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TMI Blog2010 (11) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4,65,75,000 having registered office at No. 1100, Avanashi Road, Coimbatore-37 and the factory premises is situated at Nallattipalayam, Thamarai Kulam (P. O.), Pollachi Taluk, Coimbatore District. The registered office of the company was later shifted to the factory premises on May 7, 2003. The main object of the company was to develop cheaper version of draw text rising machine. 4. As per the records, the respondents in these applications were directors of the company and the statement of affairs filed by the ex-directors shows that the following are the secured creditors of the company : (i)Union Bank of India, Coimbatore. (ii)State Bank of India, Coimbatore. (iii)Corporation Bank, Coimbatore. (iv)Industrial Development Bank of India, Bombay. (v)Industrial Finance Corporation of India, New Delhi. (vi)The Industrial Credit and Investment Corporation of India Ltd. (subsequently assigned to Standard Chartered Bank). 5. In the meeting of the secured creditors conducted on October 12, 2009, by the official liquidator, the State Bank of India, Coimbatore had given a letter dated October 11, 2004, stating that they propose to stand outside the liquidation proceedings. 6. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in C. A. No. 1940 of 2008, has permitted the official liquidator to pay dividend at 92 paise in a rupee to the workmen creditors and an amount of Rs. 48,36,278 has been paid to the workmen creditors shown in the first list of creditors and to 80 workmen in the second list. According to the official liquidator, 31 workmen shown in the second list remain to be paid. 11. It is stated that the official liquidator has realised a sum of Rs. 57,501.50 from the sundry debtors out of the due of Rs. 40,78,671. The fund position of the company in liquidation is as follows : Rs. (i) Cash : 429 (ii) Bank : Nil (iii) Investment : 85,00,000 and the official liquidator has to pay Rs. 61,532 towards the Government Commission and Rs. 51,998 towards audit fee, apart from paying the workmen creditors as per List II, who have not been paid 92 paise in a rupee as per the order passed by this court and the claims are pending for adjudication for want of sufficient documentary proof. 12. While the ex-directors have stated that the realisable value of the movable and immovable assets as Rs. 26.67 crores in the year 2004, the official liquidator was able to realise only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to the extent of Rs. 8,88,29,227 with interest at the rate of 12 per cent. per annum from the date of winding up till the date of recovery of the entire amount ; to declare that the respondents are personally liable for all the debts or liabilities ; to declare the liability of the respondents for the said sum of Rs.8,88,29,227 and for other future claims of the creditors together with interest thereon which shall constitute the first charge on the property and effects ; and for costs. 17. Respondents Nos. 2, 3 and 4 having received the notice, as it is seen in the acknowledgment filed in the proof of service, have failed to appear. The sixth respondent has filed a counter affidavit, wherein it is stated that the first respondent, L. G. Varadarajulu has passed away on May 19, 2010, as it is also reflected in the newspaper report filed by the sixth respondent. 18. It is stated in the counter affidavit filed by the sixth respondent that the second respondent is a German national resident in Germany. While the third respondent is a leading industrialist of Coimbatore city, the fourth respondent is an industrialist based in Mumbai, the fifth respondent is a lawyer practising in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores in 2007 was due to the market conditions and deterioration in the assets in the three years period. 22. It is stated that there is no fraudulent conduct of business, misfeasance, breach of trust, misappropriation of property of the company as alleged by the official liquidator and therefore, this application does not fall within the ambit of sections 542 and 543 of the Companies Act, 1956. 23. It is also stated by the sixth respondent that he is not having any personal knowledge about the present state of affairs of the company and according to the sixth respondent, there is no misfeasance. 24. I have heard learned counsel for the applicant and the respondents and given my anxious thought to the issue involved in this case. 25. Section 543(1) of the Companies Act, 1956, makes it clear that the liability is attributable to the ex-directors only if it is found that the moneys of the company under liquidation have been misapplied or there has been misfeasance or breach of trust. The term misfeasance or breach of trust is certainly relatable not only to intentional act of the directors, but also to the deliberate conduct of the ex-directors which has resulted in the loss to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is that the directors must have taken the company on a route which they are consciously aware of as leading to a case of total mismanagement, thereby bringing down the company' s existence. In the absence of any material to substantiate the allegation, one cannot go in a mechanical manner to sustain the contention put forth in the application. 29. Even though it is the case of the official liquidator that the ex-directors have given the realisable value of the movable and immovable assets as Rs.26.67 crores in the year 2004, while the same were sold only for Rs. 14 crores in the year 2007 and there is an inflation of value by the ex-directors, admittedly, the assets were sold only in the year 2007, viz., after three years from the valuation, and the reason for lesser realisation of value cannot be imputed on the respondents, especially when the official liquidator with the existing value of the assets could settle 92 per cent. of the liabilities of the secured creditors and workmen creditors, which is of utmost importance. 30. Having regard to the seriousness of the provisions and there being no material against the ex-directors, the allegations stand unproved. This application ..... X X X X Extracts X X X X X X X X Extracts X X X X
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