TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 813
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....ound up by order of this court dated November 3, 1999, as voluntary winding up and the official liquidator was appointed as its liquidator. This court appointed Shri R. M. Khandelwal, chartered accountant on the basis of application submitted by the ex-directors of the company for preparation of statement of affairs under section 454 of the Companies Act. The statement of affairs as on December 31, 1987, was prepared by the said Shri R. M. Khandelwal. The said chartered accountant submitted his report on October 6, 1993. He has mentioned therein that he was not provided complete records and books of account, especially the records of the period from January 1, 1988 to November 3, 1989, were not available. Transaction during that period were in the nature of collection of money against deposits schemes, loan recovery and security deposits. Subsequently, this court appointed Shri N. C. Jain, chartered accountant to investigate the records, who in his report dated October 5, 1994, has stated that investigation of the accounts with respect to misfeasance could not be made unless the books of account and the other records of the company were made available. It was in these circumstances....
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.... balance has not been accounted for by the respondents. There were 32 branches of the company in the State of Rajasthan and Gujarat. The ex-directors did not make the books of account and other properties of such branches available to the petitioner as per the statutory requirement of section 454 of the Act. Learned senior counsel especially invited attention of the court towards the detailed affidavit and cross-examination of Shri B. C. Meena, the official liquidator examined as PW1 before this court. 6. Shri G. K. Garg, learned senior counsel disputed that respondent No. 3 resigned or that respondents Nos. 1 and 2 were not responsible for accounting for the cash, producing records and surrendering vehicle. Respondent No. 3 filed a brief that he resigned. As per the records maintained by the Registrar of Companies, Jaipur, respondent No. 3-Rakesh Srivastava was one of the directors of the said company as on the date of passing of the aforesaid winding up order. Respondent No. 3, in response to the notice of the official liquidator, claimed that he tendered his resignation long ago and the same was accepted by other director of the company Smt. Kusum Sinha. As per the information ....
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....y, i.e., the State Bank of Bikaner and Jaipur, Tilak Marg, Jaipur did not allow them to operate bank account of the company. The amount of Rs. 5,64,000 that was lying/deposited in their account was still in the bank account. The voluntary winding up order was passed on November 3, 1989, under section 457. The official liquidator had power to summon the records from various branches and in fact it was his duty to do so. If he has failed to summon the record and collect the record from different branches, the respondents cannot be blamed for the same. 9. It is argued that Shri R. M. Khandelwal, chartered accountant appointed by the court prepared the statement of accounts based on the records up to December 31, 1987 and he had shown cash balance of Rs. 3,62,530.83. No efforts were made to recover the amount from the employees of the company as respondents Nos. 1 and 2 became directors belatedly on January 8, 1988. The statement of Shri R. C. Mishra, the then official liquidator was recorded on December 15, 2009, who neither in the statement, nor in cross-examination, has pointed out any specific act of misfeasance against any of the directors. Similarly, Shri N. C. Jain, the charter....
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....ion in respect of the misapplication, retainer, misfeasance or breach of trust, as it thinks fit. The Supreme Court in that case also held that misfeasance and breach of trust include a breach by a promoter, director, etc., of a duty of the company the direct consequence of which has been a misapplication or loss of its assets for which he could be made responsible in an action. Allegations or proof of fraud are not essential and it is immaterial that the offence is one for which the offender may be criminally liable. 12. The Supreme Court in yet another judgment in Official Liquidator, Supreme Bank Ltd. v. P.A. Tendolkar [1973] 43 Comp Cas 382 held in paragraph 40 as under (page 400) : "It is certainly a question of fact, to be determined upon the evidence in each case, whether a director, alleged to be liable for misfeasance, had acted reasonably as well as honestly and with due diligence, so that he could not be held liable for conniving at fraud and misappropriation which takes place. A director may be shown to be so placed 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 ....
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....art of director, he is liable to reimburse the company to the extent of such loss. 15. The Calcutta High Court in National Sugar Mills Ltd., In re [1978] 48 Comp Cas 339 has held that it is clearly a question of fact to determine on evidence whether a director alleged to be liable for such misfeasance, has acted reasonably as well as honestly and with due diligence so that he could not be held liable for conniving at fraud or misapplication of the fund of the company. But if a director is shown to be so placed that he has been closely and personally associated with the management of the company before funds have been misapplied then he will be deemed to be only cognizant but liable for fraud or misappropriation of the funds of the company if there is a loss, even though no specific act of fraud or dishonesty is proved against him for such loss. 16. This court in Jaipur Vastra Vyopar Sangh Ltd. (In liquidation), In re [1970] 40 Comp Cas 1140 on an application under section 543 based on the alleged misconduct of a past or present director, managing agent, etc., held that by the express wordings of the section, the right to present such application does not vest in the company, but ....
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....ors of the company on September 17, 1990, when the number of directors on the board fell below the minimum permissible in the case of a public company, i.e., three. The company was ordered to be wound up by the court on September 8, 1995. It was clear from the records of the company that the company had had no transactions at all from 1987 onwards, until it was ordered to be wound up. The balance-sheet of the company contained an entry as on December 31, 1995, relating to National Savings Certificates amounting to Rs. 55,150. In those facts, it was held by the court that there was absolutely no material to show that any transaction took place between August 20, 1990 and September 8, 1995. On the contrary, it was common ground between the parties that no transactions took place during that period when the respondent was a director of the company. Therefore, the application was held to be an abuse of the process of the court and was dismissed in limine. 18. Considering the present matter in the light of the law discussed above, it is noted that when the company was originally incorporated on November 8, 1985, Vijay Kumar Kaushal, Rajesh Shrivastava and Mrs. Shyama Shrivastava were t....
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....ly and severally liable therefor. The meaning of misfeasance is the improper performance of some act for the purpose of section 545, which a person may lawfully do. In other words, it should be such a director while carrying out an activity is otherwise empowered to carry out under the law, but performs it in such a manner that the same is improper and such impropriety has to be wilful so as to cause loss to the company. 20. The allegation of misfeasance has to be therefore pleaded and proved against each of the director(s) or erstwhile director(s) indicating thereby that such act or omission on his part has led to the loss caused to the company or that such loss resulted from his act or omission. If such connection is proved, then only it can be held that loss of the nature contemplated in the misfeasance proceedings is caused to the company by that particular director subject of course to his right of rebuttal. 21. As regards the present case, it was a case of voluntary winding up of the company and not at the instance of any of its creditors. And here, it may be noted at the cost of repetition that Shri Vijay Kumar Kaushal, Shri Rajesh Shrivastava, Smt. Shyama Shrivastava were....