1975 (8) TMI 145 - HC - Indian Laws

Summary

Issues Involved:
1. Maintainability of the appeal under Section 483 of the Companies Act, 1956.
2. Jurisdiction of the company court to substitute heirs and legal representatives of a deceased director in misfeasance proceedings.
3. Applicability of Section 543 of the Companies Act, 1956, to the heirs and legal representatives of a delinquent director.
4. Interpretation of Section 543 of the Companies Act, 1956, in light of previous Indian and English case law.
5. The common law doctrine of actio personalis moritur cum persona in the context of the Companies Act.

Detailed Analysis:

1. Maintainability of the Appeal:
The court held that the appeal is maintainable under Section 483 of the Companies Act, 1956. The section provides a substantive right of appeal against any order made in the matter of the winding up of a company. The court clarified that the words "in the matter of the winding up of a company" should be construed broadly. The court rejected the contention that the order for substitution is not a "judgment" under Clause 15 of the Letters Patent, affirming that the appeal is maintainable as it involves the winding up of a company.

2. Jurisdiction to Substitute Heirs and Legal Representatives:
The court concluded that the company court does not have the jurisdiction to substitute heirs and legal representatives of a deceased director in misfeasance proceedings under Section 543 of the Companies Act, 1956. The court emphasized that Section 543 expressly empowers the court to assess damages against the alleged delinquent director and not against their heirs. The section does not mention the liability of the estate of such delinquent director in case of misfeasance or breach of trust.

3. Applicability of Section 543 to Heirs and Legal Representatives:
The court observed that Section 543 of the Companies Act, 1956, does not extend to making compulsive orders against heirs of delinquents. The section is designed to hold directors personally liable for misfeasance or breach of trust, and there is no provision for extending this liability to their heirs or legal representatives. The court referenced the Supreme Court's decision in Official Liquidator, Supreme Bank Ltd. v. P. A. Tendolkar, which indicated that the liability of a deceased delinquent director could be declared but not enforced against the heirs.

4. Interpretation of Section 543 in Light of Previous Case Law:
The court reviewed various Indian and English case laws, including Section 235 of the Indian Companies Act, 1913, and Section 333 of the English Companies Act, 1948. The consistent view in these cases was that the remedy under these sections was personal against the delinquent director or officer and did not extend to their heirs or legal representatives. The court noted that the legislature, aware of these interpretations, did not amend Section 543 to include heirs and legal representatives, indicating an intention to maintain the established interpretation.

5. Common Law Doctrine of Actio Personalis Moritur Cum Persona:
The court held that the common law doctrine of actio personalis moritur cum persona, which means a personal action dies with the person, does not apply to cases under the Companies Act. However, the express language of Section 543 and the observations of the Supreme Court suggest that the liability for misfeasance or breach of trust is personal to the director and does not extend to their heirs or legal representatives.

Conclusion:
The court set aside the order of the court of first instance that substituted the heirs and legal representatives of Dr. Sinha in the misfeasance proceedings, allowing the appeal. The court held that the misfeasance proceedings could not continue against the heirs and legal representatives of a deceased director, as Section 543 of the Companies Act, 1956, does not provide for such substitution. The appeal was allowed, and the costs of the official liquidator were to be paid out of the assets lying with him.