2004 (10) TMI 341 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the application under Section 543(1) of the Companies Act, 1956.
2. Applicability of Section 458A of the Companies Act regarding the limitation period.
3. Allegations of misfeasance or breach of trust against the Ex-Directors.

Issue-Wise Detailed Analysis:

1. Maintainability of the Application:
The Official Liquidator filed an application under Section 543(1) of the Companies Act, 1956, seeking a direction for the Ex-Directors of the company to pay a sum of Rs. 13,86,346.30 along with interest at 12% per annum from the date of winding up. The respondents raised a preliminary objection regarding the maintainability of the application, arguing that it was barred by limitation.

2. Applicability of Section 458A Regarding Limitation Period:
The application was filed on 18-5-1987, while the winding-up order was passed on 20-5-1981. Section 543(2) prescribes a five-year limitation period from the date of the winding-up order. The Official Liquidator argued that Section 458A should be applied, which allows for the exclusion of one year following the winding-up order in computing the limitation period. If Section 458A applied, the application would be within the limitation period, expiring on 19-5-1987.

The respondents contended that Section 458A did not apply, as Section 543 provided a special limitation period that should override the general provisions of Section 458A.

3. Allegations of Misfeasance or Breach of Trust:
The Official Liquidator alleged that the Ex-Directors failed to take action to recover debts, resulting in "bad debts" and a loss to the company. The application lacked specific details or evidence of misfeasance or breach of trust against any particular Director.

Analysis and Judgment:

Maintainability and Limitation:
The court examined the conflicting interpretations of Sections 543 and 458A by various High Courts. The Andhra Pradesh High Court in *Official Liquidator v. T.J. Swamy* supported the view that Section 458A applies to misfeasance proceedings under Section 543, extending the limitation period. Conversely, the Orissa and Karnataka High Courts held that Section 543's special provision should prevail, excluding the benefit of Section 458A.

The court preferred the Andhra Pradesh High Court's interpretation, supported by the Supreme Court's judgment in *Official Liquidator, Supreme Bank Ltd. v. P.A. Tendolkar*. It concluded that Section 458A applies, and the application was within the limitation period.

Allegations of Misfeasance:
The court noted the lack of specific allegations or evidence of misfeasance or breach of trust against any particular Director. Citing judgments from various High Courts, including its own, the court emphasized that specific and positive evidence is required to hold individual Directors liable under Section 543.

The court dismissed the application on the grounds of insufficient allegations and lack of specific evidence against any Director.

Conclusion:
The application was dismissed due to the absence of specific allegations and evidence of misfeasance or breach of trust against the Ex-Directors, despite being within the limitation period as per Section 458A.