Company Petition No. 84 of 1997 · The High Court · 2025

b1 this Court. Sri S.F.H.J.Manikshaw. l{cspondent No I iri rro rnorc

2. Vide ordcr dated 19.08.1998, this Courr rlisposcd ol- C.l'.No.84 ol 1997 and ordered winding up o[' Ivlr's Asit l)acilic Investment l'rust I-td. I 'I c 2 COMPA No.6l I of 1998

3. Thereafter, OL has flled COMpA No.6ll of l99g under Sections 454 (5) and (5A) of thc Companies Act, 1956 ( for short, ,the Act') read with Rules 125 and 132 of the Companies (Court) Rules, 1959 ( for short, 'the Rules'), to Summon the respondent Nos. I to 9 herein/Accused Nos I to 9 and to punish thcm undcr sub-sections (5) and (5A) of Scction 454 of the Act, Ibr non-compliance with the requirements undcr the said section u,irh the tbllowing contentions:- i. OL attached to this Court has issued notices to Respondents No.l to 9 (Ex-Dirccrors) of thc said company for filing of statement of Alfairs and also to dcliver possession of the books of accounts and othcr rccords on 07.10.199g,

09.10.1998 and l9.l l.l99li. since rhe Respondents /Accused failed to submit statement ol'affairs within 2t days from the date o['rvinding up order, as prescribed under Section 454(3) of the Act. 1956. According ro rhe OL, the default commcncecl on t0-09-1998 i.e. 2l days after the winding up of the company. The OL in his report datcd 24. I I . I 99ll stated that no extension of time was sought fbr by the Accused either l fior-rt hirn or lrom this Court as stipulatcd uttder scction 454t3) ol the Aot. Therefore, they are liable t r lrc purrishcd undcr subsection (5) and (5A) olthc Sectiorr'l5J ol the Act. for thcir non-compliance of the Statuttlrr l,:qtlilclllctlt\ utrder sub-section (1) (2) and (3) ol thc Section '15'i ol thc Act. iii. Thcrefirre. hc sought to allow the prcscnt appl:c,rtiorr.

4. On thc other hand, the respondent Nos. I tt, 7 hai c lilcd counter stating that Respondent No.l rcsigned and Ilis rLs SllJti()n \\it\ accepted by thc Board of Directors hcld on 09.0'+.1997 l{cspondcnt No.2 resigned on 09.04.1997, Respondent No.3 Illcd I Ir irl'lltlrtvit ol' concurrence to ths statement of alfairs on 08.03.1999 llLcd br one Sri M.C.Jain, and it was taken on record by the Olflci rl l.iquitlator. Respondent No..1 rcsigned and his resignation was ilcccptcd on

10.02.1996. [{esportdent No.5 resigned and his re'itttrtttttt) rrrtr accelrtcd on 0"7 .03.1991 . Respondent No.6 rcsigLrte tl rttrtl his resignation uas accepted on 28.06.1997 and ltespoIltlertl No7 resigned and his resignation was accepted on 15.01 . l9!)7 Ntt coulltcl' flled on behalf ol A.9. They all stated that as they rcsilLrre d long lrack- the1, saaaa, be expected to be aware of the currcnt stittrts tll' thc 4 company and prepare and fi le the statcment of al.fairs thercof. They have also filed copies olForm No.32. 'lherefirre. they sought to drop charges against them.

5. By an order dared 29.03.2000, ltcspondenr No.g was discharged as he was neither the Managing I)irector nor a Director in the Board of Directors olthe Companr rr,hich was not disputed b1,the OL. On 19.02.1999, Onc Mr. M.C. Jain, claiming as Ex-Direcror of the company, has submittcd thc statetncnt ol' af lairs as rcquired u/s.454 of the Act. OF 'l'lIE ('Ot.lR'l :-

6. Perusal of the report dated 15.04.1999 ol' the OI_ would reveal that one Sri. M.C. Jain, Ex-Director of thc conrpany has submitted the statement of alfairs ol- rhc cornpany on 19.02.1999. OL filed a report on 30. I I . 1999 staring rhat in respect ol- the cessation of Accused Nos. l, 2, 5 and 6, on his veritication, no l,orm Nos. j2 have been found in the Document lrile maintained b1, rhe Registrar ol companies in respect of Resignation. r'he or. also srarcs that thc vide order datcd 12.04.1999 in COMpA No.lg2 of'1999. rhis Court has appointed Mr. Satyam and Mr. Veerabhadra (Chatterotl Accountants) 1o scmtinize the statement ol'allriirs lilc<t by Mr. MC. .lain wirh ) rcf'erence to the books of accouttts. Ilut in spite of thc r e f1irr1s. tlrcl have not lbund arry books of accounts.

7. The OL has submitted a scrutiny report, in ul'ic:h it is statcd that thc stateurent of affairs tiled by Mr. M.C. .laitr u'a: tlclcctii'c and secking clarificalions lronr the same. In the reply to th,: said scrutini report. Mr. M.C.Jain gave clarification dated .l8.05.20'X) sta(ing that thc statenrent of alfairs has been prcpared on thc basis .rl'infbrrnation taken fioru thc books of accounts and other records ar lil,thlc ri itli thc Cornpanr. He hls also stated that all the securities li:tt:d ()ut ill thc statcment of aflairs ucrc being kept in sale custody ri rtlrirl thc oflicc prcnrises of thc contpan)' as on thc date of thc wirl,.lirlq-trp ol'thc cornpany. Thereafter kcys of the office were handed ovt r to thc Ollice of the Official Liquidator. If any inventory is to be takc r b1' the oflicc of the OL, thcy could tally the same with the list p rrr ide d in tlrc statenlenl of aflhirs. In case, if further presence i: rcqtrrred lirr verilf ing thc stocks his reprcsentative will join lbr rtrilicatron. IIis rcpresentativc ,'vns positioned in the office for a perio.l ol' I tnotrths alier the date of wirrding-up order only fbr the purpo rc ol' handling over all documcnts and providing all information soutlrt lirr by the Olllcial Liquidator. 6

8. COMPA No.5t2 of 2001 dated 02.08.2001 was filed by the OL to implead Mr. M.C. Jain as Respondcnt No. l0 in COMpn No.6l I ol 1998 was allowed by this Court vide order dare<j 05 04.2002 An appeal vide O.S.A.No.3t/2002 filed by said Mr. M.C.Jain, against the said order dated 05.04.2002, was allow,ed by the Division Bcnch vide an ordcr dated 1g.03.2006 sctting asi<ic thc order dated 05 .04 .2002.

9. By a common order dated 16. I 0.2001 , this C_.ourt has constitutcd a Committee under the chairmanship ol Sri V.l..N.G.K. Murthy, consisting two representatives of the OL, one rcprcsentativc of Mr. M.C.Jain, a Chartered Accountant, one Computcr Operator and one Advocate, to recover the amount due to thc compan) and fi lc report to the said effect. The chairman of the said Comnrittec has subrnitted a memo dated 16.10.2001 urging to relicve him as Chairman on the ground that the reasons are beyond his control and no progress has been shown in the working of the Committe e.

10. In rhe report dated 07.06.2002. the OI_ $,ith regartl ro rhe recovery ofdebts, stated that despite his sincere cffbrts. he could not bc able to rccover dues and he also mentioncd reasons in cletail. 1 I l. Irr order to prove thc same, during cross-e;<am inatiotr of t).W.1/n.2 - Mr. I{.S.Clhowdhun. Ex.Director on 26 )7.2007 hv Mr M. Anil Kunrar. Icamed counsel for the OL, he statec that he had no knowlcdgc ol'anv llnancial or management crisis in anl of the Board mccting rvhich he attended. He stated that Managir g Director has accepted his rcsignation on 9.04.1997 and he has filed F'orm No.32 in proof ol'thc sanrc. As a Vicc-Chairman, he was not Lrcking after thc day to day allairs ol' [hc oompany and hence he was l ot liablc to lllc any statcmcnt ol allairs under Section 454 of the Act a; he rcsigned as I)ircctor

12. l:urthcr. during cross-cxamination of P.W. lrMr. K.Nanda Kurnar. I-.1).(llcrk of OL Officc, by Sri. Milind G.Chokale, leamed counsel lbr the respondent Nos. l, 3 and 5, he stated :hat he rvas rtot auare of the lact that ivhen the accused were appointcrl as Directors arrd they rcsigne'tl. When he was further cross-examinerl :y Sri S.l{avi. lcanred counscl lirr the respondent No.2, he stated thal c'rut of tl.tose persons u,ho s i-llned the statelnent of affairs, said to have becn I)irectors. onlr Lt.(ien. Depinder Singh and Mr. A.F,.Sipani lrlcd I;orrn 32. llc scrvcd papers on thc counsel for A-l subsequentll When hc rvas lirrther cross examined by Sri.B. Charrdraseu Reddy. 8 leamed counsel lor A.7, he stated that notice was not scnt to the address mentioned in Ex.P.7-Form No.32 because the same r.r,ere collected by him subsequently after filing the complaint. Hc srared that he was not aware as to whether A7 has any rote to play in the affairs of the company after 15.01.1997.

13. After completion of evidence, A.2, 3 and 5 wcrc cxamincd undcr Scction 3 l3 CrPC, wherein in one voicc, they spokc that the.v wcrc not aware of the facts that whether the debtors havc denied thc liability, they have handed over the books of accounts l.o thc OL and rvhen they wcre permitted to veri$, and statement o I allairs despite they did not rectify the defects. Wherein, A.2 has statcd that he has received Ex.P9 - notice dated 29.09.1998. On 14.0(r. 1997, rhc Managing Director of the company has accepted his rcsignation dated

09.04.1997 and he did not file a copy of Form 32. He is a N.R.l ancl \vas not involved in the working of the company at any stage other than occasional Board meeting which took place onco or twicc a year and he r.vas not aware of the facts required in this case . A.3 statcd that he resigned as a Director of the Company and has no kror.r,ledge what transpired subsequent to his resignation. Whereas, A.5 stated lhat hc *,n, u lhfr-tim" Director, ftrr a period of 2 years and has resigned on 1fi'9 g I 0.02. 1996 and has no knowledge of accounts being nrr.intained since thert.

14. The OL has tlted a report in August, 20 l9 stating that since tho e f'forts to rcalizc the assets and debts by appointing rrr auditor and constituting a Conrrnittec proved futile, he fited an anplication vide COMPA No.673 of 2003 betbre this Court under Sccton 543 (l) ol thc Act, against l4 l:x-t)irectors of the companl . OI in his rcport fllcd in August. 2019. statcd that without vcrilying the credit worthiness of thc clicnts. the management of the cot pirny has lent moncy to manl' financial institutions which siphonet: funds. Thc Iunds transl'errcd liom Nagar.iurra group to Prudenti tl group was substantiated by thc inspection report. -l'he OL has mcntic,ned a list ol cornparries to '"vhich the rnanagement has given loans and the inability of the auditors to louk into the docu ntcnts/books of accounts to provc the guilty of the E,x-l)irectors. t 5. In the light ol thc abovc lacts, it is apt to discu';s the relevant sections of the Act ancl the Rules rvhich are extracted bcirl1:- Scction 454 of thc Act- Statcmcnt 0f affairs to be ntade tr the Official Liquidator. (l) Where the l ribunal hits made a winding up order or r ppointed thc Official Liquidator as provisional liquidator, uuless the lribunal in its discretion otherwise orders. there shall be made out and strl,ritted to the t0 Official Liquidator a statement as to the affairs of the company in the prescribed form, verifled by an affidavit, and containing thi iollou,ing particulars, namely : - (a) the assets of thc cornpany, stating separately the cash balance in hand and at the bank, if any, and negotiable securities, if any, held by the company ; (b) its debts and liabilities ; (c) the namcs, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts ; and in the case ol'securcd debts, particulars of the securities given, whether by the company or an olficcr thereofi their value and the dates on which thev u cre given ; (d) the debts due to the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realized on account thereof; (e) such lurther or other information as may be prescribcd, or as the Olficial L iqu idator may require. (Z) The statement shall be submitted and verified by one or more of the persons who are at the rclevant date the directors and by thc 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 Oftlcial l.iquidator, subjcct to the direction of the Tribunal, rnay requirc Lo submit and verily the statcmcnt, that is to say, persons - (a) who are or havc been officers of the company ; (b) rvho have taken part in the formation of rhe company at an) time within one ycar beforc the relevant date ; (c) rvho arc 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 rhe information required; (d) ivho arc or have bcen within the said year olficers of, or in the employment of, a conrpany which is, or within the said year was, an ofllcer of the company to which the statemenl relates. (3) The statement shall be submitted within rwenly-one dal,s lrorn the relcvarx4date, or within such extended time not exceeding tLree months ,,--. ./ fiom that date as thc Oflicial Liquidator or the [1-ribunal] nurr. lirr special rcasons, appornt. (4) Any person making, or concurring in making, thc salcrnent and affidavit requircd by this scction shall be allowed, and shall hc paid bv the Olficial l,iquidatur or provisional liquidator, as the case ma\ rc. otll olthe assets of thc company, suclt costs and expenses incurrcd itt rrrll ab,lut the preparation antl ntaking ol the statcrncnt and aflldavit n\ thc Olflcial Liquidator may c,rrrsider reasonable, subject to an appeal to thc lribLrllal. (5) llany person. $'ithout reasonable cxcuse, makes delaLrlt irr complf ing rvith any of the requirements of this section, he shall be pLrri:;hable rvith imprisonment for a term rvhich may extend to two years. or rvith fine rvhich rray extend to one thousand rupees lor every day during u'hi, h lhe default continues, or rr itl hoth. (5A) The Tribunal by rvhich the u'inding up order is rr,rde or the provisional liquidator is appointed. may takc cognizance of att ,rll-cncc under sub-section (5) upon recciving a conrplaint of f'acts constitt litg such an ollence and trying the ollence itsell in accordance with the pri cedure laid down in the (lode of C'rininal Procedure. 1898 (5 of 1898). lrr the trial of summons cases b1' magistrate s. (6) Any person stating hinrscll in rvritirtg to be a creditor ol c,,ntribukrry o[ the compan),shall bc cntitlcd, by himsellor by his agent, at ..ll rcasonable tirncs, on payrncnt of the prcscribed fbe. to inspect the sLatcnr,:rrt subrnitted in pursuancc o f th is section, and to a copy thereof or extract thc rc liorn. (7) Any person untruthtully so stating himself to bc lr ;rcditor or contributory shall be guilty ofan offience under section lll2 .)l thc lndian Penal Code (45 oi 1860)l and shall, on the applicatlon ol lhc ()lficial Liqu idator. be purrishable accordingly. (8) ln this section. the expression "the relevant datc" means. itl a case rvhere a provisional Liquidator is appointed. the date of his appointrrrc lt. irnd in a case where no such appointrnent is madc. the date ofthe windir * Lr;r order. Rule 125 and lJl of lhc Rulcs:- Rule 125: Application by Official Liquidator under section lia(2) - The Official Liquidator nray apply by sutnmons to the Courl lirr an order directing any person rvho. in his opinion. is liable to lurnish a slatenretrt of af-fairs under section 454, 1o prepare and submit such a staterrjrrt or concur in making the same. Noticc of the application shall be servctl t)rr tllc pcrson t2 against whom the order is sought. Wherc the Court makes the order. such order shall bc in Form No. 56 rvith such variations as may be neccssary. Rule 132: Default in complying with scction 454 - Any default on the part of any pcrson in complying with the requirements of section 454 shall be reported to the Court by the Official l_iquidator, and the Court may thereupon pass such orders or give such directions as it may think fit.

16. In the present case, the proceedings under Section 454(5) and 454(5A) of the Acr, have been iniriated by OL for alleged delay in filing thc Statement of Aflairs against all the accused. l7 In C.ll.E. Wood Company pvt. Ltd. (in liquidation) v. Sardar lqbal Singht, the Delhi High Court categorically held that merely bccausc a person is Director olthe company wifl not make him liable under scction 454(5) of the Act. The Court has to see whether there was a delault, and it was without rcasonable excuse. In the said case, the record therein was complctely spoiled and, therefore, it was concluded that the concemed persons were liable to be acquitted because thcrc was reasonable excuse for not filing the statement of aflairs

18. 'l'he rclcvant paragraph of the said judgment is extracted below:- "7. In my vierv. the mere fact that lqbal Singh was director of the company in earlier years would not render him liable underSection ' lg8fSCC OnLine Del 265 -/ l', i' I I I It l.l 454(5) oi thc (iornpanies Act unless it is shorvn that hc hckl lhc status o[' director on thc clate of winding up ordcr. 'fhis could be dortL i:illtcr by the production of tlte company's record or by summoning an ,rfllcial of the Registrar ol'cornpanies with the rccord of that office. Notte .uch has beetr done and thcrcli,rc it is di[ficult to convict tqbal Singh for hi' failurc to file the statenlent ol aflairs- The onus in this criminal trial nttrst rcst or1 the complainant.

8. Even othenvise. Section 454(5) ol- the Companies Acl :nioins that a person can hc convicted and punishcd under its provisiott' l'hc ttrakes default in conrplying with the requircments ol thc Sc:t on rvithout reasonable cxcusc. In other words, the court has not only kr hr: :;atislled that there was dclaulr but also that it was without reasonable exctt',c Norr in the present casc as rloted above the rccord of lhe compan) h.t,l been as per admission ol thc Olflcial Liquidator complctcly spoilcd rvltttr it had been left on an opcn terrace b1, the landk.rrd, l'ublic Witness I I). Chandra, Assistant Ollicial Liquidator further admitted in cross-e. arniIation lhat an)' statement ol'allhirs prepared on the basis ofthat record would not have beetl ofany use and tllat no useful statenrcnt of'affairs could have rten prepared there from. As regards the statement ofallairs fired by Iqbal Singh later on ll-5-1982 on thc basis ol cornpilation by thc Chartercd A(countanls, hc stated that the sarne u'as entirely delective and olno use".

19. Dclhi lligh Court emphasizcd that mcrs past association as a Director in carlier vears does not autonlatically create liatrility under Section 454(5) of the Act, 1956 unless it r.vas without a reasonable excuse. Thc dutv to file a Statcnrcnt of Alfairs is restrictc(l to Directors and ( )lllcers who were in offlce on the rele\ rrr t datc ol the winding-up order which prevents an ilnposition of .ur inrpossible burden upon pcrsons who have sincc long scvercd th -'it' conttcction with the managcr.nent of the company and $'ho. thcre lirrc, u)aY not have access t() the books or allairs of thc companv r t thc rolevant t4 tlme Therefore, the ratio laid down by the Dethi High Court in C.R.E. Wood Company (supra) squarely applies to the present case

20. Perusal of record would reveal that Respondent Nos.l and 2lAl and A2 had resigned on 09.04.1997. Respondent No.4/A.4 resigned on 10.02.1996. Respondent No.5/A5 had resigned from the directorship on 07.03. 1997. Respondent No.6/A6 resigned on

28.06.1997 and Respondent No.7/A.7 resigned on 15.01.1997. All these resignations took place more than one year prior to the passing ol the winding-up order on 19.08.1998. Further this Court, vide docket order dated 30.03.2010 has dropped charges against Accused No. I as he was no more. In terms of Section 454 of the Act, and as explained in C.R.E. Wood Company (supra), liability to file the Statement of Affairs arises only in respebt of Directors who are in office on the date of the winding-up order. Sincc the said accused had ceased to bc Directors u,ell bclore that period, lhcy cannot be fastened with any criminal liability, as they specifically contended that they are not in the possession of books of accounts and have resigned long back. The onus to establish thar the persons were held the status of Dire ctorp+r relevant date of winding up, rests on the complainant, who must produce company records or summon ROC to the officials. l5 'fherefore, no criminal liabitity under Section 451(5) a ri (5A) can be imposed on accusod Nos- I , 2, 4 to 7.

21. In P.M.A. Nambudiripad v' Official Lrquidator 2, a Division Bench of Kerala High Court held: "6..."We need only point out that sub-section (3) proceeds on the basis that the obligation to file the statement arises on the relevant dat:. rvhioh is so only so far as those persons lnentioned in the earlier plrl ofSection 454(2) who are bound to submit thc stattiment even without an', rcquisition by the official liquidator are concemed. Sub-scction (3) rvo.rld, thcrcfore, govern only those whose obligation to submit the statemenl arises on thc relevant date. and not those who become bound to do so onll'rrn the olficial liquidator requiring them to do so."..."

22. Whilc dealing with a similar issue in thc Of[icial Liquidator, High Court of Andhra Pradesh, Hytlerabad V. Koganti Krishna Kumar3, the erstwhile High Court of A.P.. relcffing to P.M.A. Nambudiripad (supra) had an occasion ttr consider the liability of Ex-Directors to file the Statement of Aflairs uruder Sectiou 454 of the Companies AcL 1956 and held as fbllorvs:-

17. The question that remains is, when and under what ci crtnstances a pcrson who ccased to be a Director somc time bcfore the rcll!ant date can be required to submit and verily statement of afflairs. This qrrestion has arisen before other High Courts and I have arnple guidance in that rcgard. [n Devinder Kishore Mehra's case, (1980) 50 Com Cas 699 t.he Division Bench of thc Delhi High Court has held as follows:- 2 ( t979) 49 Conrp Case 8 l, t t993 scc onl.inc 472 l6 "Thc next conlention on behalf oI rhe appellant is that the ofllcial liquidator can only require such other persons to submit a statement of affairs, subject to lhe directions of the court, as are in a position to give relcvant information. This postulates that the Coun would apply its mind and decide in cach case whether such direction should be given. [t is not contemplated that the court would give direction to the olficial liquidator to require any and every person to file a starement of affairs merely as an academic exercise. The purpose of getting the statemenl ofaffairs is to enable effective and proper winding up ofthe company. The court is not required to give a direction which in effect would be infructuous. We are in entire agreement with this subrnission. Indeed, our learned brother has noticed that the appellant was not in a position to know anything about the affairs of thc company ever since hc was ousted fioln the management, way back in December, 1966. Hc had ccased 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 subrniued to the Punjab National Bank in Decernber. 1966. In this view of the matter, asking such a person to file a statemcnt of alfairs is an exercise in futility and rve see no reason why a mere academic order should be passed. xxxxxxxxxxxx It has bccn urged that even past ofticers rnay be able to give valuable information and S. 454(2)(a) in terms ralks of past officers. So, the date of rcsignation of the appellant is inmaterial. There is some force in this contention but in the circumstances of this case we do not see how any usclul inflormation or rather any information at all can be fumished by the appellant. As has been held by D.K Kapur Jain Omcial Liquidaror of R.S Motors p. Lrd. v. Jagiir Singh Sawhney, (1914) 44 Com Cas 381 : ILR (1974) | Delhi 243. if the books ofthe 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 submining the statement of aft'airs of the company ordered to be wound up in a prosccution launched against him tbr failure to file the statement of affairs. The appellant, as rve have already noticed, has I been held not to be in a position to have access to the books of the \company cver since he was oustcd liorn lhe managcment. ln these circumstances, calling upon him to file Ihe statement of affairs cannot bc justificd. lndccd, it cannot bc justificd for any of the persons unlcss t'7 a clear-cut linding is givcn that any one ofthe persons cottrctncd is itr a position to or capable of filing the statement olaflair;. Suclr an cnquiry is ln imperative prerequisite ior giving direction; undcr S. 454 on a motion by the official liquidator. We cannot agrle with the contention that pleading reasonablc cxcuse is available at l1c stagc of- prosecutiorl onl1,. ['utting a person injeopardy ofthat t]pe \\ithoul an earlier investigation when it is so required to be made is not cirlled lbr.

23. Placing rr:liance on the said principle in Korlanti Krishna Kumar (supra). it was held that Section 454 (3) must lre read rvith Section 454(2). Ihe obligation to fi[e the statement ol'a]lirirs arises on thc relevant datc only in respect of those persons (:nulltcratr:d il.l Section 454(2) i.c. thosc bound even without any rcquisition by the OL. and in a casc whcre no such appointment is made. .he date of thc rvinding up ordcr is considered for filing statement ol a l-fair-s. '['hLrs. Section 454 (2) applies only to persons whose duty to llle accrues on tha( date, and not to those who become duty-bourLd only upott rcqu isition by' thc OL

24. It is lurther held therein that before direcLi rg an) l)ast ofllccr to suhrnit a Statcment ol Affairs. the Court must firsl satisl)' itsell'that such pcrsou is in a position to furnish relevaut inlorntatiorr othcrrvisc. requiring cor.npliance rvould be an academic exercisc. '['hc objcct o1'Scction 454 is to facilitate eflective winding irp. noI to cast impracticable or futile burden on those who harl ccased to .1, l8 participate in the affairs of the Company long before the relevant date and who had no access to its books or records.

25. In the light of rhe aforesaid principles, coming to the facts of the case, as discussed supra, it is not in dispute that the winding-up order in respect of M/s. Asia pacific Investment Trust Ltd. was passed on t9.08.1998, and that many ofthe accused namely, A.1-Mr. HFJ Manekshaw, A.2-Mr. Rathan Singh Choudhary, A.4- Mr. Tushar Desai, A.5- Mr.J.C. Luther, 4.6- A.K. Singla and A.7- Mr.K.Thyagaraj, have srared that they hacl resigned from the Board of Directors, prior to the relevant date. Although the OL contends that the requisite Forms Nos.32 were not traceable in the Registrar of Companies file, there is no categorical assertion in the affidavit that these individuals were holding office during winding up proceedings. Therefore, it cannot be said that the accused were in a position to fumish the neccssary details or the statement of the affairs.

26. As regards A.3 - Lt. Gen. Depinder Singh, the record would reveal that he continued to be a Director of the Company within one_ year immediately preceding the date ol the winding-up order, and is, therefop, within the statutory bracket under Section 454 (2) of thc r9 Act. He had subn-ritted an affidavit of concurrence with tl-re statcment filed by Mr. N{.C. Jain on 08.03.1999. Mr. Jain filed th,: statement of aflairs on 19.02.1999. However, the OL alleged t.hat several deficiencies and contradictions in the said statem€nl, including rnissing recorcls. untraceable debtors, and unverifiablc :laims, which hampered the Iiquidation process.

27. In Thc Official Liquidator, Security rtttd Finance (P.) Ltd. v. B. K. Bcdi a, the Full Bench of the Dclhi iligh Court considercd thc aspect as to whether in a prosecution under Sectiort a5a(-5) ol the Act. thc burden of proving that the ac:used had no reasonable cxcusc lbr making the default in rcspect of rvhich he is being prosecuted lies upon the prosecution. The Full Renr:h, observed as tbllorvs: ''(24) Il thcrclbrc lhe Parliament wanted that mere making of rlelault rvould bc an of'ttncc and that onus was on the accused to show trat hc had a reasonable excuse fbr the same, Section 454(5) of the Act wot lct have been dillerently rvordcd. Adrnittedly, the legislature hiis not so pro'iirJed and we do not lind anl compelling reasons to imply and placc that cnus on the accuscd. (25) As a resLrlt rve hold that in a prosecution under Sec. 451(5 ) and (5A) the burden ol proving that the accused without reasonable er.ctrse made a detault is on ttle complainant in the first instance. The qucstiorL ol onus will have to be decided by kecping the distinction benveen legal burden of proof laid dor.vn by laiv and a provisional burden raised by state rl1 evidctrcc, as explaincd by Lrs in detail above." ' 1tsll1 +l ComP Case 499, 20

28. Further, a Division Bench of the High Court of Judicature at Hyderabad for the State ofTelangana and the State of Andhra pradesh in M/S. Vertex Stock & Sharcs pvt. Ltd., (In liquidation) rep. by the Official Liquidator, vs. Sri Vemuri Venkatewara Rao, Ex. Directors, on consideration of Section 454 of the Act. answered the reference by laying down clear propositions with regard to various aspccts i.e. when default amounts to an offence, what conslitutcs reasonable cxcuse, and how thc burdcn of proof shifts on to thc accus'ed.

29. The principles culled out therein are as follows:- ln the result, the reference is answered holding that: (l) The offence under Secrion 45a(5)ofrhe Companies Act, 1956 is ifa person makes default in complying with any of the requircrnent under Section 454 without rcasonable excuse, antl not mere makirig default in complying with the rcquirements of Section 454. (2) It is only if a person required under Section 454(2), to makc the statement o[ affairs referred ro inSection 454(l), fails to do so rvithin 2l days of the order o[ winding up (Section 454(3) read rvirh Section 454(8)) rvould he then be said to have committed an offence under Section 454(5). (3) -lhe initial onus is on the Oftlcial Liquidator ro prove rhar the person concerned had no reasonable excusc for making default in tiling the statcment of affairs within time. (4). While the initial burden ro prove the ingredients ofsection 45{(5) is on the prosecution (i.e., the Olficial Liquidator), very slighr evidence in this rcgard may suffice. The Official t_iquidator would be deemed to have discharged his burden if he adduces evidence. circumstantial or direct. as is ' 20 t8 scc onLinc l{yd 3 t 6 2l sutllcieD( to raisc a presumption that the accused did not ha'e reasonablc excusc lor his lailure to make the statement of affairs within til l€. (5). ()n thc initill onus bcing discharged by the Oflicial L q.ridator. the burdcn rvoukl then shift to the accused to prove facts, in his exclusivc knorvlcdge. to establish that he had reasonable excuse in n( t nlakillg the staternent ol'alllirs. bcfore the Olficial Liquidator, within tinre (6). I hc conrplilnt of facts, submitted by the Officir I Liquidator undcr Scction 45-l(5-A), should (isclose that:- (a) lhe accuscd is a person referred to in Section 454(2) L,l the Act, and is liablc to lllc the Statement ofaffairs. (b) hc had sclt a notice to the pcrsons, referred to in the tirst limb oIsection-]5.1(l). lo strbnrit a Statement ofaffairs; (c) the linrc prcscriltcd. for filing the statement ofaffairs, ha; lapseil; (d) rro cxtcnsion of'tinre. to file the Statement of affairs. had hccn souqht cithcr lronr hirn or from the Court; (c) in casc lrr: hus takcn custody o[ the books of accounls of the con)pan). lrc ltas intintatcd thc persons concerned that thr: llooks of accountji rrcrc availablc u'ith hirn, despite which the person cottcettted had thilcd lo li lc tl)c Statcmcnt of aflairs; and (f) rcason rrlrr hc bclievcs thal the person concernel had no rcasonahle crcusc il rnaking default in complying \"ith the rcquircntcnts ol Scction 454. (7). Il thcsc lircts lrc stated in thc complaint of facts, the Cou:t $ould then takc cognizarrcc undcr Scclion ,154 (5-A), ol the offence rrdcr Section 15{(5). and thcn ltrllorv the procedure laid down in the Cod, ,rf Criminal I)rocctlLrrc lor triul o1'sttrnnrons cases by Magistrates. (tl). t hc orus *orrld lhcn shift to the accused to show that he hlc rcasonable cxcusc lirr nol lllins the staternent of affairs within time. -i0. Irr thc light ol'thc aloresaid principle laid dou n by the High fhurts. conrin!.:, to thc prcscnt case, as discussed supra, 1t(i rvinding up ordcr rvas passcd on 19.08.1998 and there was an obl gation ot1 the 22 part of the management of the company in liquidation to file the statemenf of affairs within 2l days from the date of winding up order is mandated by Section 454 (3) ol rhe Act. In rhe presenr case, the accused Nos. 1,2,4 to g had resigned from the office of directorship much prior to the date of winding up of the Company by virtue of the order of this Court, and that their resignations werc duly acccptecl b1, the Board of Directors in the year 1997 with requisite retums in Form No.32 filed before the Registrar of Companies. .l.here is no rcprescntation on behalf of A.9, his whcreabouts arc not known and also that the leamed OL did not produce any evidence eithcr oral or documentary to show that A.9 was a Director on the date when the winding up order was passed. The contention of the above accusecl that having ceascd to be Directors long before the rerevant date, they were not rn a position to fumish the necessary information lor preparation of the statement of affairs is to be considercd. Accused No.3 had filed an affidavit of concunence to the statement of.affairs submitred by Sri. M.C.Jain, which was raken on record by the OL Accuscd No.8, by order dated 29.03.2000, stood discharged. 3l . The only allegation against A.3 is that he was the Managing the relevant date and he filed an affidavit in concurrence ro Directo!€t l-l the statement ol atlairs filed by Sri M.C.Jain with delal ,\s discusscd supra, the aspect of delay cannot be attributed to any rrf the accused nruch less kr A.3. since there is no deliberate omission or ill-intention on his part. E,ven the record, does not disclose the prel;ence of mens rea in causing such dclav. and the cxplanation offered indicates that thc dclav was occasioned by circumstances beyond h s control and rather than b1 anl conscious or will[ul delault. i2. This (lourt in Crinrinal Appeal No. 67 o1 2023, rvhile dealing rvith o ff'cnccs undcr the lncomc'l'ax Act, 1961. has addressed the issue of culpable rnental statc, holding that in the abs:ncc ofsuch a mcntal statc, thc accuscd is cntitlcd to plead it as a defcncc for the act charged. It lurthcr statcd that the accused must rais,l thc plca of absencc ol culpable lnental state betbre the trial cour1. nhich is then rcquired to consirler it rvhen ad_iudicating the matter. This cotrfi rvhile rendering that jutlgnrent has ret'erred to the Apex courl judgrnent in Prakash Nath Khanrra v. (ll-I'6. where the court has tonsidered the Scope and ambit of thc exprcssions "Willfully fails" and " in due tinre" nrentioned in Scction - 27 6C.C of the Act, 196 I 'l'he relevant paragraph of C'riminal Appcal No. 61 ol'2023 is extracte,l as under: o. coo4) 9 scc 686 " 16. 'lhe Apex Court held that there is a statutory presumprion prescribcd in Scction - ZTBE of the Act, 1961. The Court has to presume the existence of culpable mental state, and absence of such mental state can be pleaded by an accused as a defence in respect to the act charged as an oflence in the prosecution. The accused has to plead the absence olculpable mental state before the trial Court and lhe trial Court has to consider the same when the matter is taken up for trial.,,

33. Applying the above principle to the lacts ofthe present case, thc allegations against Accused No.3 do not disclosc any clement of r.villul dctault or deliberate intention to evade oompliance. The material placed on record, indicates only a delay in compliance and not a conscious or intcntional act. In the absence o[ such culpable mental statc, which forms the very foundation for attracting penal consequences, thc prosccution cannot be sustained. Therefore, by necessary application of the ratio laid down in prakash Nath Khanna (supra) and as reiterated by this Court, it is evident that Accused No.3 cannot be tastcned with criminal liability, and the allegations levelled against him remain without legal substance.

34. It is also apt to note that A.3 is aged about 95 years as on today.

35. Therefbre, it is evident that there is no material to suggest that$..3 had acted rvith any mens reo or culpable mcntal state. The --. l5 lapse was inadvcrlent, occasioned b1' reasons beyontl his oontrol. Consequently, the allcgations levelled against the a.:cused. more particularly A.3. are not sustainable in law and cannot t'e accepted or treated as proved. Therefbre allegations levclled ag,ainst a[[ the accused particularty against A.3 (as hc was the managing, director on thc rclevant date of the winding up) by the OL arc not pr,x'ed.

36. In vies of thc lacts and circumstances of the case, this Court is of the considcrcd opinion that thc contentiotr t f thc OL that the accused have conrmittcd dclnult in liling the statenlcllt of atTairs as required under Scction .15,1 of thc Act, is untenable an,l cannot be acccpted since thc statemellt of aflairs was eventually f iI:d and is or-t record. Though the OL pointed out nrany deficiencies and contradictions in the statemcnt of aftairs to rvhich ,\ 3 has filed alfidavit ir.r concurencc. he tailed to l)rovc the said alle,oalion. Perusal of thc record rvould reveal that thcre is no intcntion on t lc: pafl of A.3 in submitting the statctrcnt of-aflairs rvith delay. Whcn :he case is so, the ends of justice uould not bc adcqtratcly met if A.3 ir; ,:onvicted as sought by the ()L.

37. In thc Iight olthe alorcsaid iliscussion, this Co.rrt is satisired that the iacts alleged against A.l to 9 do not constitut,l any offence 26 under Section 454 (5) and 5 (A) of the Act and they are entitled for exoneration from the punishment. COMPA No .547 0F 2002 in C.P.No.6 ll oF 1998

38. During the pendency of COMpA No.6l l of 199g, the OL, fited COMPA No.547 of 2002 under section 457 (l) (e) of the Act, read with Rule 9 ol' thc Rules, against Respondent Nos. I to l0 seeking folbwing relicfs: - i. to appoint an auditor or auditors to examine, investigate and look into the alfairs, books and accounts of the company wilh particular relercnce to Sections 542 and,543 of the Act and to submit report as to whether the amount shown as realizable by the Ex-Directors is truc, whether the funds of the company are misapplied, mis-utilised or diverted or whether the directors of the company have been guitty of any misfeasance or breach of trust in relation to the company, to reler lhe rnatter to the Economic Offence Wing of CBI situated at Chennai or CBCID or Economic Offences Wing of Statc Police to investigare into the aspects:_ 21 a) to fix the time for the auditors and investigating agency to give their report, b) to direct the Ex-Directors including Sri M.C..lrin to give all the information to the auditors and Investigating ,\11cncy, c) to permit the OL to allou' the auditor and Investigating Agencl, to inspect the books of accounts of the conrpany under his custody and his record in relation to the comp:ny, d) to fix the fees of the auditors so appointed, e) to direct Sri M.C.Jain and/or other Directors trl pa,v the fees and expenses of the auditors so appointed in rdvance to be deposited with the OL. f) to permit the auditor so appointed to look into the records in relation to the company under the custody of atrJ (iovernment or statutory agency lor the limited putpose of procuring information in relation to thc attairs of thc compan y, and g) to permit the auditor or auditors to takc writretr slatcments from the llx-Directors and olficers of thc comp:rny u'herevcr necessan,/ and fbr costs. b 28

39. With the aforesaid reliefs, the Official Liquidator contended as follow:- As per the Statement ol affairs submitted by the Ex-Directors, there are about 1550 trade debtors, but there are no full address particulars in respect of 923 debtors from whom the Company has to recover a sum of RS.60 Crores. It ln respect of 627 cascs, the OL has issued notices to the debtors. out of rvhom 295 rvere served and 3 13 retumed unserved. 128 dcbtors out ol 295 who were served with the notices have denied any liability to rhe company. In addition to these, there are about 84 cases where the Ex-Directors have shown thc money as due and payabte, the parties have produced termination letters issued by the company. Itt. Due to non- availability of information in the books of the company and the statement of affairs as also non-cooperation from the Ex-Directors of the company, he could not proceed to IV , realize the dchrs ro u hich the company is entitled to. I \tOL in his report submits that someone who is competent has to go beyond the facts stated in the statement of affairs and ascertain r.r,hether the debt transactions disclosed in the \ I 29 statelnent of affairs are correct, whether proper care has been taken by the persons in charge ol the management in the rnatter of extending hire-purchase loans, whether any' misfeasance, malfeasance or negligence was involved in lhe nratter of conduct of the affairs of the company v. One M/s Satyanarayana and Veerabhadra- (lharrered Accountant have submitted a report on 28.03.2()(t0 u hcrcin it was stated that they have searched lor tu,o months at thc oflice of the conrpany for books of accounts to tlnd orrt the basis on which statement ofaffairs is prepared, but thcy arc not ablc find those books at the office of the company to veril' lhc statcmcrlt of affairs OL is unable to find the books of accounts re ating to trade debtors, loans and advances and also other flles irr:lucling stock resrsters they are not physically availablc. -fheretbre, investigation is necessary to find out when the t,usincss of the compauy went bad, whether any amouut q'as arlvanccd to the incapable persons for repayment, r.vhether an1 lnauthorized adjustments wcre made or whethcr al1)' rllone] r.l as dive rtcd either to the companies or whether Ex-Manager t as bccn guilty l0 of any misleasance or brcach of trust in relation to the company. vii. This Courr on 27.07.200t in COMpA No.156 of 2000 has directed the OL to file an Aclministrative Report stating the reasons therefor as to why Sri.M.C.Jain was not shown as an accused in COMpA No.6 I I ol 1998. viii. OL has filed the Aclministrative Report on 10.0g.2001 stating that Form No.j2 and 29 which are relating to appointment and consent of a Director relating to Sri.M.C.lain were not tbund in the documents. However, the computer statement showing total Directors and thcir addresses including the name of Sri M.C. Jain as a Direcror w e.f. 09.04. 1997.

40. On the other hand, Respondent No.9 i.e. Sri M.C.Jain filed counter contending as follor,r s: - subsequent to the audit conducted by rhe chartered Accountant, a search was conducted and nearly 700 files were retrieved by his representative which shows that there was no diligence shown by the oL in preparing the inventory records and other items, entire premises of the company and all its records have been in the plsCssion of OL since 199g. Therefbre, the report of. the 3l Chartered Accountant is not to be considered at ,rll as lre u'as unable to locate the relevant files. It A simitar application has been filed by the OL in t.re nronth of September, 2000 vide C.A No.424 of 2000 with sinrilar rclicf and vide order dated 11.10.2000, the same was relused b.v this Court. Fiting the present application with the similar relief is, nothing but an abuse of the process of the Court. He has also relied on the Sections 235.236,237 ttn'J 219 of thc Act, wherein it deals with that the Central Govenirncnt has the powers to investigate in the affairs of a company. '[ he Courl under Section 237(2) has specific power to order iuspccti,rrr. Whcn the Act provides for investigation, referencc to CtlI lo' investigation need not be sought. OL has nowhere pointed out any offence said tc have becn committed by any of the Directors and as sr c'l entrusting investigation to CBI is unwarranted. ln supporl of his case, he placed reliance on the -itttrgments of the Apex Courl in State of Karnataka vs. Arun Kumitr AggarwalT, '1zooo; t scc 2lo 32 CBI vs. State of Rajasthan E, Common Cause, a registered Society vs. UOI e , Adina.ayana Reddy Ramdas Motor Transport Ltd. vs. Taadi Adinaryana Reddyro and Secretary Minor Irrigation and Rural Engineering Services, U.P. vs. Sahngoo Ram Aryalr, contended that when neither a specific crime nor persons involved in the crime or place of crime is known, this Court merely on the basis of suspicion, this Court cannot order a CBI enquiry. He tirrther stated that this Court under Article 226 of Constitution ol India has power to entrust investigation to CBI and that power has to be exercised very sparingly. vl. An allegation has been made that [.edger Folio Numbers are not disclosed; but it is not stated by the OL that the registered contract number of each transaction has been mentioned in the statement of affairs with these contract numbers. cach transaction can be verified both from the files as also the computers. In the repon of the Chartered Accountant, it is stated that several relevant files were not available. but the Respondent's 8atnzoot sc66t ' reel 1oy scc 667 'o etR 1997 sc 2189 " zooz 5 scc 521 33 representativc has complied with full particulars r:.1' 28 nra-ior debtors and was in the process of completing the li:t o1'5l nra.iur debtors rvhen the OL has sought relerence of the matle -to (l.f].1

41. Respondent No.2 has also filed his counter j()ntending as lollows:- I lc has no Knowledge about the proccedings pi:ndine in this Court u. lle has res igned lrom thc Board of Directors o l' tl rc (lonrnen,r on 09.04.I997 and when his resignation was ac(cptcd hc \\'xs not in possession ofany records of the Companl l I{c is unablc to answer most of thc allcgations co rtaincd in thc application filed by the OL, seeking investigation b1,[-'BI or CBCID etc., a-s he was totally in the dark about th: rnatlor ir'. [Jnless his innoccnce is established in the trial to b.: conductctl on the rnain application filed by the OI- under Scction 45,{ of' the Contpanics Act, any investigation by the ('lll or Ctl('lL) rvould unlairll, pre.iudicc him and his name untl rcq;utatit,n would be tarnished 34 ANALYSIS AND FINDING OF THE COURT:-

42. In view of the above facts and Sections and Rules of the Act, points that arise for consideration of this Court are:- l. Whether an Auditor or Auditors should be appointed to investigate misfeasance, misapplication of funds, or breach of trust by the Ex- Directors with reference to Sections 542 and 543 of the Act? 2. Whether there exists a prima facie case lor rcfcrring the rnatter to an external criminal investigative agency such as the CBI. CBCID. or Economic Offences Wing for inquiry into the financial irregularities alleged against the ex-directors? Point No.l:

43. In the tight of the above facts, it is apt to discuss the relcvant sections of the Act and the Rules which are extracted below:- Section 457(l) (e) of the Act: To do all such other things as may be necessary for winding up the affairs of the company and distributing its assets. Rule 9 of the Rules:- Inherent powers of Court - Nothing in these rules shall be deemed to limit or otherwise aflect the inherent powers o[the Court to give such directions or pass such orders as may be necessary for the ends of.iustice or to prevent abuse ofthe process of thc Court. Section 542:- Liability for fraudulent conduct of business:- (l) If in the course of the winding up of a company, it appears that any business of the company has been canied on, with intent to defraud creditors of the company or any other persons, or tbr any fraudulent ptrpose, the Tribunal, on the application of the Official Liquidator. or the liQ\idator or any creditor or contributory ofthc company. may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, fbr all or any oi the debts or other liabilities of the company as the Tribunalmay direct. On the hearing of 35 an application undcr this sub-section, the Official I-iqu d,ltor or thc liquidator, as the case lnay be, may himsclf give evidencc or crll * itncsscs. (2) (a) Where thc-lribunal makcs any such declaration, it rray give such lurther directions as it thinks proper for the purpose of giving c ffcct to that declaration. (b) [n particular, thc Tribunal rnay makc provision for makilg the liability of any such pers,rn undcr the declaration a charge on any deh r,r obligation due from the conrpany to him, or on any mortgage or charge or anf interest in any mortgagc or charge on any assets of the company held l,y or vcsted in him. or any person on his behalt, or any person claiming as as. ignce lrom or through the person liable or any person acting on his behalf. (c) The Tribunal nray. tiorn time to time, make such further or:lirr as ntay bc necessarv lor the puqrose ofenflorcing any charge imposed Lrnclcr this sLrb- section. (d) For the pLrrpose oIthis sub-section, the expression "assigrce" includes any person to rvhonr or in u,hose favour, by the directions ol tlre person liable. the dcbt. obligation. mortgage or charge was crertjd. issued or transferred or the interest was crcated. but does not includc ar rssigncc lor valuable considcration (not inclLrding considcration by nal r'f nrarriage) given in good laith and r.r'ithout noticc of any of thc matters on tlLc grourtd of- u'hich the declari(ion is nrade. (3) Where anl business ofa conrpany is carried on with such intent or fbr such purpose as is rnentioned in sub section (l), every per.on who rvas krowingly a party to thc carrying on of the business ir tllc rnanner aforesaid, shall be punishable with imprisonment for a terr r rvhich nray extend to lwo \ ertrs. or rvith fine rvhich nray extcnd to fiftythousand rupees, or \\,ith both. (4) This section shall apply. notwithstanding that.the person c()ncerned may be criminally liable in respect o[ the matters on the ground ol'which the dcclaration is to bc nrade. Section 543 of the Act:- I'ower of Tribunal to ass(ss danrages against delinqu ent l)ircctors ctc. ( I) If in the cour se of winding up ol' a cotnpany, it appcars thal any persorr u,ho has takcn plrt in the promotion or formation of the conrpany, or any past or presen t dircctor, nranager, liquidator or olficer of thc t o npany - (a) has misapplicd. or retained, or becolne liable or accountable Ii r. any rnoncy or property of the cornpany tor 36 (b) has been guilty of any misfeasance or breach of trust in relation to the company, the Tribunal may, on the application ofthe Official Liquidator, or the liquidator, or of any creditor or contributory, made within the time specified in that behalf in sub-section(2), examine into the conducr of rhe person, director, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or propeffy or any part thereof respectively, with interest at such rate as the Tribunal thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Tribunal thinks just. (2) An application under sub-section (l) shall be made within five years lrom the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplication, retainer, misf'easance or breach of trust as the case may be, whichever is longer. (3) This section shall apply notwithstanding that the matter is one for lvhich the person concemed may be criminally liable.

44. The OL sought to appoint an auditor to investigate if any misfeasance, misapplication of Funds or breach of trust by Ex- Directors have been made or not with reference to Section 542 and 543 of the Act, and other consequential directions. Perusal of the record would show that such relief is not warranted in the present case as the material placed on record does not disclose any prima facie case of misfeasance, fraud, or breach of trust attributable to the Ex- Directors so as to necessitate an Auditor or Central Bureau ol Investigation. [t is to be noted that the OL has been in possession of the company's premises and records since 1998, yet not have traced any vital documents which were subsequently recovered by a representarive of the respondents, thereby casting doubt on the 31 diligence exercised by the OL. Appointment of Audi.or under such circumstances must be lounded on clear suspicion supported by specific financial irregularities, and not merell general dissatisfaction r.vith the conduct of past Directors. [n the above circumstances this Court is of the view that there exisr.s no necessitv for appointing an auditor at this stage. Therefore, this pc,int is answercd accordingly Point No.2

45. With regard to cntrustment of investigation, CBI, CBCID, or Ilconomic Ollence s Wing to investigate/to inquire into the financial irregularities alleged against the llx-Directors, it is rele,,ant to discuss a judgment of F-ull Bench of the Supreme Court in Common Oause, a registered society (supra), held as follows:- "174. The other dircction, namely, the direction to the C.B.t. tr, investigale "any other offence" is wholly erroneous and cannot be sustainc.d Obviously, direction lor investigation can be given only if an ollencc is. orima facie, lound to have been committed or a person's involvement is prirna facie established, but a direction Lo the C.B.[. to investigate wheth:r any person has committed an off'ence or not cannot be legally given. Su;h a direction would be contrary to the conccpt and philosophy of "LIFE" and "LIBERTY" guaranteed to a person under Article 2l ofthe Co lstitution". 38

46. A Division Bench of the Apex Court in Vinay Aggarwal (supra) held as follows:- "13. The I-ligh Courts should direct for CBI investigation only in cases where material prima facie discloses something calling for an investigation by CBI and it should not be done in a routine manner or on the basis oI some vague allegations. The "ifs" and "buts" without any tlefinite conclusion are not sufficient to put an agency like CBI into motion (r2Minor trrigation & Rural Engg. Services, U.P. v. Sahngoo Ram Arya,). After going through the records of the case, we are of the view that the present case is not the one where CBI investigation ought to have been directed by the High Court."

47. I'his Court in Mr.B.Sailesh Saxena vs. (Jnion of Indiall had an occasion to consider the circumstances under which investigation can be transferred to the Central Bureau of Investigation. This Court ret'erring to several landmark judgments of the Apex Court, held that entrustment of investigation to the CBI is not a matter of routinc, but an extraordinary power to be exercised sparingly and only in rare and exceptional cases. The relevant paragraph is extracted as folloq,s: "3t. No doubt the Magistrate cannot order investigation by the CBI vide CBI vs. Stare of Rajasthan and another (Supra), but this Court or the High Cfurt has power under Anicle 136 or Article 226 to oder investigation by r(zooz1s scc 52rl 39 the CBI. That, horvever should be done only in sorne rare anl exceptional case, otherwise, thc CBI would be flooded with a Iarge numbel of cases and would find it impossible to properly inyestigate all of them. }L{XX

34. 'fhere is no dispute that this Clourt under Anicle 226 of, ( onstitution is having porver to entrust the investigation to any indeperrdlnt agency including CBI. The said principle was also Iaid down by the l.pex Court in the judgments relerred supra. As held by the Hon'ble Apex [)ourt in Arab Ranjan Goswami's Case that transfer of investigation to CBI i:, rrot a matter of routine, in extraordinary circumslances by using powers rf this Court sparinglf in exccptional circumstances. the investigation has t[ t,e cnlrusted to CBI."

48. Further this Court in Sailcsh Saxcna (supra) la; ref'ened to a Three-Judge Bench of the Apex Court in Prof.K.V.I,,lajendran V. Superintcndent of Policc, CBCID South Zone, Chennairr, wherein it was stated that : "CBI investigation could be ordered, but such power must be exercised in rare and exceptional cases whcrc thc Court finds it nccessary rl ordcr to do justice between the parties and to instill confidence in the pu'rl c mind. or where the investigation by thc Statc police lacks credibility and it is necessary lor having "a fair, honest and complete invcstillation and particularly rvhen it is impcrativc to rctain public conl'idcnce in tl'e impartial rvorking o[ thc State agencies". It has lurther observed thiLt rvhere thc investigation rvas already completed and charge sheet u,as filtd ordinarily superior Courts should not rcopcn the invcstigation and leave il t,) the Court coucerned, to proceed with the mattcr in accordance u,ith la,r'. Under no '' 1uot:y l2 scc 480 40 circumstances, should the Court make any expression of its opinion on merit relating to any accusation against any individual,,

49. In the light of the aforesaid precedents, it is clear that reference of any matter to the CBI on or other extemal agencies is not to be made as a matter of course, but only where there exists a clear prima facie disclosure of commission of a cognizable offence of serious nature. or where the investigation by ordinary means would lack credibility. [n the present case, the OL seeks a direction for investigation by CBIiCBCID enquiry essentially on the ground that the Ex-Directors have t'ailed to cooperate and that several files and records are not traceable. However, mere non-availability of records, discrepancies in the statement of affairs, or want of diligence by the ex-management, without a prima facie finding of criminality, cannot by itselfjustifi, the extraordinary step of-entrusting investigation to the CBI. As noticcd by rhe Supreme Court in Common Cause (supra) and reiterated in Vinay Aggarwal (supra) as well as by this Court in B. Sailesh Saxena (supra) entrustment of investigation to CBI arises only when specific acts constituting an offence are prima f'acie made out. In the absence of such concrete material, entrusting investigation ,1t to the CBI on the basis of suspicion or irregularities, is impermissible in [arv.

50. In the present case, there is no supporlirg evidentiary material pointing to any wilful fraud, misappropriation. or dishonest conduct on the part ol the Ex-Directors that would warrant entrustment of invcstigation to CBI. Thc allegations are general in nature and do not reflect such gravity as to neccs;itate CBI to investigate in the circumstances of the case

51. In light of thc afbresaid principles, this (lourt is of the considered r.'iei.v that in the absence ol prima facie case indicating misfeasance or dishoncst conduct. this Court cannot. excrcise its jurisdiction to cntrustment investigation to CBI lor invt:stigation into the financial irregularities etc., committed by the I;x-Directors as alleged, and also to appoint Auditor. Therefore. the OL is not entitled for any relief rnuch less the relief sought in the pr:rs,ent company application. T'hus, this application is liablc to be cliirnissed and is dismissed. COMPA No. 477 OF 2010

52. OI- filed COMPA No.477 ol 2010 against said M.C. .Iain i.e. respondent herein, under sub section (5) and (5A) of Section 454 42 of the Act read with Itule t 25 arul 132 of the Rules, to punish the respondent under Scction 454 for making false statcments in the Statement of aflairs filed by him, with the following conrenrions:- In view of the deficiencies in the statement of affairs, earlier he has filed COMPA No.5l212001 seeking impleadment of Sri M.C. Jain as respondcnt No. l0 in COMPA No.6ll of 1998 under Section 454 of thc Act ii. Vide order dated 05.04.2000. this Court allowed the said application implcading Sri. M.C. Jain in COMPA No.6l1 of

1998. Aggrieved by thc said order, he prefened an appeal vide O.S.A.No.3l and 2002. Vide an order dated 18.03.2006, Division Bench allowcd the said appeal observing that: "..... ..Only other stage lvhen the court is empowered to add any other person to array of rhc accuscd is after reaching evidence collection when powers under Section 319 of the Code can be invoked. We are unable to find any orher power lor the Sessions Court to permit addition of ncw pcrson or persons to the array of the accused. Of course, ir is not necessary lor the Court to wail until the entire evidence is collected for exercising the said powcr. For these rcasons, wc allow the appeal. set aside the order of the Company Court." .l.l l In his report, hc stated that during the hearing 'rl the original complaint under Section 454 irr COMPA No.6l l of' 1998 filcd against the othcr ex-directors, thc Cornpanl' Cot rt vidt: dockct orders datc<i 20.04.2010 and 03.06 2010 direct':d hirn to lile separate apptication against the respondent hcreirr. Though the rcspondcnt hercin has [lled statcrncrrl o['al'lairs' thc same is defective olt various counts as hc could lot rcalizc any major amounts rellccted in it duc to countcr clarn's and clailns of the satislaction by thc rcspcctive debtors. Thc respondent herein was not convicted irr thc original procccdings initiatcd by thc OL undcr Scctii rul5-l ol' the Companies Act, 1956 in COMPA No.5l2120( I in (IOMPA No.6l l/1998 at n0 point oltinre. I{e stales that basing on thc false itrformation sLrhrnitlcd in thc statement of affairs. he has initiated proceeding: trttder Section 543 of the Companies Act, 1956 vide CA No.('}7 i"2001 to pa)/ a sum of Rs. 56, 14, 49, 712'92 paise to the rtccourrt of the comparly by the lrx-Directors including thc re s rotrdetrt herciu lor their n-risappropriat ion and mismanagenrcnt ol'tlre al'lairs ol' the company. 'l'herelore, in the cvent ol'this (lt'Lrr1 considcring 44 the present plea of respondent herein for discharge from the proceedings initiated by them, the respondent will take the said shelter in COMPA No.673l2003 to cvade compliance of the responsibility of Ex_direcror in accounting for the misappropriation of the funds olthe company.

53. The respondent herein filed countcr contending as follows:_ i. He was inducted into Board of the Company only on 09.04.1997 i.e. one year before the winding up of the company on I9.08.199g and that the other Director,s arraved AS respondenrs in COMpA No.6l I of I 99g were active while performing their duties as the directors of the company Earlier rhe OL filed COMPA No.5l2 of 2001 to implead him as Respondenr No.10 in COMPA No.6l l of 199g. OL let in entire evidence in COMpA No.6l I of l99g and he was also examined under Scction 313 Cr.p.C. after closing the evidence and no application \vas ever filed by OL under Section 319 of Cr.p.C. It. I lr. IV without any fresh information or without. any further evidence in the rrial conducred in COMpA No.6l I of 200g. fresh/present application filed by the OL is clear abuse of.the a _-l 45 process of law. Therefore, initiation of present lrosccutton ls clearly barred under the law of limitation as contemplated under Section 468 of Cr.P.C which ctearty specitie: that 1-or the offense ptrnishable up to 3 years, the limitation lor taking cognizance is 3 years tiom the date of cogniz'ance of the offence. l'he OL herein by invoking the prcvisions under Section 543 of the Act, alleging misfeasance, mrlleasancc aud negligence against the Ex-Directors including thi; -csporrdent is barred under the law of timitation and due trl tlre above sequencc of events which happened more tharl -: 1"ears prior to the present complaint any claim by the OL 'v th rogard to continuance ofthe offence would be a clear abusc ofprocess of law.'lherefore, this application liable to be dismi;sed' ANAI,YSIS AND FINDING OF THE COURT:-

54. In the light of the aforesaid lacts of the casc, the following points arise for consideration of this Coutt:- l. Whether the accused can be held liable under Sectio r 45'l(5) and (5A) of the Act, for submitting a defective atrc rnisleading statement of affairs according to the OL?

2. Whether the fresh applicatiorVpre sent application fil':d by the OL is barred by limitation under Section 468 CrPC? -/ 46

3. Whether filing a second application under Section 454 violates Section 300 Cr.pC or amounts to an abusc of process, considering earlier proceedings i.e . COMpA No. 6 I l/ l99g and COMPA No. 156/2000? Point No. l:

55. Perusal of the record would reveal that the winding up order was passed on 19.08. 1999. On 19.02. 1999 the accused filed statement of affairs claiming as a I)irector of the Company. .t.his application is filed to punish the respondent herein lor making false statcmcnts in the statemenr of affairs filed by him.

56. It is relevant to notc that thc Iligh Court ot- Kerala in oflicial Liquidator v. K. Indira Karthar5, herd that in order to prosecute the accused under section 454 (5) and 5l\ of the Act, it must prove that the accused has committed detault without reasonable excuse.

57. The paragraph which is relevant is extracted below:- "3. . ...... ... ....The importanr ingredienl ol- an oflbncc punishable under sub-s.(5) ofsection 454 is that the accused has committed the default wifhout reasonable excuse. Unless, on the evidence available, the court is in a position to come to this conclusion, thc accused cannot be convicted. Thc question, whcther in a prosecution under Section 454(5) of the Acr, the burden of proving rhar the accused had no reasonable excuse lor rnaking thc r.lefhult lres upon the " ,.,t{ 54 Comp. Cases 64 4 l 47 prosecution or not, came trp fbr consideration before a []r ll l]ench of the Dclhi High Oourt in re [1974] 44 Comp Cas 4()9 Sjcurit)' & Finance (P.) I-td., Alter an elaborate consideration of th(: relevant provisions in the Act and similar provisions in thc English Act. knowlr as thc Cornpanies (Winding up) Act, 1890, the Irull []e nch h:ld tlrat in a prosecution under Section 454(5) and (5A) of the Act. tl c burdcn of proling that the accuscd had no reasonable excuse lbr nraking the delatLlt is on the prosecution in the first instance."

58. It is relevant to note that the High Court ')l' Madras in P.V.R.S. Manikumar V. Official Liquidator'" tlcalt with thc requiremcnts to prove the ingredients ol'section 454 i-i) and (5A) ol thc Act and hcld as under:- "2-.i. Since tltc requircment of absence of reasonablc excttsc i:' an essential inercdient ofan oflcnce punishable under sub-section (5) ol l:4 ollhe Act' the initial brrrden is on the Ofllcial Liquidator to provc thc said lact 'lhc burden ol prool would shift to the accused only in casc tllc colnt)lainant discharges thc printary requirenrent of the provision regartlirru absctrce of reasonable cxctrse. 'lhe liability being one of criminal in rlat rrj. thc onus is on the conrplarnant to prove the case. Therelorc, it is tlrc dut! ol thc prosecution to l)rovc tllat in spite ofthc availability ol-rclc\irrtl records' the accLrsed lailed to submit the statement olaffairs and thcre ulti tto reasonablc ercusc for thc dc t'au lt. XXXX 27. Sub-section (5) ol'section 454 has to bc read in the irlhl ol'Section 6-ll of the L'ottrpanies Act. Section 633 ol the Act pcrrnits the (lourt trr consider ovcr all circumstances ofthe case and to arrivc al t .loncltlsion as to whcther thc accused has actcd honcstly and reasonablv lrrrd the delaLrlt 'o11zttt:1SCC onLine Mad 3201 48 was beyond his control. In case the Coun is satisfied that the accused acred reasonably and there was no dishonesty on his pa4 necessarily, he should bc relieved of the liability subjec to reasonable terms. Sub-section (2) ofSection 633 also makes the posirion very clear that the High Coun shall have the power to relieve him, as if it had been a Court before which a proceeding against that oificer for negligence, default, breach of duty, misfeasance or breach of trust had been brought under sub_ section (l) of Section 633 of the Companies Acr.,,

59. In the present case, there is no allegation, much less proof, that the accused has made any false representation or actcd tiaudulently in preparing or submitting the statement of affairs. The defects pointed out by the Official Liquidator such as incomplete debtor details or unavailabre supporting documents are consistent with the explanation that the accused has relied upon the company,s existing records.

60. OL, in his report, dated 26.03.2011 has srated that during the hearing of the original comptaint fired under section 454 in coMPA No.6l r of l99g against rhe other Ex-Directors, vidc docket orders dared 20.04.2010 and 03.06.2010, this Court direcred him ro filc separate application against Sri M.C. Jain. But on perusal of the docket on the said dates, nowhere it is mentioned. i I i I I i 49

61. No evidence has been adduced to show tl-rat lhe rcspondent deliberately suppressed facts, fabricated data, or concealed matcrial transactions. In the Present case, the OL has to prove tla: the accused has made lalse statcrnents in the statement of affairs lLtt:d by hirn in order to ntake him liable under section 454 (5) and (5A) of the Act, bel,ond reasonahle excuse, but he failed to produce sulflcient evidetlce lbr the same. Therclbre, the OL has not made out any cirse l-o punish the respondent hereir-r. This point is answered according ,v Point No.2 62 Whethcr the tiesh application/present applir:ation filcd by the OL is barred by limitation under Scction 468 CrPC'? Section 468 of the Act:-Bar to taking cognizance after lapse of thc period oI limitation. (l) Exccpt as otltenvise provided elscwhere in this Code, no Corrt shalltakc cognizancc of an offence of the category specified in sub-sc:tlon (2), after the expirl ol the period of limitation (2) The period oI lirnitation shall be (a) six rnonths. ilthc oflence is punishable with fine only; (b)one lear, il'the oflcnce is punishable with imprisonment ft)r a term not cxceeding olre \ ear: (c) thrce years, it the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years' (3) For the purposes of this section, the period of limitation' n rclation to ofences which rnay bc tried together, shall be determined w tl relerence to 50 the offence which is punishable with the more severe punishment or, as the case may be. the most severe punishment. Section 473 of the Act:- Extension of period of limitation in certain cases.-Notwithstanding anything contained in the foregoing provisions of this Chapter, any Court may take cognizance ofan offence after the expiry of the period of limitation, if it is satisfied on the facts anrj in the circumstances ol the case that the delay has been properly explained or that it is necessary so to do in the interests ofjustice.

63. In the present case, the statement of affairs was {lled on 19.02.1999. The prosecution, initiated in the year June 2010 much later, exceeds the three-year limitation period provided as per Section 468 of the CrPC. The delay of nearly l l years has nor been properly explained by the OL. The continuing nature under Section 454 (5) and (5A) ends once the obligation is duly performed. [)oint No 3:

64. With regard to whether filing a second application undcr Section 454(5) and (5A) of the Act, violates section 300 CrpC or amounts to an abuse of process, considering earlier proceedings vidc COMPA No. 156 of 2000 in COMpA No. 611 of 1998. I.his COMpA No.l56 of 2000 is hled to initiate necessary penal action as provided under section 629 of the Act, against Sri.M.C Jain an Ex_Director of the Company having made false statements in the statement of affairs. 5l The said application was disposed on 27 '06 '2002 It i j peflrnent to note that Section 300 of crPC mandates that a person o rc:e convicted or acquitted not to bc tried for the same offence' At the cost of repetition, it is necessar.v to note that the OL has earlier iled COMPA No. 512 of 2001 seeking permission of this Court tc' implead the Accused as Respondent No. l0 in Company Applicati'rn No 6l l of 1998 by invoking Section ;154 (5) and (5A) of the Act Furlher, this Court vide ordcr date<l 0i.04.2000 has implead thi' Accused as Respondent No.l0. Aggricved by the said order, the r\cctrsed has preferrecl an appcal vide OSA No.31 of 2002 in COMD'\ No 6ll of 1998 and after hearing thc sanle, the Division Bench of this Clourl has allowed the said appeal on 18.03.2006 placing reliancc on thc principle [aid clorvn by the Apex Court in Kishun Singh vs' Statc of Biharti

65. The abovc appcal filed by Mr' M' C' Jain n as allowed by Divisionat Bench of this (lourt whercin it was held thar it is alter the rcaching of thc evidencc collection, the person can be inlp'leadcd'

66. COMPA No.477 of 2010 is filed with the sirnilar reliefs to that of COMPA No. 156 of 2000 tlled by OL against Ac';used hcrein' ''1993 2 scc l6 I I t h. 52 which was disposed of vide order dated27.06.2002. Therefore, fihng tho present application is not maintainable in the present case. Accordingly point No.3 is answered.

67. Perusal of the record would reveal that the statement of alfairs was filed on 19.02.1999, and after a delay of I I years, the present application is filed alteging submission of a farse statement of aflairs. Such prosecution is clearly barred by limitation under Section 46tl of rhe Crl,C. The OL failed to explain the delay properly to satisSr the C'ourt lor granting the relief. The application is devoid of any merit and the complainr filed by the OL is barred as per Scction 46g of the CrPC. Therefore, this Company Application (COMPA No.477 of 2010) is liablc to bc dismissed and is dismissed.

68. In rhe light of the aforesaid discussion, these Company Applicat ions are dismissed. As a sequel, the miscellaneous petitions, if any, pending in these company applications, shall stand closed. SD/-K.SRINIVASA RAO JOINT REGISTRAR //TRUE COPY// ECTION OFFICER To, 1 The Officiat Liquidator, It//s. Asia pacific lnvestment Trust Limited (in Liqn.) 'lst ftoor, Corporate Bhawan, Br"dt;;;;; r,:}gole, Hyderabad _ -OI]:"^^rt 500068 'an"*an' l;;;" )H tioor Corporate Village Hayathnrgrr. Pin Code 500 680

2. The Registrar of Companies, Ministry of Corporate Affairs' Government of - Nagole' Bandlagtrda' Thattiannaram l\'l'nO'l Ranga heddy Districl Telangana State 3. The Regional Director, South Eastern Region' I\/inistry of Corporate " nttl'r.'iA-i'"oiCo|.poi"t" Bhawan Nagole' Bandlagirda' Thattrannaram Ranga n6Ody District Telangana State' Pin -M,nO"l, - Village Hayathnrgrl. Code 500 680 Court for at HYderabad [OPUC] + ine S O O.S. Section, High Court at Hyderabad' for the State of Telangana' 5. One CC to Srr G. t<atyan tnitravarthy' Counsel for Ofllcial Liquidator' High 6. One CC to Sri S. Ravi, Advocate (OPUC) 7 One CC to Sri Deepak Misra, Advocate [OPUC] 8. Two CD CoPies Kam/PSL Ny { HIGH COURT DATED:1 110912025 --: S (' 2 ( I 1 'il\l C,t=, I ( COMMON ORDER \ .,) 1) a) k COMPA.No.547 ot 2002 COMPA.No.611 of 1998, COMPA.No.611 of 1998, COMPA.No.477 of 2010 COMPANY PETITION No.84 of 1997 DISMISSING OF THE COMPANY APPLICATIONS qc\1