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Issues Involved:
1. Whether the respondents-Ex Managing Director and Directors have committed misfeasance or breach of trust in taking necessary steps for recovery of the debts that are due to the company under liquidation, and whether any or all of the respondents-Ex Directors are liable for reimbursement of the loss caused to the company under liquidation? 2. Whether the application under section 543(1) of the Act is barred by limitation? Issue-wise Detailed Analysis: Issue 1: Misfeasance or Breach of Trust by Respondents The Official Liquidator filed an application under section 543(1) of the Companies Act, 1956, alleging that the respondents, who were the Ex-Managing Director and Directors of the company under liquidation, failed to recover debts due to the company, resulting in a loss of Rs. 17,00,088.67. The statement of affairs filed by the first respondent listed sundry debtors, but the Official Liquidator could recover only Rs. 3,759.08 due to incorrect addresses and other issues. The respondents argued that the application was barred by limitation and denied any misfeasance or breach of trust. The court found that the respondents were obligated to file the statement of affairs within three weeks of the winding-up order dated 27-7-1990 but did so only on 3-12-1991. The debts listed were already time-barred by the time of filing. The court held that the respondents' failure to take timely action to recover the debts constituted negligence and breach of trust, resulting in a loss to the company. The court referred to various precedents, including Official Liquidator v. Raghawa Desikachar, which emphasized the need for specific allegations of misfeasance or negligence. However, the court concluded that the respondents were liable for the loss caused to the company due to their inaction. Issue 2: Limitation The respondents contended that the application was barred by limitation, arguing that the period should be computed from the first appointment of the liquidator in C.P. No. 35 of 1987, which was set aside on 16-9-1988. The court held that the relevant date for computing the limitation period was the winding-up order in C.P. No. 68 of 1988, dated 27-7-1990, as the Official Liquidator took charge only after this order. The application filed on 26-7-1995 was within the five-year limitation period. The court also referred to section 458A of the Act, which provides an extended limitation period, and various precedents supporting this interpretation. Conclusion: The court concluded that the respondents, except the fourth respondent who retired before the debts became time-barred, were guilty of misfeasance, negligence, or breach of trust. The respondents were held jointly and severally liable to compensate the company for the loss, with interest at 9% per annum from the date of the application until payment. The application was allowed, and the respondents were ordered to make good the loss caused to the company.
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