OJCR/13/2007 1/14 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD CRIMINAL CASE No. 13 of 2007 In COMPANY PETITION No. 215 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= O.L. OF CRYSTAL WATCHES LTD. - Complainant(s) Versus JAYKUKAR N. SHAH & 2 - Accused ========================================================= Appearance : OFFICIAL LIQUIDATOR for Complainant(s) : 1,MR NITIN K MEHTA for Complainant(s) : 1, MR ANIP A GANDHI for Accused : 1, MR PAVAN S GODIAWALA for Accused : 1 - 3. ========================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ Date : 05/02/2008 ORAL JUDGMENT 1. The Official Liquidator has filed this OJCR/13/2007 2/14 JUDGMENT complaint under Section 454 of the Companies Act requesting this Court to take cognizance of the default committed under Section 454(5) of the Companies Act, 1956 and to issue process against the accused Nos.1 to 3 to try and punish them in accordance with the provisions of law and in view of the facts stated in the complaint. 2. This Court has issued the process on 22.11.2007. On 26.12.2007, this Court has passed an order wherein it is observed that the Ex-Directors of the Company have filed the Statement of Affairs on 23.11.2007. On verification of the statement of affairs, the Official Liquidator has found that stock in trade of Rs.59,334/- and Rs.2,182/- has been shown in Schedule-V, but it was not disclosed as to where the stock was lying. The Official Liquidator, therefore, wrote letter dated 24.12.2007 to the accused and requested them to hand over the possession of the OJCR/13/2007 3/14 JUDGMENT stock. The Court has further recorded on that day, submission made by Mr.Pavan Godiawala, learned advocate appearing for the accused, that the accused were prepared to surrender the said stock to the Official Liquidator. He has also submitted before the Court that at the time when the possession of the assets of the Company was taken over, this fact was disclosed to the representative of the Official Liquidator. The Court, therefore, directed the Official Liquidator to place all the details about panchnama and inventory qua the same and the report prepared by his officer when the possession was taken over. 3. On 27.12.2007, this Court has passed further order. The file of the Official Liquidator was perused by the Court and Court observed that while going through the file presented by the Official Liquidator, it was found that the statement of affairs of the OJCR/13/2007 4/14 JUDGMENT Company has been filed and statement of Ex- Director of the Company was recorded. The Concerned representative of the Official Liquidator, Mr.N.J.Kansara as well as Ex- Director of the Company both were present in the Court. One Mr.Arvindbhai Patel was also present alongwith Ex-Director. He has reiterated before the Court that all these facts were pointed out to the representative of the Official Liquidator. The same has been denied by the representative of Official Liquidator. Hence, both these persons Directors were directed to place the correct facts on record by way of affidavit. Mr.Manoj Shah – original petitioner was present when the possession was taken. The Court, therefore, issued notice to the said Mr.Manoj Shah and directed him to remain present before the Court on 10.1.2008. The original accused were also directed to file their affidavits with regard to the stock in trade. OJCR/13/2007 5/14 JUDGMENT 4. Pursuant to the order passed by this Court on 27.12.2007, further affidavit was filed by Mr.Jaykumar Shah on 9.1.2008. In para-3 of the said affidavit it was stated that at the time of handing over possession, he and Arvindbhai informed the concerned officer of the Official Liquidator that stock of watches are lying at 124, Vrundavan Shopping Center, 132 Ring Road, Nr.Medilink Hospital, Satellite, Ahmedabad. It was further stated that the said officer also accompanied with Shri Arvindbhai Patel after few days and visited the above place (godown) where the stocks were lying. The concerned representative upon visit informed that the valuer would be required while taking possession and the office of the Official Liquidator would undertake the exercise of the same and simultaneously the possession would be taken. Even at the time of giving the statement, he being the Ex-Director OJCR/13/2007 6/14 JUDGMENT informed that the possession of the stock of watches was not taken by the office of Official Liquidator but unfortunately, the statement did not reflect the same as per the information available. An affidavit was also filed on 9.1.2008 by Arvindbhai Patel, pursuant to the direction of this Court, wherein more or less same facts have been reiterated by him. 5. Pursuant to the notice issued by this Court on 27.12.2007, the original petitioning creditor Shri Manoj K. Shah was personally present before the Court on 10.1.2008. Mr.Anip Gandhi, learned advocate appeared on behalf of Shri Manoj K. Shah. On being asked by the Court, he has specifically stated that in his presence, Shri Jaykumar Shan and Shri Arvindbhai Patel have asked the officer of the Official Liquidator about the stock lying in the godown. For this limited purpose, notice was issued on him and he has confirmed OJCR/13/2007 7/14 JUDGMENT the facts stated by Shri Jaykumar Shah and Shri Arvindbhai Patel. Since the presence of Mr.Manoj K. Shah was no more required in the matter, the notice issued on him stood discharged on 10.1.2008. 6. Vide order dated 27.12.2007, the Court has directed Mr.N.J.Kansara to file affidavit. Pursuant to the same, he has filed his affidavit on 10.1.2008 and stated that it was not made clear on that day i.e. 28.5.2007 to him that some more stock was also lying elsewhere. From his affidavit, the Court found that though affidavits of Shri Jaykumar Shah and Shri Arvindbhai Patel are dated 9.1.2008 and both these affidavits have been read over by him, the specific averments and/or allegations made therein have not been dealt with by him in his affidavit filed on 10.1.2008. The Court has, therefore, asked him as to whether he wanted to file further affidavit in the matter. He expressed his OJCR/13/2007 8/14 JUDGMENT desire to file further affidavit to deal with the averments made in the earlier two affidavits. For that purpose, the matter was adjourned to 16.1.2008. 7. The Court has also perused the report filed by the Official Liquidator dated 9.1.2008 alongwith sealed cover containing the valuation report of the stock which has been collected from the godown. The stock was ordered to be disposed of in the same manner and in accordance with the directions which were earlier issued by the Court. 8. Subsequent to the order dated 10.1.2008, a further affidavit dated 28.1.2008 was filed by Shri N.J. Kansara. It is stated therein that on 28.5.2007 he had been to take possession of the registered office of the Company as directed by the Official Liquidator. Thereafter, in the meantime, he had accompanied them to the godown where the OJCR/13/2007 9/14 JUDGMENT subject stock was lying and he specifically informed them to give in writing to the Official Liquidator so as to take possession officially with the help of valuer but they could not do so till filing of Statement of Affairs i.e. 31.12.2007. It is further stated by him in the said affidavit that as per the office procedure the said file was re-allocated to one of the Company paid staff Mr.Chital Sheth for onward process. On 5.7.2007, Ex-Director's statement was recorded under Rule 130 of the Companies (Court) Rules, 1959 but the subject stock matter was not recorded therein. He has further stated in the affidavit that in the event of miscommunication on the basis of statement of Ex-director before this Court and the action of not taking timely possession was neither intentional nor willful for which he was not having any malicious intention. He has also expressed his unconditional apology before the Court. OJCR/13/2007 10/14 JUDGMENT 9. On perusal of the above referred two affidavits filed by Shri N.J.Kansara, dated 10.1.2008 and 28.1.2008 it appears to the Court that the fact regarding stock lying in the godown was well within his knowledge. It is also the fact that despite this knowledge, the possession of the stock was not taken by the Official Liquidator. The affidavits filed by the Ex-Directors and the affidavit filed by Shri N.J.Kansara give different pictures about the knowledge and information of the stock. The stand of the Ex-Director were consistent that they have informed Shri N.J. Kansara about the stock. They have disclosed this fact in the statement of affairs and they have also shown their willingness to surrender the stock. On the other hand, the initial version of Mr.Kansara was that it was not made clear to him about stock and second version was that he has communicated the Ex-Directors to write a OJCR/13/2007 11/14 JUDGMENT letter to the Official Liquidator and thereafter with the help of the valuer the possession was taken. The Court is, therefore, of the view that the affidavits do not give the clear indication about the happening of the event. The fact still remains that there is no short fall in the stock and same stock was found when the possession was taken. The Court would have taken serious view in the matter, but for the fact that the stock was found intact and the learned advocate appearing for the Ex- Directors as well as Ms.Amee Yajnik, learned advocate appearing for the Official Liquidator and the Official Liquidator himself have pleaded before the Court that this may be the result of miscommunication and there might not be any malafide intention on the part of Mr.Kansara not to disclose this fact immediately and hence lenient view be taken in the matter. OJCR/13/2007 12/14 JUDGMENT 10. Having considered the facts and circumstances of the case and having seen the explanation tendered by the parties, the Court closes this chapter here by directing the Official Liquidator to take some precautionary measures with the staff and see to it that when possession of the assets of the Company in liquidation is sought to be taken pursuant to the winding up order, proper record should be maintained, panchnama should be drawn and inventory may be taken and prompt reporting should be made to him so that such incidents in future may be avoided. Mr. Kansara may also be warned accordingly. 11. In his report the Official Liquidator has observed that the Ex-Directors have informed that the godown in which the stock is lying is not owned by the Company in liquidation but the same is owned by Birenbhai Dipakkumar. Shri Harshadbhai R. Joshi representative of the owner of the godown has OJCR/13/2007 13/14 JUDGMENT submitted papers of the godown to the representative of the Official Liquidator. The Official Liquidator has also produced the copy of minutes dated 2.1.2008 and ownership papers of the godown, alongwith the report dated 9.1.2008. Based on this report, Mr.Pavan Godiawala, learned advocate submitted that the godown is wrongly sealed by the Official Liquidator and hence the same may forthwith be desealed. This issue would be considered as and when appropriate application is moved before the Court by the owner of the godown. 12. As far as criminal case is concerned the Ex-Directors have filed statement of affairs. Though there is some delay, extension of time was sought for and within the extended period statement of affairs was filed. All queries raised by the Official Liquidator have also been satisfied by the Ex-Directors and there is no further query. The statement was also OJCR/13/2007 14/14 JUDGMENT recorded and hence all the formalities required under Section 454 of the Companies Act have been observed. Since proper explanation has been made by the Ex-Directors about the statement of affairs nothing further is required to be done in the matter. This criminal complaint is accordingly disposed of and process issued against the accused stands discharged. (K. A. PUJ, J.) kks