2009 (7) TMI 789 - HC - Companies Law

Winding up petition - Held that - It is true that in the statements of accounts of the second respondent-company for the year 2004-05 and 2005-06, the income is shown as nil , but the statements as well as the auditor s reports do not contain all the names of the directors of the company and two directors, viz., Mr. Sin Wai Shing and Mr. Tang Keen Fei have signed the statements. Further, it is also admitted by the second respondent itself in the counter affidavit that three ex-directors of the first respondent-company, viz., Mr. Hassen Adam Bin, Mr. Ramesh and Mr. Sivakumar have resigned on June 21, 2005, June 22, 2005 and June 21, 2005, respectively. Thus a reasonable suspicion arises about the formation of the second respondent-company and it is necessary that an investigation has to be ordered in respect of the affairs of the second respondent-company. Direct the official liquidator of this court to investigate about the affairs of the second respondent-company, viz., M/s. Scanwell Logistics P. Ltd., especially with reference to the object of the said company and the transactions which have taken place from the date of its incorporation, viz., May 28, 2004, till date and file a report to enable this court to pass final orders in the above applications. The petitioning creditor/applicant shall deposit an amount of ₹ 10,000 (rupees ten thousand only) with the official liquidator towards expenses relating to the said investigation within one week from this date.

Issues Involved:
1. Filing of the statement of affairs by ex-directors.
2. Examination of the conduct of ex-directors under sections 542 and 543 of the Companies Act, 1956.
3. Alleged fraudulent constitution of a new company and transfer of assets.
4. Misfeasance and breach of fiduciary duty by ex-directors.
5. Investigation into the affairs of the newly constituted company.

Detailed Analysis:

1. Filing of the Statement of Affairs by Ex-Directors:
The petitioning creditor filed applications against the ex-directors of the company under liquidation, seeking a direction for them to file the statement of affairs. The court noted that the winding-up order was passed on March 22, 2006, and the ex-directors were directed to file the statement of affairs within three weeks. One of the ex-directors, Mr. S. Ramesh, filed the statement on June 27, 2006, and another director concurred. However, discrepancies were found in the statement, including unaccounted bank balances, cash on hand, trade debtors, and loans and advances.

2. Examination of the Conduct of Ex-Directors Under Sections 542 and 543 of the Companies Act, 1956:
The official liquidator filed an application to examine the conduct of the ex-directors under sections 542 and 543, alleging misfeasance and seeking to hold them personally liable for the company's debts. The discrepancies in the statement of affairs indicated potential mismanagement and mal-administration. The court emphasized the need to investigate the ex-directors' conduct to determine their liability for the company's debts and any fraudulent activities.

3. Alleged Fraudulent Constitution of a New Company and Transfer of Assets:
The petitioning creditor alleged that the ex-directors fraudulently constituted a new company, M/s. Scanwell Logistics P. Ltd., during the pendency of the winding-up petition. The new company was formed with some of the ex-directors of the company under liquidation, and there were allegations of transferring the assets and business of the first respondent-company to the new entity. The court noted the suspicious timing of the new company's incorporation and the involvement of the ex-directors, warranting further investigation.

4. Misfeasance and Breach of Fiduciary Duty by Ex-Directors:
The petitioning creditor argued that the ex-directors breached their fiduciary duty by constituting the new company and transferring assets, amounting to misfeasance under section 543 of the Companies Act. The court recognized the need to lift the corporate veil to uncover any fraudulent activities and determine the ex-directors' liability for misfeasance.

5. Investigation into the Affairs of the Newly Constituted Company:
The court directed the official liquidator to investigate the affairs of M/s. Scanwell Logistics P. Ltd., focusing on the company's objectives and transactions since its incorporation. The investigation aimed to determine whether the new company was formed to defraud the creditors of the company under liquidation and to transfer its assets unlawfully. The petitioning creditor was required to deposit Rs. 10,000 with the official liquidator for the investigation expenses.

Conclusion:
The court emphasized the need for a thorough investigation into the conduct of the ex-directors and the affairs of the newly constituted company to uncover any fraudulent activities and hold the responsible parties accountable. The official liquidator was directed to file a report within eight weeks, and the case was scheduled for further hearing on September 14, 2009.

← Previous Next →