Misfeasance liability requires specific pleadings, while unexplained employee welfare dues can support an inference of misappropriation.

Misfeasance liability against directors requires specific pleadings and proof of the particular acts or omissions causing loss; general allegations or a mere repetition of the auditor's report are insufficient. A former non-executive director was not fastened with liability where no material showed his participation in misappropriation or misapplication of company assets. The broader claims against the remaining directors also failed for want of particulars, including the sales tax head. Liability was sustained only for unexplained provident fund and allied employee dues collected by the company, because such monies were not available for company use and non-remittance justified an inference of misappropriation.

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Issues: (i) Whether the proceedings for misfeasance could be sustained against a former non-executive director in the absence of material showing his participation in the alleged misappropriation or misapplication of company assets. (ii) Whether the claims against the remaining applicant-directors could succeed without specific particulars of the alleged wrongdoing, and whether any part of the claim for misappropriation of provident fund dues was maintainable.

Issue (i): Whether the proceedings for misfeasance could be sustained against a former non-executive director in the absence of material showing his participation in the alleged misappropriation or misapplication of company assets.

Analysis: The claim against the former non-executive director rested on general allegations without any specific act connecting him with the alleged misappropriation. The record showed that he was appointed for liaison and settlement negotiations, had resigned long before winding up, and the auditor's report did not attribute any distinct act of misappropriation or misapplication to him. In misfeasance proceedings, liability must be founded on material showing participation, neglect, or such close association with the management as would justify responsibility.

Conclusion: The proceedings against the former non-executive director were not sustainable and were dismissed.

Issue (ii): Whether the claims against the remaining applicant-directors could succeed without specific particulars of the alleged wrongdoing, and whether any part of the claim for misappropriation of provident fund dues was maintainable.

Analysis: Misfeasance allegations must contain detailed particulars of the specific acts or omissions, the loss caused, and the persons responsible. The points of claim were substantially a reproduction of the auditor's report and did not identify with precision how the alleged misappropriation occurred or who was responsible. The claim relating to sales tax failed because the deferment circular displaced the assumption of wrongful retention and the liquidator did not establish the necessary particulars. However, the sum collected towards provident fund and allied employee dues stood on a different footing because such monies were not available for the company's use and no explanation was offered for their non-remittance. A presumption of misappropriation therefore arose in respect of that amount.

Conclusion: The general claims for misappropriation failed, but liability was sustained for the provident fund and allied employee dues, with directions for payment against the concerned applicant-directors.

Final Conclusion: The misfeasance proceedings succeeded only in part: the former non-executive director was absolved, most heads of claim failed for want of particulars, and liability was upheld only for the unexplained provident fund and related employee dues.

Ratio Decidendi: In misfeasance proceedings, liability cannot be imposed on directors without specific pleadings and proof of the particular acts or omissions causing loss, but unexplained retention of employee welfare dues collected by the company may justify an inference of misappropriation and consequent liability.

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