2002 (4) TMI 833 - HC - Companies Law

Summary

Issues:
Interim orders in O.S. No. 33 of 1998 challenged in two appeals - C.M.A. No. 247 of 1998 and A.S. No. 1020 of 1998. Claim petition filed regarding properties attached. Dispute over attachment of property belonging to a company for its debts and liability of the Managing Director.

Analysis:
1. Interim Orders Challenge: The appeals were filed against interim orders in O.S. No. 33 of 1998. C.M.A. No. 247 of 1998 challenged the order making the attachment before judgment of certain properties absolute. A.S. No. 1020 of 1998 contested the dismissal of a claim petition regarding the attached properties. The claim petition was filed by the Managing Director of the company against which the suit was filed for the realization of a balance amount.

2. Property Attachment Dispute: The dispute arose over the attachment of property belonging to a company, Jikku Chit Fund, for its debts. The Managing Director contended that the property in question belonged to him personally and not to the company. Evidence presented in the claim petition established that the property was purchased by the Managing Director personally, as shown through various exhibits including the sale deed, bank certificate, tax receipt, and company registration documents.

3. Liability of Managing Director: The key issue was whether the property of the Managing Director could be attached for the debts of the company. The court clarified that the liability of a company is separate from that of its officers or directors. Citing legal precedents, the court highlighted that unless there is a specific provision imposing personal liability on the Managing Director, they cannot be held personally liable for the company's debts. The court emphasized that the liability rests with the company as a separate legal entity.

4. Legal Precedents: The court referred to various legal precedents to support its decision, emphasizing that the liability of the Managing Director is limited to the extent specified by law. The court distinguished between the liability of the company and that of its officers, stating that unless there is a provision explicitly making the Managing Director personally liable, the liability remains with the company. The court rejected the argument that the company was merely a facade controlled by the Managing Director, reiterating that the suit was against the company for the recovery of the balance amount.

5. Judgment: In conclusion, the court set aside the orders passed by the lower court, dismissing the claim petition and allowing the appeal. The court held that the property of the Managing Director cannot be attached for the debts of the company, reiterating the principle of separate legal entities for companies and their officers. Consequently, the court allowed A.S. No. 1020 of 1998 and C.M.A. No. 247 of 1998, dismissing I.A. No. 303 of 1998 and allowing I.A. No. 33 of 1998.