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TMI Blog2012 (6) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. Mr. P. K. Chatterjee who was appointed as auditor submitted his report on December 6, 2007. On examination of the report, this court ordered misfeasance proceedings to be started. They were accordingly started and the misfeasance application came to be numbered as C. A. No. 14 of 2007. This application had ten respondents, all directors or responsible officers of the company. It appears that the statement of affairs was filed by the second, third, sixth and ninth respondents. 4. Further to leave granted by this court in the misfeasance application, points of claim were filed implicating the respondents jointly. They were accused of misapplication and misappropriation of the funds of the company aggregating to Rs. 1,52,07,388. 5. Four respondent former directors of the company have made separate applications to the court to absolve them from all the charges of misappropriation and misapplication made against them by the official liquidator. They are the second respondent who has made the application C. A. No. 467 of 2008, the sixth respondent who has made the application C. A. No. 466 of 2008, the ninth respondent who has made the application C. A. No. 468 of 2008 and the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application and the other applications by the respondents relied on the case of Official Liquidator v. Raghawa Desikachar [1975] 45 Comp Cas 136 (SC). He also relied on a judgment of brother Jayanta Kumar Biswas J., in Official Liquidator v. Padam Kumar Khaitan [2011] 161 Comp Cas 402 (Cal.), where the respondent director was discharged, applying the principles contained in Order 7, rule 11 of the Code of Civil Procedure, 1908. To advance this proposition reliance was also placed on Security & Finance (P.) Ltd. v. B. K. Bedi [1991] 71 Comp Cas 101 (Delhi), Official Liquidator, Milan Chit Fund & Finance (P.) Ltd. v. Joginder Singh Kohli [1978] 48 Comp Cas 357 (Delhi), Official Liquidator & John Galt Laboratories Ltd. v. R. B. Sangare [2006] 133 Comp Cas 258 /[2007] 74 SCL 129 (Bom.) and Official Liquidator v. V. Selvaraj [2009] 152 Comp Cas 177 /[2011] 106 SCL 56 (Mad.). 11. Although, Mr. A. K. Dhandhania, learned counsel for the official liquidator disputed the date of resignation of this respondent, he could not positively show from the records that the respondent participated in the affairs of the company after the date of his resignation. Therefore, I have said that there is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents. 14. The auditor made his report on December 6, 2007. On the basis of the report the points for claim were filed. I am amazed as to how these points of claim could be drafted, without calling for any particulars from the auditor or without asking the court to direct the auditor to make a more specific enquiry and file a more specific report against the directors. 15. The points of claim are a mere reproduction of the report of the auditor. All the respondents have been made jointly liable for any unaccounted cash and movable properties of the company like motor vehicles, generator, stock, stores, spare parts, raw materials, unpaid loans and so on. There is no detail of the assets, how they were misappropriated or misapplied and by whom. 16. The directors and other officers of the company do not become automatically liable for all the loss that the company has suffered. The loss or misappropriation or misapplication of assets and other properties of the company have to be identified in detail and responsibility fixed jointly upon those in control of the company or upon some of them or one of them, with the necessary justification for fixing such liability. 17. The ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of action and was liable to be dismissed. 20. In a similar application Baldev Raj Taneja v. Official Liquidator [2011] 161 Comp Cas 417 (Cal.), concerning the fourth respondent I tried to embellish this principle by saying that when it can be shown that any director or officer of the company had resigned much before the date of winding up of the company, the obligation of the official liquidator to furnish details was much more than with regard to those officers who were connected with the company at or about the time of winding up. The obligation to give details of wrong doing, according to me is always there. But the time of relinquishment of the office determines the amount of details to be furnished. The details of wrong doing about a director at the time of winding up need not be as much the details of the wrong doing of the director who left the company, say, 15 years before its winding up. This is so because the longer in point of time a person has dissociated himself from the company, the presumption is stronger that he might not have been involved with the misappropriation alleged. However, in that decision I departed to some extent from the principles in the case of Pada ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,33,144 on account of Provident Fund, ESI and EDLI liabilities. I felt that this amount was collected from the customers or employees and the company could not use these funds. The sales tax had to be deposited with the sales tax authorities ; the provident fund with the provident fund authorities. When such amount had not been deposited there was a presumption of misappropriation by these respondents, who were in control of the company at the material time. 23. In those circumstances I directed the auditor to file a supplementary report. That report was brought on record by the official liquidator by his report dated July 21, 2011. Nothing was added to the original report. The auditor has in turn relied upon the report of the auditor of the company. This was for the year 2000-01. The company auditor's report was as follows : "The amount outstanding as on March 31, 2001, in respect of undisputed sales tax, income-tax, wealth tax, custom duty and excise duty, which were due for more than six months from the date they became payable are sales tax Rs. 93,69,399 and income-tax (TDS) Rs. 500." 24. In those circumstances I called upon the applicant respondents to rebut this presump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentify the person or persons associated with this. Unfortunately, there is no such detail in the points of claim. 29. So this claim fails. 30. There are no details of the involvement of the applicants or any of them in the alleged acts of misappropriation mentioned in sub-paragraphs (a), (b), (c), (d) and (g). Hence, these claims also fail. 31. But one claim against the applicant respondents is to succeed because there is no explanation for this sum. This is the sum of Rs. 1,33,144 deposited with them by the employees on account of Provident Fund, ESI and EPLI liabilities. For this sum the same presumption will apply as with regard to sales tax, namely, that the company cannot use this money which belongs to the employees and so it is deemed to have been misappropriated, by the directors or those in charge of the company unless suitably explained [see the case of P. A. Tendolkar (supra)]. 32. There is no such explanation. For misappropriation of Provident Fund and other dues I would impose a high penal rate of interest, because by misappropriation of this sum, the employees of the company have been deprived. 33. It appears on consideration of the records that the applicant-re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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