2002 (7) TMI 748 - HC - Companies Law

Appeal dismissed, appellant liable for Rs. 1,10,000 + interest, company direction upheld.

Satbir Singh Versus Major SC. Bugg

The appeal was dismissed, and the directions of the learned company judge were upheld. The court found the appellant accountable for Rs. 1,10,000 plus ... Winding up – Power of court to assess damages against delinquent directors, etc Issues Involved:1. Accountability of the appellant for Rs. 1,10,000 plus interest.2. Direction for payment of Rs. 50,000 by the appellant to the company.3. Validity of the licence granted by the appellant to the company.4. Consideration of the appellant's claim that no permanent structure was erected.5. Appellant's contention regarding the deadlock in the company.6. The role of the official liquidator in settling the claims of the creditors.Detailed Analysis:1. Accountability of the appellant for Rs. 1,10,000 plus interest:The learned company judge directed that the appellant, Satbir Singh, is accountable to the company for Rs. 1,10,000 plus interest at 10% per annum from April 1, 1972, till the date of payment or the amount at which the claim of creditors may be settled by the official liquidator, whichever is lesser. This was based on the finding that the appellant had promoted the company for developing an orchard and setting up a canning factory, and had granted a licence to the company for these purposes. The judge observed that the company's balance-sheet and director's report indicated the establishment of the factory and development of the orchard, thus confirming the incurred expenses and the existence of a work of permanent character.2. Direction for payment of Rs. 50,000 by the appellant to the company:The appellant was directed to pay Rs. 50,000 received from the Lakhanis on behalf of the company within four weeks. The balance amount was to be paid within four weeks of requisition by the official liquidator after the claims had been settled. The judge found that the machinery and other assets remained with the Lakhanis, and thus, the appellant was held liable for the payment. The appellant's contention that the machinery should have been the responsibility of the Lakhanis was rejected.3. Validity of the licence granted by the appellant to the company:The court found that the appellant had indeed granted a licence to the company to develop the orchard and set up the factory. This was inferred from the appellant's own admissions and the company's balance-sheet, which showed significant expenditures on plant, machinery, and the development of the orchard. The judge noted that these constituted works of a permanent character, thus invoking the protection under Section 60(b) of the Easement Act, which prevents the revocation of a licence when such works have been executed.4. Consideration of the appellant's claim that no permanent structure was erected:The appellant's claim that no permanent structure was erected was dismissed. The judge highlighted that the balance-sheet showed expenditures on fixed assets and the development of the orchard. The judge concluded that the installation of machinery and development of the orchard over the years constituted permanent works, thereby validating the licence and the expenditures incurred.5. Appellant's contention regarding the deadlock in the company:The appellant argued that since there was a deadlock in the company since 1971, there was no possibility of revival, and therefore, no loss was suffered by the company. The judge dismissed this argument, stating that the deadlock did not negate the incurred expenses and the existence of a work of permanent character, which justified the directions for payment.6. The role of the official liquidator in settling the claims of the creditors:The judge directed that the claims of the creditors, including Bugg, on account of arrears or loans, be settled by the official liquidator within three months. The appellant's contention that the official liquidator had not conducted an enquiry was rejected, as the official liquidator had filed C.A. No. 583 of 1979, which was decided along with C.A. No. 138 of 1975. The judge emphasized that the official liquidator's role was crucial in finalizing the claims and ensuring the equitable distribution of the company's assets.Conclusion:The appeal was dismissed, and the directions of the learned company judge were upheld. The court found no merit in the appellant's arguments and emphasized the importance of the official liquidator's role in settling the claims. The judgment reinforced the principles of accountability and the protection of works of permanent character under the Easement Act.