TaxTMI 
TaxTMI 
1997 (5) TMI 377
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pay the amount to the official liquidator or such sum which the court may determine along with interest at the rate of 12 per cent, per annum from the date of winding up of the company, i.e., September 22, 1983, till its realisation along with costs. The case set up by the petitioner is that Xpo Xpert Private Limited was incorporated on November 29, 1977, having its registered office at S-146, Industrial Area, Sodal Chowk, Jalandhar. The paid-up capital of the company was Rs. 2,30,500 which was divided into 4,910 equity shares of Rs. 100 each, i.e., Rs. 50 called and paid up and Rs. 15,000 remaining unpaid capital. The authorised capital of the company was Rs. 10,00,000 divided into 10,000 equity shares of Rs. 100 each. The main object of the company before it went into liquidation was export and import of all kinds of merchandise, machinery, equipment, articles, manufactured or otherwise processed. A winding up order of the company has already been passed on September 22, 1983, and the official liquidator attached to this court has been appointed as liquidator of the company. The official liquidator has been authorised to file or defend any suit, claim petition, prosecution or ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ticated by ex-directors of the company. With these broad averments, a prayer has been made that the ex-directors of the company-respondents Nos. 1 to 5-be held jointly and severally liable and directed to pay this amount to the official liquidator along with interest at the rate of 12 per cent, per annum till actual payment is made. This petition is duly accompanied by an affidavit. Necessary annexures in support of the claim laid too had been annexed with the petition. A joint reply has been filed by respondents Nos. 1 to 3 and 5. The respondents in their reply have stated that respondent No. 4 was not a director of the company whereas the remaining being members of the board of directors were conducting the business of the company. The respondents have denied/controverted the various material averments made in the petition. The respondents have specifically denied the charge that they are guilty of misfeasance and breach of trust in relation to the affairs of the company or that there have been acts of omission and commission on their behalf. As regards the various amounts which have become time barred, it has been stated that all efforts were made to recover the amount but they....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t addresses of the persons were not sup plied by the ex-directors to the official liquidator and so all these amounts had become time barred. All these witnesses were cross-examined by the contesting respondents. Nothing has come on record creating any doubt to the veracity of any of the witnesses' statement. The respondents have not chosen to lead any evidence. In fact, they have also not appeared as their own witnesses. Learned counsel for the petitioner has argued that as per the facts proved on record, the respondents' carelessness and negligence is writ large. In fact, they are deafly guilty of misfeasance and breach of trust in running the affairs of the company till the same was taken over by the official liquidator and so they are jointly and severally liable to pay this amount along with interest to the official liquidator in terms of sections 541, 542 and 543 of the Companies Act. Reliance has been placed upon the following decisions : P.A. Tendolkar v. Official Liquidator [1967] 37 Comp. Cas. 392 (Mys); Smart Advertising Co. (P. ) Ltd. ( In Liquidation) v. Ramesh K. Nanchahal [1989] 65 Comp. Cas. 92 (Punj. & Har.) ; P.K. Nedungadi v. Mala-yalee Bank Ltd., AIR 1971 SC 82....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y liable for all or any of the debts or liabilities of the company as the court may direct. Similarly, under section 543 of the Companies Act, the court can assess damages against delinquent directors and direct them to repay the same with interest at such rate as the court may think just. Under this section, such an application has to be filed within five years from the date of the order for winding up. The aforesaid sections and other relevant provisions of the Companies Act envisage fixing of liability of the defaulting party as well as make them liable for a criminal prosecution. Presently, the petition has been filed to fix the liability of the delinquent director-managing director/director-with a further prayer that they be directed to reimburse the company for the losses which have occurred on account of their acts of misfeasance and breach of trust. The official liquidator in support of his petition has examined a functionary of the Registrar of Companies as well as the chartered accountant who audited the accounts of the company. The chartered accountant has submitted his report on the basis of record which was made available to him. The official liquidator has also depos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d and to have been so closely and so long associated personally with the management of the company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of the business of a company even though no specific act of dishonesty is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the company even superficially. If he does so he could be held liable for dereliction of duties undertaken by him and compelled to make good the losses incurred by the company due to his neglect even if he is not shown to be guilty of participating in the commission of fraud. It is enough if his negligence is of such a character as to enable frauds to be committed and losses thereby incurred by the company." Similarly, the apex court in P.K. Nedungadi's case [1972] 42 Comp. Cas. 120 held that it is not essential to prove fraud on the part of the director. It is sufficient to hold directors liable in case it is proved that they are guilty of misfeasance and breach of trust which includes breach of duty of the company in misapplying the company's assets. A mere act of omission cannot be construed to be a case....