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of <h1>Directors & manager found guilty of misfeasance, ordered to repay Rs. 90,573. Judgment restores company assets.</h1> <h3>Indo-Burma Industries Ltd., In re</h3> The court found the directors and manager guilty of misfeasance and ordered them to jointly and severally repay Rs. 90,573-7-3 with interest at 6% per ... Winding up – Power of court to assess damages against delinquent directors, etc. Issues Involved:1. Examination of conduct under Section 235 of the Indian Companies Act.2. Allegations of loans advanced to three concerns.3. Role and conduct of the directors and manager.4. Legal implications of the loans under Sections 86D, 87D, and 87E of the Indian Companies Act.5. Misfeasance and misapplication of company funds.6. Defenses raised by the respondents.7. Delay in proceedings and its impact.8. Legal consequences and orders under Section 235 of the Indian Companies Act.Issue-wise Detailed Analysis:1. Examination of Conduct under Section 235 of the Indian Companies Act:The application was made by the official liquidator for examining the conduct of three individuals and for an order compelling them to repay or restore certain sums of money belonging to the company. The court was asked to scrutinize their actions and determine if they were liable for misapplication, retainer, and misfeasance.2. Allegations of Loans Advanced to Three Concerns:The company advanced loans to Ghosal Biswas & Co., Bhowanipur Wayside Garage, and Electric Corporation. The amounts involved were Rs. 54,477-12-0, Rs. 46,397-8-3, and Rs. 19,222-9-0 respectively. The loans resulted in significant losses to the company, with only partial repayments made.3. Role and Conduct of the Directors and Manager:Manindra Nath Ghosal and Kanai Lal Tarafdar were directors, and Sudhangsu Kumar Bose was the manager of the company. It was established that Manindra and Kanai were partners in Ghosal Biswas & Co., and Manindra was the sole proprietor of Bhowanipur Wayside Garage and Electric Corporation. The manager, Sudhangsu, was identified as the brain and adviser behind these transactions.4. Legal Implications of the Loans under Sections 86D, 87D, and 87E of the Indian Companies Act:Section 86D prohibits loans to directors or firms in which directors are partners. The court found that the loans were in contravention of these sections. The directors and manager were held liable for the illegal loans, which caused a loss of Rs. 90,573-7-3 to the company.5. Misfeasance and Misapplication of Company Funds:The court concluded that the actions of the directors and manager constituted misfeasance. The term 'misfeasance' covers misconduct by an officer of the company, leading to pecuniary damage. The court referenced judicial precedents to support its findings and emphasized that the acts were not mere indiscretions but deliberate misapplications of funds.6. Defenses Raised by the Respondents:The respondents argued that the loans were not illegal and were made in good faith. They claimed that the loans were part of a scheme to consolidate various businesses under the company's management. However, the court rejected these defenses, stating that the loans were illegal and the actions constituted a breach of duty.7. Delay in Proceedings and Its Impact:The respondents contended that the liquidator delayed the proceedings and that an application for the liquidator's removal was pending. The court found that the liquidator acted with due diligence and that the delay was justified. The application for the liquidator's removal was seen as an attempt to stifle the public examination and was not pursued further.8. Legal Consequences and Orders under Section 235 of the Indian Companies Act:The court ordered Manindra Nath Ghosal, Kanai Lal Tarafdar, and Sudhangsu Kumar Basu to jointly and severally repay Rs. 90,573-7-3 with interest at 6% per annum from 1st April 1949. The respondents were also ordered to pay the costs of the application. The court emphasized that the order was made to restore the company's assets and compensate for the misapplication and misfeasance.Conclusion:The judgment thoroughly examined the conduct of the directors and manager, found them guilty of misfeasance, and ordered them to repay the misapplied funds with interest. The defenses raised were dismissed, and the liquidator's actions were validated. The court's decision aimed to restore the company's assets and ensure accountability for the illegal loans.
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