Discretionary misfeasance relief in winding up denied where the applicant-director joined the impugned company transactions.

In winding-up proceedings, discretionary misfeasance-style relief under sections 185 and 195 of the Indian Companies Act, 1913 was not normally to be granted at the instance of one director against another where the applicant had himself participated in the impugned company transactions. The Madras HC noted that the shareholder-director sought directions concerning alleged misfeasance in resolutions and sale transactions in which he had been involved, and treated personal hostility as a relevant factor against granting relief. It indicated that any investigation into loss to the company should properly be pursued by the official liquidator, with further audit only if funds became available.

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Issues: Whether the appellant could invoke sections 185 and 195 of the Indian Companies Act, 1913 to seek relief against a former managing director and whether the court should exercise its discretion to grant the requested directions in the circumstances.

Analysis: The application was made by a fully paid shareholder who was also a director at all material times. The reliefs sought concerned alleged misfeasance in company transactions in which the appellant himself had participated as a director, including the resolutions approving the sale of the factory and the subsequent reduction in price. The court held that, even assuming maintainability, the powers under sections 185 and 195 were discretionary and should not be invoked at the instance of one director against another where the application appeared to be prompted by personal hostility. The proper course, if any loss to the company had to be investigated, was for the official liquidator to proceed, and the court indicated that further investigation by a qualified auditor could be considered if funds became available.

Conclusion: The application was not fit for grant at the instance of the appellant, and the appellate challenge failed.

Final Conclusion: The court declined to interfere with the dismissal of the misfeasance-related application and left any further action to be taken, if warranted, by the official liquidator after investigation.

Ratio Decidendi: In winding-up proceedings, the court will not ordinarily exercise its discretionary powers to grant misfeasance-type relief at the instance of one director against another where the applicant himself participated in the impugned transactions and the official liquidator is the proper person to act.

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