Misfeasance liability requires specific pleading and proof, while appellate courts may admit additional evidence when defence evidence was wrongly shut out.

In misfeasance proceedings under section 235 of the Indian Companies Act, 1913, the liquidator must specifically plead and prove the directors' wrongful acts, breach of trust, or misappropriation, and liability cannot be imposed on unsupported allegations. The discussion also states that additional evidence in appeal may be allowed under Order XLI Rule 27 of the Code of Civil Procedure where the trial court wrongly refused admissible defence evidence or where such evidence is needed to enable judgment. On the facts noted, several claimed items lacked reliable proof, while only the amounts sufficiently established on the record were sustained, and the appellate interference was confined accordingly.

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Issues: (i) Whether the appellate court was justified in permitting additional evidence and remanding the matter for that purpose under Order XLI Rule 27 of the Code of Civil Procedure, 1908. (ii) Whether the official liquidator had established the directors' liability for the claimed amounts in the misfeasance proceedings under section 235 of the Indian Companies Act, 1913.

Issue (i): Whether the appellate court was justified in permitting additional evidence and remanding the matter for that purpose under Order XLI Rule 27 of the Code of Civil Procedure, 1908.

Analysis: Additional evidence in appeal is permissible where the trial court has improperly refused to admit evidence that ought to have been admitted, or where the appellate court requires such evidence to pronounce judgment, or for other substantial cause. The record showed that the respondents had sought to lead evidence and cross-examine a material witness, but the trial court declined the request after the matter had been fixed for argument, despite the seriousness of the misfeasance allegations and the absence of adequate particulars in the liquidator's application. In these circumstances, the refusal to permit defence evidence was unjustified.

Conclusion: The direction to record additional evidence and the remand were justified.

Issue (ii): Whether the official liquidator had established the directors' liability for the claimed amounts in the misfeasance proceedings under section 235 of the Indian Companies Act, 1913.

Analysis: Misfeasance proceedings require specific pleading and proof of wrongful conduct, breach of trust, or misappropriation, and the burden lies on the official liquidator. On the evidence, several claims were unsupported: the alleged commission on the Stein-Muller boiler transaction lacked proof of any connection with the company; the claims relating to General Motors commission and additional commission on other machinery were not proved by reliable evidence; and the claim for further commission on certain stock and purchases was partly unsubstantiated. Only the amounts sufficiently proved on the record survived scrutiny, including the wrongful remission item and certain stock and purchase discrepancies accepted by the High Court.

Conclusion: The High Court correctly interfered with the trial court decree and limited liability to the amounts proved.

Final Conclusion: The appeal failed, and the High Court's decree, as modified, was left undisturbed.

Ratio Decidendi: In misfeasance proceedings, liability cannot be imposed unless the liquidator specifically pleads and proves the alleged wrongful acts and loss, and an appellate court may permit additional evidence where the trial court has improperly shut out evidence necessary for the defence.

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