Statutory director liability for public issue refund and compensation can survive death, limited to inherited estate assets.

A director's liability for refund and compensation under a public issue regime may survive death where it arises from statutory duties rather than a purely personal claim. The text explains that later notice, inspection and hearing to the legal representatives can cure the objection that proceedings were initiated against a deceased person, where the authority subsequently affords participation. It further states that a director who authorised prospectus-related documents may be exposed to liability for untrue statements, omissions, refund obligations and statutory compensation, even without personal gain. Enforcement against legal representatives is confined to the value of the inherited estate and assets traceable to the deceased, while liability may continue jointly with other responsible entities.

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Issues: (i) Whether the proceedings and directions could be treated as void for having been initiated against a deceased person and for alleged non-representation of the legal representatives; (ii) Whether Late Shri Y.N. Saxena was liable as a director and authorising signatory under the Companies Act, 1956 for refund and compensation arising from the OFCD issue; (iii) Whether the causes of action under section 73(2) and section 62(1) of the Companies Act, 1956 survived the death of Shri Y.N. Saxena and could be enforced against his legal representatives, and to what extent.

Issue (i): Whether the proceedings and directions could be treated as void for having been initiated against a deceased person and for alleged non-representation of the legal representatives?

Analysis: The record showed that the authority became aware of the death only later and thereafter afforded the legal representatives notice, inspection of records and personal hearing. The earlier order was treated as not finally adjudicating liability against the deceased, but as a fresh opportunity to the legal representatives to meet the allegations. The objection that the proceedings were a nullity merely because the deceased could not be personally represented was rejected, as subsequent service and participation by the legal representatives cured the procedural concern.

Conclusion: The objection was rejected; the proceedings were held to be maintainable against the legal representatives.

Issue (ii): Whether Late Shri Y.N. Saxena was liable as a director and authorising signatory under the Companies Act, 1956 for refund and compensation arising from the OFCD issue?

Analysis: Documentary material from the corporate records established that he was a director during the relevant period and that he had authorised the prospectus-related documents. The OFCD mobilisation was found to be a public issue attracting the public issue regime under the Companies Act, 1956, including the duties relating to listing, disclosures, refund and compliance. Liability under section 73(2) was characterised as a strict statutory civil liability of directors who fall within the expression officer in default, and the signing/authorising role also attracted liability under section 62(1) for untrue statements and omissions in the prospectus. The absence of personal gain did not displace the statutory responsibility attached to the office and authorisation.

Conclusion: Late Shri Y.N. Saxena was held liable under section 73(2) and section 62(1) of the Companies Act, 1956.

Issue (iii): Whether the causes of action under section 73(2) and section 62(1) of the Companies Act, 1956 survived the death of Shri Y.N. Saxena and could be enforced against his legal representatives, and to what extent?

Analysis: The liability was held not to be personal in the sense excluded by section 306 of the Indian Succession Act, 1925. The wrongs concerned proprietary loss to investors and a statutory duty to refund and compensate, not personal injury, and therefore the cause of action survived. The liability was further treated as flowing from fiduciary obligations of directors and from statutory strict liability, not as a penal consequence. At the same time, recovery against the legal representatives was confined to the value of the inherited estate and assets traceable to the deceased, with joint and several liability continuing with the other liable entities.

Conclusion: The causes of action survived and were enforceable against the legal representatives only to the extent of inherited assets.

Final Conclusion: The legal representatives were held liable to comply with the refund and compensation directions arising from the OFCD issue, but their exposure was limited to the estate inherited from the deceased director, and the statutory directions were made operative accordingly.

Ratio Decidendi: Where a company director's liability for refund and compensation arises from a statutory public-issue regime and not from a personal cause of action, the liability survives death, may be enforced against legal representatives to the extent of inherited assets, and is not defeated merely because the deceased was not alive when the later adjudicatory step was taken.

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