1940 (8) TMI 21 - HC - Companies Law

Summary

Issues:
1. Liability of the appellant under Section 235 of the Indian Companies Act.
2. Applicability of Section 235 in cases of misfeasance or breach of trust causing pecuniary loss.
3. Difference between Section 165 of the English Companies Act and Section 235 of the Indian Companies Act.
4. Power of the Court to compel restoration of property under Section 235.
5. Requirement of loss to the company for an order under Section 235.
6. Justification of the order for delivery of books to the liquidator.

Analysis:
1. The judgment deals with an appeal regarding a misfeasance summons under Section 235 of the Indian Companies Act against the appellant, who was the manager of the company. The liquidator sought payment of two sums of money and the production of certain company books from the appellant.

2. The appellant argued that Section 235 requires a loss to the company before an order can be passed. Citing precedents, it was contended that the section applies to cases involving a breach of duty causing pecuniary loss. The liquidator claimed that the retention of the books by the appellant could lead to significant loss, justifying the order for their delivery.

3. A comparison was drawn between Section 165 of the English Companies Act and Section 235 of the Indian Companies Act. Unlike the English law, Section 235 empowers the Court to compel restoration of property, in addition to repayment or compensation, enhancing the remedies available to address misfeasance or breach of trust.

4. The Court clarified that the appellant's possession of the company books constituted possession of company property. The order for the delivery of the books was deemed appropriate as their retention by the appellant could result in a loss to the company, fulfilling the requirement for invoking Section 235.

5. Emphasizing the necessity of a loss to the company for invoking Section 235, the judgment highlighted that the books' retention by the appellant, although not proven to cause loss, implied a potential loss due to their value. Therefore, the order for their delivery to the liquidator was justified based on the likelihood of loss.

6. Ultimately, the appeal was dismissed, affirming the order for the delivery of the books to the liquidator. The appellant was held liable under Section 235, and the judgment concluded that the order was proper and in accordance with the provisions of the Indian Companies Act.