Misfeasance in company lending: directors and a manager were held liable for advancing funds to their own concerns.

Directors and a manager were found liable for misfeasance and misapplication of company funds where company money was advanced to concerns in which the directors had a direct proprietary interest. The court rejected the defence of bona fide commercial discretion because the advances were knowingly made in breach of statutory restrictions on lending to directors or firms in which they were interested. Section 235 of the Indian Companies Act, 1913 was held wide enough to cover misfeasance, misapplication, retention, and liability for company money, and the respondents were directed jointly and severally to restore the loss with interest and costs.

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Issues: Whether the directors and manager were guilty of misfeasance and misapplication of company funds so as to be liable under section 235 of the Indian Companies Act, 1913 to restore the amounts advanced to their own concerns with interest and costs.

Analysis: The evidence established that the company's funds were advanced to concerns in which the directors had a direct proprietary interest, and that the manager was the moving force behind the transactions. The loans were made in contravention of the statutory restrictions on lending company money to directors or firms in which they were interested. The plea of bona fide management or commercial discretion was rejected because the advances were knowingly made despite the illegality of the arrangement. The court held that section 235 was wide enough to cover not only technical misfeasance but also misapplication, retention, and liability for company money, and that the respondents' conduct squarely attracted that provision.

Conclusion: The respondents were held liable for misfeasance and misapplication of company funds and were directed jointly and severally to restore the quantified loss with interest and costs.

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