauses (m), (n) and (o), with imprisonment for a term which may extend to five years, or with fine, or with both, and, in the case of any other offence, with imprisonment for a term which may extend to two years, or with fine, or with both:

Provided that it shall be a good defense-

(i) to a charge under any of the Clauses, (b), (c), (d),

(f)(n) and (o), if the accused proves that he had no intent to defraud; and

(ii) to a charge under any of the Clauses, (a), (h), (i) and (j), if he proves that he had no intent to conceal the true state of affairs of the company or to defeat the law.

541. Liability where proper accounts not kept,--(1) Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year.

(2) Fro the purposes of Sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not been kept-

(a) such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid; and

(b) where the business of the company has involved dealings in goods, statements of the annual stocktaking and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be indentified."

4. The pleas of the learned counsel for the appellants are without merit and deserve rejection. Even in the memo of appeal the appellants have clearly admitted that there was non-completion of the documents and non-filing of statement of affairs as required by the OL under the Companies Act. It has been admitted that the first appellant had filed the statement of affairs which was considered by the OL to be incomplete and the complete statement of affairs could not be filed by the appellants because of the incomplete record. In our view, the non-completion of record and the incomplete filing of the statement of affairs is wholly of the appellants' own making and the desertion of its own staff and the sealing of the office of the company by the income-tax authorities cannot be legally sustainable grounds for seeking quashing of the appellant's prosecution under Section 446(3) by the Company Court. Inherent in the memo of appeal of the appellants is the admission of the appellants that the appellants did not complete the accounts and did not file an appropriate statement of affairs. The observations made in the Order dated 14.1.980 cannot bear the meaning sought to be given by the appellants for quashing of complaint. In any event, the appellants have admitted that they did not complete the accounts and complete statement of affairs was not filed with the OL. A perusal of Section 538(c) and 541 of the Act clearly shows that at this stage the petitioner cannot seek the transfer, disposal and quashing of the proceedings. It cannot be said at this stage that no ingredient of the offence under Section 538 and 541 of the Act can be made out even if all the averments of the complaint are taken to be true. In any event these are pleas which the appellants may, if so advised raise in the complaint as a defense and cannot lead to the quashing of proceedings under Section 538 and 541 of the Act. In this view of the matter, the appeal is without merit and the learned Single Judge was fully justified in dismissing the application filed by the appellants under Section 446(3) of the Companies Act.

5. The appeal is accordingly dismissed with no orders as to costs.