Bombay High Court Acquits Ex-Directors in Prosecution under Section 454 of Companies Act, 1956

Headnote:

The Bombay High Court held that failure of ex-directors to file the Statement of Affairs of a wound-up company constitutes a continuing offence under Section 454(5) of the Companies Act, 1956. However, the Court acquitted the accused, holding that the prosecution failed to prove willful default (default without reasonable excuse) beyond reasonable doubt.

Background:

1. M/s. Geeta Marine Services Pvt. Ltd. was ordered to be wound up on 19 March 2009, and the Official Liquidator was appointed.
2. Under Section 454(1)–(3), ex-directors were obliged to file the company’s Statement of Affairs (SoA) within 21 days (extendable up to 3 months).
3. Despite repeated notices and court orders, the ex-directors allegedly failed to furnish the prescribed SoA, instead submitting incomplete documents such as balance sheets, vouchers, and bank statements.
4. The Official Liquidator filed a criminal complaint under Section 454(5), alleging willful default. Process was issued on 8 August 2013.
5. The accused pleaded not guilty, contending, complaint barred by limitation, partial documents were submitted, evidence recorded by affidavit was illegal in a summons trial

and one accused had resigned prior to the winding-up order.

Court Observations:

1. Continuing Offence: The Court held that non-filing of SoA is a continuing wrong, as liability extends “for every day” of default until compliance. Thus, the complaint was not barred by limitation.
2. Evidence Issues: Although evidence was recorded via affidavit instead of oral deposition, the Court ruled that since no timely objection was raised, it could not invalidate proceedings.
3. Burden of Proof: The Court clarified that the prosecution bears the initial burden to prove that the accused willfully defaulted despite having access to records. Only then would the burden shift to the accused.
4. Failure of Prosecution: The evidence only showed that incomplete/irregular documents were submitted,but failed to prove willful default. In fact, correspondence (letters of March 2012) suggested some effort was made to file the SoA.
5. Accused No. 2’s Defence: Evidence showed he had resigned in 2005, much before the winding-up order, which weakened the prosecution’s case against him.

Legal Provisions Concerned:

1. Section 454, Companies Act, 1956 – Filing of Statement of Affairs by directors/officers of the company under liquidation.
2. Section 454(5) – Punishment for default (imprisonment up to 2 years, fine up to ₹1,000 per day, or both).
3. Section 454(5A) – Court’s power to take cognizance of such offence.
4. Sections 101, 105, 106, Indian Evidence Act, 1872 – Burden of proof.
5. Sections 468, 472, CrPC – Limitation for filing complaints; continuing offences.

Case Details:

Case Title: Official Liquidator of M/s. Geeta Marine Services Pvt. Ltd.

Vs. Chaudhary & Ors.

Citation: Complaint No. 3 of 2013 in Company Petition No. 628 of 2008

Coram: Justice Sharmila U. Deshmukh

Court: High Court of Judicature at Bombay (Ordinary Original Civil Jurisdiction)