Director liability for misfeasance requires proof of personal gain or breach of trust, not mere poor commercial judgment.

Section 543 of the Companies Act, 1956 requires substantive proof of misapplication, retention, misfeasance, breach of trust, or personal gain before damages can be recovered from a director. On the stated facts, the director had participated in board decisions on loans, but there was no proof that he was a proprietor or partner in the borrowing concerns, personally benefited from the transactions, or misappropriated funds. Settled or partially settled accounts also undermined the claim. Mere imprudent or bad commercial judgment, without actionable misconduct, was insufficient to establish liability, and the recovery claim failed.

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Issues: Whether the respondent-director was liable to pay damages under section 543 of the Companies Act, 1956 for alleged misfeasance and breach of trust in sanctioning and regularising loans that later resulted in losses to the bank.

Analysis: Liability under section 543 requires substantive proof of misapplication, retention, misfeasance, or breach of trust, and the record must show that the director personally benefited from the impugned transactions or otherwise participated in conduct amounting to actionable misconduct. The evidence showed that the respondent was a director during the relevant period and had participated in board decisions, but there was no allegation or proof that he was a proprietor or partner in the borrowing concerns, nor that he personally gained anything from the transactions. The loans and accounts had also been settled or were under settlement in several instances, and the material did not establish that the respondent had misappropriated funds or retained any pecuniary benefit. Mere imprudent or bad commercial decisions by a director, without more, do not by themselves establish misfeasance or breach of trust for the purpose of recovery under section 543.

Conclusion: The respondent was not liable under section 543 of the Companies Act, 1956, and the claim for recovery failed.

Final Conclusion: The petition seeking damages and recovery against the respondent-director was dismissed because the essential ingredients of misfeasance and breach of trust were not proved.

Ratio Decidendi: Proceedings for recovery against directors under section 543 of the Companies Act, 1956 require proof of actual misapplication, breach of trust, or personal gain; mere participation in collective lending decisions or negligent commercial judgment is insufficient.

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