Misfeasance claims in bank winding up: special limitation applies, directors may be personally liable, but heirs cannot face coercive orders.

Misfeasance proceedings against banking-company directors were held within the special limitation scheme governing winding up, because time ran from the first appointment of the liquidator under the amended provision. The summary jurisdiction was held not to authorise coercive orders against the heirs or legal representatives of a deceased director, though a declaration of the deceased director's liability could still be made where he had been heard or represented. On the evidence of mismanagement, false accounts and deficient supervision, the directors were held personally liable for the losses, with the managing director bearing the primary responsibility and liability apportioned among the responsible directors.

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Issues: (i) whether the misfeasance proceedings against the directors were barred by limitation; (ii) whether the proceedings could continue against the heirs and legal representatives of a deceased director under the misfeasance provision; (iii) whether the directors, including the managing director, were liable for the losses caused to the banking company and to what extent.

Issue (i): whether the misfeasance proceedings against the directors were barred by limitation.

Analysis: The special limitation scheme applicable to a banking company in winding up governed the claim. The amended provision allowing limitation to run from the first appointment of the liquidator created a new basis for computing time, and the claim was brought within that period. The contention that the earlier company-law limitation had already expired did not prevail, and the plea that the claim had become time-barred before amendment was not accepted.

Conclusion: The proceedings were not barred by limitation.

Issue (ii): whether the proceedings could continue against the heirs and legal representatives of a deceased director under the misfeasance provision.

Analysis: The misfeasance jurisdiction under the 1913 company provision was directed against directors, managers, liquidators and officers in their personal capacity and did not authorise coercive orders against heirs or legal representatives. At the same time, a declaration of liability against the deceased director could still be made where he had been heard or was represented, leaving other remedies against the estate open outside that provision.

Conclusion: No coercive order could be made under the misfeasance provision against the heirs or legal representatives, though the deceased director's liability could be declared.

Issue (iii): whether the directors, including the managing director, were liable for the losses caused to the banking company and to what extent.

Analysis: The evidence showed prolonged mismanagement, fictitious entries, false balance-sheets, deficient supervision, and tolerance of irregularities by the board. A director could not escape liability by passive reliance on the managing director where the circumstances showed knowledge, participation, or reckless neglect of duty. The managing director bore the primary share of responsibility, but the founder and other directors were also answerable for failure to ensure honest and efficient administration. On the evidence, the total loss assessable against the delinquent board was fixed at Rs. 2,50,000, with apportionment among the responsible directors as directed.

Conclusion: The directors were liable, and the total liability was restored at the higher figure determined by the Court with the revised apportionment stated in the judgment.

Final Conclusion: The Court upheld the banking company's misfeasance claim, rejected the limitation defence, held that coercive orders could not be passed under the misfeasance provision against the deceased director's heirs, and restored substantial liability against the surviving directors, while leaving separate remedies against the deceased director's estate open.

Ratio Decidendi: In misfeasance proceedings, limitation under the special banking-company provision is governed by that provision's own scheme, directors may be personally liable for losses caused by fraudulent or grossly negligent mismanagement, and the summary misfeasance jurisdiction does not authorise coercive orders against heirs or legal representatives of a deceased director.

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