TMI Blog2019 (4) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Court wherein the Court is vested with the jurisdiction to examine conduct of the past or present Director, Manager or any other officer of the Company who is found to be guilty of any misfeasance or breach of trust. Thus, such proceedings have to be treated in the nature of quasi criminal proceedings. Misfeasance is not to be imputed to a Director unless he has dishonestly acted or abstained from acting any conflict with his plain duty. Such allegation must be pointedly put up by the Official Liquidator in the application moved under Section 543 of the Act of 1956. There has to be a positive and specific evidence and pleadings in support of the individual Director of a nature contemplated by the Section. From the documents which have come on record, pleadings of the parties as well as the submissions which have been recorded, this Court has been unable to find a specific allegation as against a particular Director apart from the general allegations of the loss caused to the Company which is difficult to be pinpointed on a particular individual Since there is no detailed narration of a specific act or act of commission or omission on the part of each Director qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audited annual accounts and the un-audited accounts for the year 1998-99 and 1999-2000 (01/04/1999- 12/08/1999) and other records and papers of the Company in liquidation were examined. 2. Vide order dated 14/09/2007, this Court framed following issues:- (1) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of ₹ 4,29,591.56 along with interest towards the value of the assets of the Applicant Company namely Furniture and Fixtures, Office Equipment, Air Conditioners, Refrigerators and Electric Installations ? ...Applicant (2) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of ₹ 19,275.00 along with interest in respect of the Electrical Equipment belonging to the Applicant company sold by them on 1.4.2000 ? ...Applicant (3) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of ₹ 74,400/- along with interest towards the cost of 93 Push Button Telephones and 62 PMB/EMPB dialers belonging to the Applicant Company ? ...Applicant (4) Whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d viz. Furniture and fixtures was ₹ 3,03,935.92. Office equipment was ₹ 48,229.82, air-conditions and refrigerators was ₹ 17,974.95 and of electric installations was ₹ 59,450.87 respectively aggregating to ₹ 4,29,591.56. The said sale transaction had been made through a journal voucher no.40 dated 7th July, 1999 and had been entered in the account books. In recording this sale transaction, the Company had however not received any payment in cash and the Company had simply debited sundry creditors account and credited the sale account. The minute book of the Board meetings maintained by the Company did not have any resolution of the Board empowering the ex-management to sell the assets of the Company. Besides, the sale transaction had been effected while the winding up petition was pending with the High Court. As per Section 531 of the Companies Act, the said sale transaction was therefore void. Therefore, in this case also the sale of assets made by the ex-directors on 7th July 1999 to its creditors is covered u/s 531 of the Companies Act. No valuation report is on record to show the correct value of the gods either. (B) Issue No. 2 : Voucher No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Refrigeration for cylinder security and M/s Motorcades for monthly Petrol bill respectively. These were not recovered. The Statement of Affairs had disclosed about ₹ 2,03,823.00 as being doubtful of recovery against total dues of ₹ 2,47,191.61 (F) Issue No. 6 and 7 : The scrutiny of the list plant and machinery items enclosed as Annexure VI to the Statement of Affairs at page No. 47, had revealed that certain Plant items belonging to the Company had been shown as lying with third parties They had not handed over the possession of the same to the Official Liquidator till the date of filing of the Statement of Affairs with the Official Liquidator. The details of the items was as under : a) Moulds for Plastic parts lying with M/s Industrial Plastic Moulders, A-5-16, Jhilmil Tahirpur Industrial Area, Shahdara. b) Moulds for Plastic parts lying with M/s Precision Plastics, Tigaon Road, Ballabhgarh, Haryana. c) D.G. Set 250 K.V.A. (1 No) lying with M/s SRS Engineering Services UG-3, Gyan Deep Complex, 66-A/11, New Delhi. (Since delivered on 28th December 2001). d) Refrigeration (1 No) Book value ₹ 7600/- lying with exdirectors (since delivered on 28t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Official Liquidator. The office furniture and electrical instruments were sold to the landlord for adjustment of ₹ 10 lac without there being any such resolution after the Company in liquidation had gone into liquidation and thus, it is stated that the respondents are jointly and severally liable to compensate with interest the loss caused by them to the Company in liquidation. 5. It is submitted that the sale was conducted at the level of the Directors without tender or valuation. The sale of goods lying in the Company premises was done to benefit particular section of creditors which is in violation of the provisions of Section 531 of the Companies Act. It is pointed out that there were missing items when possession was taken over by the Official Liquidator for which the Directors will have to be held liable and thus they are guilty of act of misfeasance and breach of trust. 6. During pendency of the proceedings of the Company Application, Mr. SR Joshi, Adv. has put in appearance on behalf of the respondents no.1 to 3 and submitted that the Company was wound up vide order dated 12/08/1999 and the allegations levelled by the applicant have been denied. Individual r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is firm and several cheques issued by the Company were bounced from time to time. The firm initiated proceedings against the Directors of the Company, which were ultimately settled between the parties. The company is no longer indebted to the firm and the moulds for plastic parts may be taken over by the Official Liquidator, who made no efforts in this regard. So far moulds for plastic parts with another firm M/s Precision Plastic is concerned, the Company was indebted ₹ 1,52,413/- as on 12.8.1999, the date of passing of winding up order. (d) That allegation of missing of some finished goods is prima facie false, since the possession of the factory was taken by the Official Liquidator on 20.8.1999 and the above stated finished goods were found missing on 28.12.2001, i.e., after a lapse of more than 2 years for which the Answering Respondents were not liable. (e) That it was not practical to recover form each sundry debtors, the amount payable to the company, although due to efforts were made by the company and certain amounts were also recovered and remaining parties were reminded for payment of their dues. Apart from this, legal action was also taken in some cases. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restore the money or property or any part thereof respectively, with interest at such rate as the Tribunal thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Tribunal thinks just. (2) An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplication, retainer, misfeasance or breach of trust as the case may be, whichever is longer. (3) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable. 8. In the case of Official Liquidator, Supreme Bank Ltd. Vs. P.A. Tendolkar (Dead) by Lrs. and ors.: AIR 1973 (SC) 1104, the Apex Court has laid down following principles:- It is certainly a question of fact, to be determined upon the evidence in each case, whether a Director, alleged to be liable for misfeasance, had acted reasonably as well as honestly and with due diligence, so that he could not be held liable for conniving at fraud and misappropriation which ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n executed on the basis of duress and force, have already been annulled by this Court. Sufficient mitigating grounds, as noted above, are made out. Merely on the basis of report of Mr. N.C. Jain, Chartered Accountant, who has admittedly not examined the books of accountants, which makes it obvious that the case for initiating proceedings and punishing the respondents under Section 543 of the Act of 1956 is not made out. It is also stated that the OL had already sold the said properties. 13. Taking into consideration that the Company Application fails to detail narration of the specific acts of commission or omission on the part of each Director and further the OL has not been able to prove the case of misfeasance or committing any breach of trust in discharge of functions and duties and the respondents have been able to justify their action in not making available the records and selling their properties in duress, the issues no.1, 2, 3 and 4 as framed by this Court, are not found to be proved and are answered in favour of the respondent. It is noted that non-handing over the possession of current stock, books of accounts is on the basis of reasonable excuse and this Court is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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