Director Breach of Duty: failure to pursue company debts amounted to misfeasance and triggered compensatory liability with interest.

Past directors failed to institute recovery proceedings and allowed company debts to become time-barred, constituting misfeasance and breach of trust; under Section 543 of the Companies Act, 1956 the court examined their conduct on the liquidator's application and compelled contribution by way of compensation for the loss, awarding restitution of the outstanding debts and interest. The court treated the breach of duty causing non-realisation of assets as the operative basis for liability and granted a decree for recovery against the respondents with interest at 12% per annum.

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Issues: Whether the respondents, being past directors, are liable to reimburse the company Rs. 4,056.77 together with interest for misfeasance or breach of trust for allowing the company's debts to become time-barred and failing to take proceedings for their recovery.

Analysis: The Court examined the statement of affairs filed in liquidation showing debts aggregating Rs. 4,056.77 as the only realizable assets and found that the respondents did not institute recovery proceedings and allowed those debts to become time-barred. The Court applied the statutory power under Section 543 of the Companies Act, 1956, which permits the court on an application by the liquidator to examine the conduct of past or present directors and to compel contribution by way of compensation for misfeasance or breach of trust. The Court relied on established definitions of misfeasance and breach of trust to conclude that breach of duty resulting in loss or failure to realise assets renders directors liable to restore the company's loss. The petitioner also claimed interest at 12% per annum from the date of filing of the petition; the Court considered this claim in view of the decretal relief sought and the period of inaction by the respondents.

Conclusion: The respondents are jointly and severally liable to pay Rs. 4,056.77 to the petitioner with interest at the rate of 12% per annum from April 10, 1987, until realisation; a decree for recovery is passed in favour of the petitioner against the respondents.

Ratio Decidendi: Where a director's breach of duty causes loss to the company by failure to realise its assets, the court under Section 543 of the Companies Act, 1956, may compel the director to contribute by way of compensation equivalent to the loss sustained.

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