2018 (3) TMI 718 - HC - Companies Law

Winding up petition - Held that - In the course of winding up of a company, it appears that any person who has misapplied, or retained, or become liable or accountable for, any money or property of the company, the court can direct the said person to repay or restore the money. May only note that under section 446 of the Companies Act where winding up order has been made, the OL takes into custody and control all the property of the company of which the company is entitled to. It is apparent from the facts as stated above that Mr. Vinod Vij, the Ex-Director of the Company after passing of the winding up order taken money from the Batra Hospital which he was not entitled to receive in terms of the provisions of the Companies Act. He further claims to have disbursed the amount for the bonafide payment of debts of the respondent Company which he could not have done. This fact itself of having disbursed the funds to discharge the bonafide debts of the respondent Company is a doubtful contention. Further there is no merit in the plea of Mr. Vij that he was not aware that he cannot operate the accounts of the company to make bonafide payments for and on behalf of the company. Allow the present application and pass a direction to Mr. Vinod Vij to deposit with the OL the said amount of ₹ 16,31,174/- within four weeks from today. In the interest of justice, the period for depositing the said sum is extended by eight weeks.

Issues:
1. Condonation of delay in filing a reply.
2. Application under sections 446, 542, and 543 of the Companies Act, 1956 seeking direction for remittance of a specific amount.
3. Misappropriation of funds by an Ex-Director post winding up order.
4. Legal provisions under section 543(1) of the Companies Act, 1956.
5. Direction to the Ex-Director to deposit the misappropriated amount with the Official Liquidator.
6. Extending the timeline for the deposit.
7. Inspection and shifting of company records.

Issue 1: Condonation of delay in filing a reply
The applicant sought condonation of a 114-day delay in filing the reply, which was allowed by the court, and the reply was taken on record.

Issue 2: Application under sections 446, 542, and 543 of the Companies Act, 1956
An application was filed under these sections seeking a direction for the Ex-Director to remit a specific amount along with interest to the Official Liquidator (OL) due to default in payments and expenses incurred post settlement disputes.

Issue 3: Misappropriation of funds by an Ex-Director post winding up order
The Ex-Director collected a substantial sum post-winding up order, which the OL demanded to be refunded, alleging misappropriation. The Ex-Director claimed the funds were used for the company's debts, but the court found the manner of fund transfer irregular and contrary to normal accounting procedures.

Issue 4: Legal provisions under section 543(1) of the Companies Act, 1956
Section 543(1) empowers the court to assess damages against delinquent directors who misapply company funds, compelling them to repay or restore the money with interest. The OL takes control of company property post-winding up order under section 446.

Issue 5: Direction to the Ex-Director to deposit the misappropriated amount with the Official Liquidator
The court directed the Ex-Director to deposit the misappropriated amount within four weeks, later extended to eight weeks, emphasizing that the funds were received post-winding up order and should be returned.

Issue 6: Extending the timeline for the deposit
In the interest of justice, the court extended the period for depositing the sum by eight weeks, without imposing interest or penalties on the Ex-Director.

Issue 7: Inspection and shifting of company records
The court directed the Official Liquidator to inspect an alternate area offered by the Ex-Director for storing company records, with further instructions for inspection and sealing of the records.

This detailed analysis covers the core issues and legal aspects addressed in the judgment, highlighting the misappropriation of funds, legal provisions, and the court's directions regarding the repayment and handling of company records.

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