Misfeasance claims need independent proof of director misconduct; a higher statement-of-affairs value alone is not enough.

A misfeasance claim under Section 543(1) of the Companies Act, 1956 requires independent material showing actual misconduct, misuse of assets, or loss attributable to former directors; a higher figure in the statement of affairs alone is insufficient. The discussion notes that where the earlier valuation already distinguished book value from realisable value, the balance sheet reflected a lower book value, and the assets were later sold in auction for an amount broadly consistent with that book value, no misfeasance could be proved. On that basis, the application was not maintainable and was liable to be rejected.

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Issues: Whether a misfeasance application under Section 543(1) of the Companies Act, 1956 was maintainable and proved on the basis of the difference between the value stated in the statement of affairs, the subsequent valuation, and the amount realised in auction.

Analysis: The application was founded on the declaration in the statement of affairs that the fixed assets had a higher realisable value than the valuation later obtained by the Official Liquidator. The record showed, however, that the earlier valuation report itself reflected a substantial distinction between book value and realisable value, that the balance sheet as on the date of winding up showed a lower book value, and that the assets were ultimately sold in auction for an amount broadly consistent with that book value. The only basis for the claim was the statement of affairs, and there was no independent investigation or additional material to establish that the erstwhile directors had misutilised company assets or committed misfeasance.

Conclusion: The ingredients for misfeasance were not established, and proceedings under Section 543(1) could not rest merely on the stated realisable value of assets. The application was liable to be rejected.

Ratio Decidendi: A misfeasance claim under Section 543(1) of the Companies Act, 1956 cannot be sustained merely on the basis of a higher figure shown in the statement of affairs unless supported by independent material showing actual misconduct or loss attributable to the directors.

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