TaxTMI 
TaxTMI 
1993 (6) TMI 200
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....ndulal Mody, one of the directors of Atlas Import and Export Co. Pvt. Ltd. in liquidation, under section 543(1) of the Companies Act claiming that in respect of five items aggregating to Rs. 30,090.89, the respondent was liable to account to the company and for a direction from this court to make good the said sum of money. Before the learned single judge, it was contended by the appellant-director, that he was not liable to pay the amount and it was contended that as long as there was no dishonesty attributed to the appellant-director, no proceedings under section 543(1) of the Act were sustainable. It was also contended that as the legal representatives of the deceased director, J. M. Berry, were not brought on record as they are also liable, it was not open to the official liquidator to proceed only against the appellant, Babubhai Chandulal Mody. The learned single judge rejected the contentions of the appellant-director, Babubhai Chandulal Mody, and granted a decree directing the appellant to pay a sum of Rs. 30,069.89 with interest at 6% per annum from the date of application till the date of payment with costs of Rs. 50. No orders were passed in respect of Company Applicati....
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....money or property of the company, under section 543(2) of the Companies Act. Further, the liability of the directors, under section 543 of the Companies Act, is joint and several. In the instant case, there were two directors, viz., the appellant-director, Babubhai Chandulal Mody, and the deceased director, J.M. Berry, and both of them as directors of the company (in liquidation) are jointly and severally liable for the money or property of the company, misappropriated by them. Learned counsel for the appellant cited the ruling of the Supreme Court in the case of Official Liquidator v. Parthasarathi Sinha, AIR 1983 SC 188, 194 ; [1983] 53 Comp Cas 163 , 173 wherein the Supreme Court has held as follows : "The liability arising under the misfeasance proceedings is founded on the principle that a person who has caused loss to the company by an act amounting to a breach of trust should make good the loss, section 543 of the Act does not really create any new liability. It only provides for a summary remedy for determining the amount payable by such person on proof of the necessary ingredients. The section authorises the court to direct such persons chargeable under it to pay a sum of....
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....rst appointment as the liquidator in winding up or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer. In the instant case, the official liquidator has not taken any proceedings against the deceased director within the period of five years as contemplated under sub-clause (2). As the liability of the directors of company is joint and several, we are of the view that the non-impleading of the deceased director and his legal representatives will not vitiate the proceedings instituted against the surviving director. We, therefore, reject the first contention of learned counsel for the appellant that non-joinder of the deceased director and his legal representatives vitiate the entire proceedings instituted by the official liquidator under section 543(1) of the Companies Act. With regard to the merits of the case relating to the aggregating of a sum of Rs. 30,060.89, we are of the view that except the first item relating to Rs. 11,000, the learned single judge has erred in respect of other five items. The first item relates to a sum of Rs. 11,000 given as loan by the appellant-director on August 7, 1968, from and out of the funds o....
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....,000. We hold that the appellant is not liable regarding a sum of Rs. 3,000 relating to deposit with the Income-tax Department. The fourth item relates to the claim of Rs. 766 being the value of stock not accounted for. It was contended by the appellant-director that the stocks being chemicals were spoiled and, therefore, destroyed in the year 1971 and in the directors' report dated June 7, 1972, permission was sought for to write off the stocks. The learned judge erred in holding that since there is no clear data as to how the stocks came to be disposed of, the director was liable for the stock of Rs. 766. In view of the explanation given by the director he is not liable for the sum of Rs. 766 relating to the stock that was destroyed. The fifth item relates to dues from trade debtors. It is alleged that the director has not taken any steps to recover a sum of Rs. 4,870.85 from Arun Agencies though it was outstanding from 1966. The sixth item relates to a sum of Rs. 1,339 that had to be recovered from Shah Electronics, though it was outstanding from 1967. It was alleged that the directors allowed the above items to be barred by time. It was contended by the appellant-director that ....