Personal liability under Section 542 may be prima facie found to permit interim attachment and criminal action by the liquidator.

Prima facie material showing a pattern of diversion of investor funds to directors justifies interim attachment of specified immovable property under the Companies Act and initiation of a process to determine personal liability of ex-directors; the court applies an inferential, less exacting standard of proof than criminal law for interlocutory relief and orders attachment pending evidence. Separately, the official liquidator is authorised and directed to institute criminal complaints for non-filing of statement of affairs and non-delivery of records and to pursue statutory remedies, with a short timeframe and prescribed procedure for recording and exchanging evidence.

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Issues: (i) Whether, on the basis of the CBI reports and material on record, a prima facie case under Section 542 of the Companies Act exists to hold the ex-directors personally liable and to order attachment/sale of specified property; (ii) Whether the official liquidator may be permitted to file criminal proceedings under Section 454 and to take action under Sections 468 and 477 of the Companies Act for non-filing of statement of affairs and non-delivery of company records.

Issue (i): Whether a prima facie case under Section 542 of the Companies Act is made out to attach the specified immovable property and to proceed towards declaring personal liability of the directors.

Analysis: Consideration is given to the CBI reports, the pattern of transactions showing collection of public monies on promise of high returns, diversion and alleged siphoning of funds into related entities and to the personal benefit of the directors, and to the statutory scheme of Section 542 permitting the Court to declare persons knowingly parties to carrying on business with intent to defraud creditors personally liable. The standard required to form an opinion under Section 542 is inferential and less exacting than criminal standard; prima facie material may suffice to trigger interlocutory measures and to require evidence to be led before a final adjudication.

Conclusion: Issue (i) answered in favour of the petitioners; prima facie case under Section 542 is found and the specified property is ordered attached pending recording of evidence.

Issue (ii): Whether the official liquidator is permitted and directed to file criminal complaint under Section 454 and to take action under Sections 468 and 477 for non-filing of statement of affairs and non-delivery of records.

Analysis: The material on record, including the CBI report alleging non-filing of statement of affairs and non-delivery of records by ex-directors, supports initiation of proceedings contemplated by Sections 454, 468 and 477. The official liquidator is in a position to institute such proceedings and is to be directed to take necessary steps within a short time-frame; the Court also prescribes a procedure for recording and exchange of evidence before further orders on civil liability under Section 542.

Conclusion: Issue (ii) answered in favour of the petitioners; the official liquidator is permitted and directed to file criminal complaint under Section 454 and applications under Sections 468 and 477 of the Companies Act and to take necessary steps within one week.

Final Conclusion: On the cumulative prima facie material, interlocutory reliefs are granted to protect creditors/investors and to enable evidentiary testing: the specified property is attached, the official liquidator is directed to pursue criminal and statutory remedies, and directions are given for recording and exchange of evidence to determine final civil liability under Section 542.

Ratio Decidendi: Where prima facie material demonstrates a pattern of conduct indicating funds collected from investors were diverted for directors' personal benefit, the Court may, under Section 542, on an inferential standard lower than criminal proof, order interim attachment and proceed to determine personal liability of directors while providing them an opportunity to lead evidence.

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