TMI Blog2002 (4) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... breach of duty, gross negligence in discharging their duties and managing the affairs of the company. ( b )For a declaration that the respondents directors of the above company, have misapplied, retained or became liable or accountable for the money or property of the company. ( c )For an order that all necessary inquiries be made an accounts taken for ascertaining what sums the respondents are liable to contribute to the assets of the said company by way of compensation for such misfeasance and breach of trust aforesaid. ( d )For an order that the respondents directors do jointly and severally contribute to the assets of the said company and do pay to the Official Liquidator of the said applicant company all such sum as they may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed for carrying out investiga tion in case of company (in liquidation). The Chartered Account ants have tendered report dated 22-2-1996 wherein it is stated that books of accounts and financial statements and other rele vant records of the company (in liquidation) pertaining to ac counting years 1977-78 to 1984-85 have been examined by them. 3. The facts which are culled out from the report of the Char tered Accountants are that originally the company was promoted by person comprising one Patel Group but due to financial crisis,the Patel Group was not in position to run the company and, conse quently, one Mr. R.C. Gupta and his associates took over the management of the company (in liquidation), w.e.f. 15-5-1979. The new management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against this, Mr. Rajesh D. Dave appearing on behalf of respondent Nos. 2 to 6 states that Respondent No. 2 who was actually in-charge of the various affairs had expired on 27-12-1997. That Respondent No. 5 had filed an affidavit-in-reply on behalf of Respondent Nos. 3 to 6 on the basis of available re cords after carrying out inspection of such records lying with the Official Liquidator. It is further stated that the business of the company (in liquidation) was being looked after by Re spondent No. 2 namely, deceased Shri Rameshchandra Krishanlal Gupta and the accounts were being audited by M/s N.M. Shah, Chartered Accountants of Surat who has also expired. In these circumstances, it was not possible for the deponent to answer with preci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : ". . . It may be mentioned that misfeasance action against the directors is a serious charge. It is a charge of misconduct of misappropriation or breach of trust. For this reason, the appli cation should contain a detailed narration of the specific acts of commission and omission on the part of each director quantify ing the loss to the company arising out of such acts or omis sions. The burden of proving misfeasance or non-feasance rest on the Official Liquidator. The Official Liquidator, it may be men tioned, merely relied upon the evidence recorded in public exami nation of the directors and on a few documents tendered in evi dence. At the stage of public examination, there was no charge of misfeasance against the directors and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to enable frauds to be committed, and losses thereby incurred by the company." (p. 1115) 7. Therefore, to bring the charge of misfeasance against the ex-director, it is necessary that specific acts of commission or omission and/or negligence on the part of each director are pointed out; the loss arising to the company as a result of such specific act of commission or omission or negligence shall also have to be quantified as the order of recovery from such a direc tor would be based on the said quantification. The liability under the provision though in the nature of tortuous liability, it yet is quasi-criminal in nature, and it is a particular direc tor who has caused loss to the company by his act which would amount to misappropriati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any specific acts of commission or omission or had misapplied or retained any monies/properties of the company (in liquidation) ? The Chartered Accountants in their report have specifically stated that the losses had been incurred by the company (in liquidation) due to poor debtors management, payment of higher interest, higher production costs and lower sales pricing of the products of the company. At the highest, this could be termed as acts of poor financial management. The obser vations hereinbefore culled out from the Chartered Accountants report are based on the following findings, if one may term them to be findings : " It creates doubts about reasonability of sales pricing. The pattern of sales pricing in detail is enclosed in A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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