Misfeasance proceedings against a surviving director can continue despite a co-director's death; liability depends on proved misapplication.

In misfeasance proceedings under section 543 of the Companies Act, 1956, director liability is joint and several, so the application can proceed against a surviving director even if another director has died and his legal representatives are not impleaded, especially where no timely claim was pursued against them. Liability is confined to items of misapplication or accountability proved on the merits. On the facts, the court upheld liability only for the company funds advanced to Devichand and Co. with interest, and set aside liability for the remaining disputed items, thereby modifying the decree accordingly.

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Issues: (i) Whether proceedings for misfeasance under section 543(1) of the Companies Act, 1956 could be maintained against the surviving director without impleading the deceased director and his legal representatives. (ii) Whether the appellant was liable for all the items claimed by the official liquidator.

Issue (i): Whether proceedings for misfeasance under section 543(1) of the Companies Act, 1956 could be maintained against the surviving director without impleading the deceased director and his legal representatives.

Analysis: Liability under section 543 is compensatory and can be enforced against a person who has misapplied or become liable or accountable for company assets. The liability of directors in such proceedings is joint and several. The death of one director does not, by itself, vitiate the proceedings against the surviving director. Non-impleading of the deceased director and his legal representatives, particularly when the claim against them was not pursued within the period contemplated by section 543(2), does not invalidate the application against the surviving director.

Conclusion: The proceedings against the appellant were valid and were not defeated by non-joinder of the deceased director or his legal representatives.

Issue (ii): Whether the appellant was liable for all the items claimed by the official liquidator.

Analysis: The claim was examined item-wise. The advance of Rs. 11,000 to Devichand and Co. from company funds was an improper use of company money, and the directors remained accountable for the loss with interest. The remaining items were not established against the appellant with sufficient justification: the tax deposit, the destroyed stock, and the trade debts were not shown to warrant personal liability in the manner found by the court below. The court therefore interfered with the decree to the extent of those items.

Conclusion: The appellant was liable only for the first item relating to the loan of Rs. 11,000 with interest, and was not liable for the other items.

Final Conclusion: The appeal succeeded only in part, with the decree modified so that liability was confined to the loan item while the challenge to the maintainability of the misfeasance proceedings failed.

Ratio Decidendi: In misfeasance proceedings under section 543 of the Companies Act, 1956, the liability of directors is joint and several, the proceedings may continue against a surviving director notwithstanding the death of another director, and personal liability is confined to items of misapplication or accountability that are proved on the merits.

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