Misfeasance under company law requires specific proof of wrongful conduct; general allegations and audit reports alone are insufficient.

An application under section 543 of the Companies Act, 1956 was held to be within limitation because it was filed within five years of the winding-up order and section 458A excluded an additional year from computation. Liability against the ex-directors was not established for alleged non-recovery of debts, advances, security deposits and inventories, as the evidence showed loss of control over records and assets, no recoverable wrongful conduct, and no personal benefit. Allegations based mainly on a Chartered Accountant's report were found too general, because section 543 requires specific, individualised proof of misfeasance or breach of trust.

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Issues: (i) Whether the application under section 543 of the Companies Act, 1956 was barred by limitation. (ii) Whether the respondents were liable to compensate the Official Liquidator for the alleged non-recovery of sundry debts, advances, security deposits and the value of inventories. (iii) Whether the allegations in the Chartered Accountant's report disclosed specific acts of misfeasance or breach of trust against the respondents.

Issue (i): Whether the application under section 543 of the Companies Act, 1956 was barred by limitation.

Analysis: The application was filed within five years of the winding up order. Section 543(2) of the Companies Act, 1956 prescribes a five-year period, and section 458A excludes an additional period of one year from computation. On that basis, the filing was within the permissible period.

Conclusion: The limitation objection failed and the issue was decided against the respondents.

Issue (ii): Whether the respondents were liable to compensate the Official Liquidator for the alleged non-recovery of sundry debts, advances, security deposits and the value of inventories.

Analysis: The evidence showed that the company's assets and records had been taken over by RIICO prior to winding up, the respondents had lost effective control over the records and inventory, and the amounts advanced to suppliers were not shown to have been recoverable in the circumstances. The security deposit amount was also proved to have been deposited with the Official Liquidator. No positive evidence established that the respondents had caused the losses by wrongful conduct or that they had personally benefited.

Conclusion: No liability was made out against the respondents on these monetary and inventory claims.

Issue (iii): Whether the allegations in the Chartered Accountant's report disclosed specific acts of misfeasance or breach of trust against the respondents.

Analysis: Proceedings under section 543 require clear, specific and individualised allegations of commission, omission, negligence or breach of trust, supported by evidence. The application rested substantially on a Chartered Accountant's report and contained general allegations without particularised proof of misconduct by each respondent. The material did not establish misfeasance, malfeasance or breach of trust with the specificity required in law.

Conclusion: The charge of misfeasance and breach of trust was not proved against the respondents.

Final Conclusion: The Official Liquidator failed to establish a sustainable case for recovery against the ex-directors under section 543 of the Companies Act, 1956, and the application was dismissed.

Ratio Decidendi: An application for misfeasance under section 543 of the Companies Act, 1956 must plead and prove specific, individual acts of wrongful conduct causing quantified loss; vague allegations or reliance on accounts alone are insufficient to fasten liability on ex-directors.

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