1998 (11) TMI 598 - HC - Companies Law

Summary

Issues involved:

1. Liability under Section 541 of the Companies Act, 1956 for not keeping proper accounts.
2. Liability under Section 542 of the Companies Act, 1956 for fraudulent conduct of business.
3. Liability under Section 543 of the Companies Act, 1956 for misfeasance or breach of trust.

Detailed Analysis:

1. Liability under Section 541 of the Companies Act, 1956 for not keeping proper accounts:

The petitioner alleged that the respondents failed to keep proper books of account throughout the period of two years immediately preceding the commencement of the winding up. The auditor, P.W.-1, stated that the accounts were incomplete when made available to him, but there was no evidence to show that the books were incomplete throughout the required period. The auditor's report indicated that proper books were kept but not properly maintained. Additionally, there were no specific averments or evidence to show which respondent was responsible for maintaining the books. Thus, no case under Section 541 was made out.

2. Liability under Section 542 of the Companies Act, 1956 for fraudulent conduct of business:

Section 542(1) requires evidence that the business was carried on with intent to defraud creditors or for any fraudulent purpose. The petitioner's allegations were limited to the respondents' failure to take legal steps against debtors for recovery of amounts due. There were no averments or evidence of any fraudulent intention. Mere failure to initiate legal steps does not constitute fraudulent conduct under Section 542. Therefore, no case under Section 542 was established.

3. Liability under Section 543 of the Companies Act, 1956 for misfeasance or breach of trust:

The petitioner claimed that certain respondents misapplied and retained movable properties and failed to pay amounts due to the company. However, no relevant records, books of account, or necessary vouchers were produced as evidence. The petitioner's case relied heavily on the auditor's report, which did not substantiate the claims under Section 543. Even if some items of furniture were found missing, there was no specific evidence linking any particular respondent to the missing items. Therefore, no case under Section 543 was made out.

Conclusion:

The court found no merit in the petition as the petitioner failed to provide sufficient evidence to substantiate claims under Sections 541, 542, and 543 of the Companies Act, 1956. The petition was dismissed with no order as to costs.