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2017 (9) TMI 129 - HC - Companies LawDefalcation and fraud by the appellant - appellant's motivation in infusing his personal funds to the company's liability towards the creditors - winding up proceedings - Held that:- The appellant, admittedly, even according to the learned Single Judge, enabled the settlement of dues, of more than ten thousand depositors. To achieve this end, concededly, the appellant brought in his personal funds. Clearly, by providing funds, the appellant has become a creditor of KOFL. That apart, the appellant is also a contributory of KOFL. The fact that the appellant enabled a settlement with the depositors by delving into his personal funds would not deprive him of the protection of limited liability. The KOFL liability towards the creditors cannot enable the creditors to latch on to the appellant's personal assets unless they are able to establish malfeasance, defalcation and fraud by the appellant. Though, in the Administrator's report, there is a reference to the factum of appointment of M/s.Rangan and Krishnan as auditors of KOFL, nothing has been placed before us to suggest that the appellant had defalcated KOFL's funds. Therefore, the appellant's motivation in infusing his personal funds cannot, to our minds, be the basis for coming to the conclusion that keeping the winding up petition in play works to his benefit. Whatever may have been the reasons for the appellant to infuse funds, the fact of the matter is that, claims of a vast majority of depositors were settled with help of funds brought in by him and therefore, if criminal proceedings initiated against the appellant were closed on account of settlement of dues of depositors is any issue on which, we cannot comment as that aspect of the matter is not within the scope of the present proceedings. What is clear though the motivation of the appellant to keep the company petition ongoing cannot impinge upon construction of the Rules adverted to above by us. Having said so we make it abundantly clear that nothing that we said above will come in the way of prosecution of the appellant in civil and criminal proceedings, if, otherwise they are tenable in law. Therefore, for the foregoing reasons, we are of the view that the impugned judgement and decree cannot be sustained. It is ordered, accordingly. The appeal is allowed. C.P.No.179 of 2001, is put back on board. The OL, who is, presently, acting as PL, will continue to prosecute the winding up proceedings under the supervision and as per the orders of the learned Company Judge. Resultantly, the consequential directions issued via the impugned judgement and decree shall also stand set aside.
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