Winding-up misfeasance proceedings may start on relevant disclosures, but specific allegations remain essential against each respondent.

Proceedings under sections 542 and 543 of the Companies Act may begin during winding up once relevant disclosures make fraud, misfeasance, misapplication or breach of trust appear, without waiting for final liquidation accounts or an established shortfall. The application was also held to be within limitation, because the section 543 filing was within five years of the winding-up order and the section 542 claim was brought within three years of the statement of affairs disclosing the relevant conduct. General allegations were insufficient, however, and the application could proceed only against respondents against whom specific material was pleaded, not against respondents 3 to 6.

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Issues: (i) whether a composite application invoking sections 538, 539, 542 and 543 of the Companies Act was maintainable and whether the application could be confined to sections 542 and 543; (ii) whether proceedings under sections 542 and 543 were premature for want of completed liquidation accounts and ascertainment of any shortfall; (iii) whether the application was barred by limitation; (iv) whether the application disclosed specific allegations sufficient to proceed against the individual respondents.

Issue (i): whether a composite application invoking sections 538, 539, 542 and 543 of the Companies Act was maintainable and whether the application could be confined to sections 542 and 543.

Analysis: The criminal and civil components of the composite application could not properly proceed together. The objection to combining sections 538 and 539 with sections 542 and 543 was accepted. The application was treated as one under sections 542 and 543 only, with liberty to amend it by deleting references to the impermissible provisions and irrelevant allegations.

Conclusion: The objection succeeded in part. The application was maintainable only under sections 542 and 543 after suitable amendment.

Issue (ii): whether proceedings under sections 542 and 543 were premature for want of completed liquidation accounts and ascertainment of any shortfall.

Analysis: The language of sections 542 and 543 does not require the court to await final realisation of assets or a concluded statement of deficiency before proceedings can begin. The trigger is that it must appear in the course of winding up that the company was run with intent to defraud or that there was misapplication, retention, misfeasance, or breach of trust. Quantification is required, but the provisions do not make liability dependent on an established shortfall. Proceedings may begin once relevant disclosures emerge during winding up.

Conclusion: The proceedings were not premature.

Issue (iii): whether the application was barred by limitation.

Analysis: The application under section 543 was filed within five years of the winding-up order and was therefore within time. As to section 542, the right to apply accrues when relevant disclosures arise in the course of winding up, not merely when the impugned conduct occurred. The filing of the statement of affairs constituted such a disclosure, and the application was filed within three years thereafter.

Conclusion: The application was not barred by limitation.

Issue (iv): whether the application disclosed specific allegations sufficient to proceed against the individual respondents.

Analysis: General allegations against directors were insufficient where no specific act of fraudulent conduct, misapplication, misfeasance, or breach of trust was pleaded against certain respondents. The application contained some material against respondent No. 1, but no specific allegations against respondent No. 3, and only allegations relating to unpaid share capital against respondents Nos. 4 to 6. A claim for unpaid share capital is enforceable under section 426 of the Companies Act and does not, by itself, attract sections 542 or 543.

Conclusion: The application could proceed against the respondents against whom specific allegations were made, but it failed against respondents Nos. 3 to 6.

Final Conclusion: The preliminary objections succeeded only partially. The proceeding survived as a section 542/543 application against the properly implicated respondents, but it was struck down as against respondents Nos. 3 to 6 and required amendment to remove the impermissible and irrelevant parts.

Ratio Decidendi: Proceedings under sections 542 and 543 of the Companies Act may be initiated during winding up once relevant disclosures make the impugned conduct appear, without awaiting final liquidation accounts or an established shortfall, but the application must contain specific allegations and a quantified basis of liability against each person proceeded against.

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