TaxTMI 
TaxTMI 
1975 (8) TMI 145
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....married daughters, Smt. Maya Bose and Smt. Mira Mitra, as his heirs and legal representatives. Thereafter, on February 12, 1970, judge's summons was taken out at the instance of the official liquidator for leave to proceed with the said misfeasance application against the said heirs and legal representatives of Dr. Sinha and for their substitution in place of Dr. Sinha. On November 9, 1970, S. P. Mitra J., as his Lordship then was, passed an order for substitution. This appeal has been preferred on December 7, 1970, against the said order. 3. Mr. R. Chaudhuri, counsel for the appellant, has drawn our attention to the words in Section 543(1) of the said Act, and relying upon several English and Indian decisions, has submitted that the misfeasance proceeding, in the very nature of such proceeding, cannot continue against the heirs and legal representatives of a deceased director. Mr. B. Das, counsel for the official liquidator, however, has justified the correctness of this order of Mitra J, mainly on the ground that the heirs and legal representatives of the said delinquent director have enriched themselves by inheriting money or property of the said company which Dr. Sinha wro....
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....of the said Act. Section 483 reads as follows : " Appeal from orders.--Appeals from any order made, or decision given, in the matter of the winding up of a company by the court shall lie to the same court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the court in cases within its ordinary jurisdiction." 5. On a plain construction of the said section, the first part gives the party affected a substantive right of appeal against any order which may be made in the matter of winding up of a company and the words " in the matter of winding up " must be construed as " in connection with " or " in the course of such winding up". The latter part of the section only sets out the procedure or the mode and the manner in which such appeal can be filed. 6. In connection with the maintainability of this appeal, Mr. Das has also submitted that the order under appeal is not a " judgment " under Clause 15 of the Letters Patent. According to him, the order under appeal has only decided to substitute the heirs of Dr. S. N. Sinha at the instance of the official liquid....
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.... the misfeasance proceeding but the fact remains that the liability of the heirs of a delinquent director in a misfeasance proceeding has been held to be possible in spite of the express provision of Section 543 of the Companies Act, 1956. If the court has the power to substitute the heirs on the ground that the children can be made liable for the conduct of their father, a decision to that effect has been made on the company court's jurisdiction and thus the test of the said Full Bench decision is satisfied. It has been held by Mitra J. that the heirs may be liable in the same way as the director might be liable for misfeasance or breach of trust under certain contingencies and it is on that basis the learned judge has substituted the heirs of Dr. Sinha although Dr. Sinha died before he was even examined under Section 543 of the Act. The learned judge has not only decided a substantive law of importance but also has indirectly decided the rights of the company court to determine the liability of the heirs of such delinquent director to the limited extent of the properties inherited by them. 8. In this connection reference may be made to Shankarlal Aggarwala v. Shankarlal Podd....
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....e a "judgment " under the said Clause 15. Section 104(l)(i) of the Code provides for an appeal against orders which include, " any order made under Rules from which an appeal is expressly allowed by Rules ". Section 122 of the Code empowers the High Court to make rules in different States. If the conditions relating to appeal in respect of an order passed by a company court in the districts are to be determined by rules framed by different High Courts in different States, the maintainability of an appeal against such order or decision would be different in different States. Similarly, in the same State also the right to appeal in respect of such order or decision would be different if such order is passed by a company judge of the High Court and a district judge of a civil court in the State. Reliance may be placed upon the observations of Ayyangar J., at page 13, which are as follows : " We thus agree with Chagla C.J. that the second part of the section which refers to ' the manner ' and ' the conditions subject to which appeals may be had ' merely regulates the procedure to be followed in the presentation of the appeals and of hearing the....
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....or to contribute to any loss which has been caused to the assets of the company in liquidation by way of compensation. The liability, therefore, is fixed upon the director personally. The section nowhere mentions the liability of the estate of such delinquent director in case of such misfeasance or breach of trust. There is complete silence of any liability directly or indirectly to be imposed upon the heirs and legal representatives of such director on the ground that such heirs and legal representatives have enriched themselves by wrongfully misappropriating the assets of the company. In this connection reliance may be placed upon Official Liquidator, Supreme Bank Ltd. v. P. A. Tendolkar, [1973] 43 Comp Cas 382 (SC) where Beg J., at page 398, has stated. " But we think that the power under Section 235 of the Act of 1913 which corresponds to Section 543 of the Act of 1956 would not extend beyond making a declaration against a deceased director provided he, in his lifetime, all heirs, after his death, have had due opportunity of putting forward the case, on behalf of the allegedly delinquent director. If either a liquidator or the heirs of a delinquent director, against whom ....
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....f procedural nature, the ultimate liability cannot be imposed upon such heirs or legal representatives of Dr. Sinha. It may be added that, in the Supreme Court decision, the delinquent director, Mr, Tendolkar, died after his examination by the company court in the misfeasance proceedings. Even, in such a case, although the liability of Mr. Tendolkar was declared, his estate was not followed up in the hands of his heirs or legal representatives. In the present case, Dr. Sinha died before he was even examined and no declaration of liability against him could be made. Thus, even from a practical point of view even if the appellants were substituted in place of Dr. Sinha no compulsive order could be made against them, although the company court might decide against the delinquent directors who are jointly and severally liable. Further, the son and the two married daughters of Dr. Sinha could not have any personal knowledge about their father's "dealings and affairs with the said company in liquidation. 14. The common law doctrine of actio personalis moritur cum persona, as argued by the counsel for both the parties, cannot have any application to cases under a special statute....
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.... 6. Section 235 of the Indian Companies Act, 1913, reads as follows : " 235. (1) Where, in the course of winding up a company, it appears that any person, who has taken part in the formation or promotion of the company, or any past or present director, manager or liquidator, or any officer of the company has misapplied or retained or become liable or accountable for any money or property of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the court may, on the application of the liquidator, or of any creditor or contributory made within three years from the date of the first appointment of a liquidator in the winding up or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer, examine into the conduct of the promoter, director, manager, liquidator or officer, and compel him to repay or restore the money or property or any part thereof respectively with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the court thinks just. (2) ....
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....liquidator or officer, and compel him to repay or restore the money or property or any part thereof respectively with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the court thinks just. (2) The provisions of this section shall have effect notwithstanding that the offence is one for which the offender may be criminally liable. (3) Where in the case of a winding up in England an order for payment of money is made under this section, the order shall be deemed to be a final judgment within the meaning of paragraph (g) of Sub-section (1) of section one of the Bankruptcy Act, 1914." 9. From a perusal of the abovementioned provisions in regard to the proceedings relating to misfeasance committed by directors or other officers of a company it is clear that the above-mentioned 3 sections have been expressed in identical terms with very minor variations. 10. Section 236 of the Indian Companies Act of 1913 was in terms same as Section 165 of the English Companies Act, 1862. In construing Section 165 of the English Companies Act....
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....rcing rights which can be enforced by the companies or by its liquidators by means of an ordinary suit. The section has conferred powers upon the court to "examine into the conduct " of delinquent director or officer mentioned in the section and " compel him to pay " such amount as would compensate the company for the loss occasioned to the company by the misfeasance or breach of trust of such directors or officers by means of an application in the winding-up proceeding itself without being required to recover the loss from such delinquent director or officer by means of a separate suit, so that " complete justice might be done between the parties and a complete winding-up effected". Reference may be made to the observations of Giffard L.J. in Stringer's case, [1869] 4 Ch D 475, 493. 12. The decision in the abovementioned English case relating to the construction of Section 165 of the English Companies Act of 1862 was followed by different courts in India in interpreting Section 235 of the Indian Companies Act, 1913. Harrison J. in S. B. Billimoria, Official Liquidator v. Cecilla Mary De Souza, AIR 1926 Lah 624 was of the opinion that Section 235 ....
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....has been stated earlier that Section 543 of the Companies Act, 1956, which repealed the Indian Companies Act, 1913, is in identical terms as Section 235 of the repealed Act except certain very minor variations. The legislature, no doubt, was aware of the construction put by the courts on Section 235 of the repealed Act. Notwithstanding the same, Parliament enacted Section 543 of the Companies Act, 1956, in identical terms as Section 235 of the repealed Act. In the premises it has to be held that the legislature intended that Section 543 would have the same meaning as was held to be the meaning of Section 235 of the repealed Act by the courts for the long series of years before the 1913 Act was repealed. Reference in this connection may be made to the case of Bengal Immunity Co. v. State of Bihar, and especially to the observations of the Supreme Court appearing at paragraph 22 of the judgment at page 674 of the report. Parliament in the Companies Act, 1956, made certain sections applicable to heirs and legal representatives in express terms, e.g., Sections 429, 430, 431 as well as Section 542. In refraining from making Section 543 applicable to the deceased director or officer, etc....
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.... the order under appeal is not appealable also has no substance. The order was passed in the matter of a winding-up proceeding within the meaning of Section 583 of the Companies Act, 1956. The said section is reproduced hereunder : "583. Winding up of unregistered companies.--(1) Subject to the provisions of this part, any unregistered company may be wound up under this Act, and all the provisions of this Act with respect to winding up shall apply to an unregistered company with the exceptions and additions mentioned in Sub-sections (2) to (5). (2) For the purpose of determining the court having jurisdiction in the matter of the winding up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situate in more than one State, then, in each State where it has a principal place of business ; and the principal place of business situate in that State in which proceedings are being instituted shall, for all the purposes of the winding up, be deemed to be the registered office of the company. (3) No unregistered company shall be wound up under this Act voluntarily or subjec....