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Issues Involved:
1. Misfeasance by the Directors and Officers 2. Negligence in the performance of duties 3. Limitation period for filing the application under Section 235 of the Companies Act 4. Applicability of the Limitation Act to proceedings under Section 235 Issue-wise Detailed Analysis: 1. Misfeasance by the Directors and Officers: The liquidator claimed that large amounts were recoverable from the respondents due to misfeasances, primarily involving the granting of loans contrary to the company's bye-laws. These loans, now irrecoverable, were granted at the absolute discretion of the first respondent (Managing Director) without prior Board sanction, making the first respondent primarily liable for the losses. 2. Negligence in the performance of duties: The liquidator alleged that the other Directors, the auditor, and the head clerk were aware of these loans and were negligent in their duties by not taking steps to prevent the loans or recover the amounts lent. Consequently, the liquidator argued that these respondents were equally liable along with the first respondent. 3. Limitation period for filing the application under Section 235 of the Companies Act: The winding-up order was made on January 9, 1942, and the business of the company was discontinued from April 7, 1941. The liquidator's application was presented on November 8, 1944, and filed on November 14, 1944. Under Section 235(1), the court may grant relief on an application made within three years from the date of the first appointment of a liquidator in winding-up or the misapplication, retainer, misfeasance, or breach of trust, whichever is longer. The first appointment of a liquidator was on November 19, 1941, making the application clearly within time. 4. Applicability of the Limitation Act to proceedings under Section 235: The respondents contended that Section 235 is a procedural section that provides a summary mode of enforcing existing rights and does not create new rights. They argued that any defense of limitation available in a suit filed by the company or the Official Liquidator under Section 179(a) of the Act should also be available in these proceedings. They claimed that if a suit had been filed, the limitation period would be governed by Article 36 of the First Schedule to the Limitation Act, and since the business was discontinued in 1941, the reliefs sought would be barred. Therefore, the present proceedings should also be barred. The court referred to the history of Section 235, noting that it was a verbatim reproduction of a provision in the English Companies Acts. The court acknowledged that English courts have consistently recognized that applications of this nature are subject to the same limitation as suits for the same relief. The court also noted that the Indian Limitation Act of 1908 was applied to an application under this section as if it were a suit, but this provision was removed in 1936, and words of limitation were added to sub-section (1). The court concluded that the addition of the words of limitation to Section 235(1) in 1936 indicated an intention to exclude the right of a person charged to avail themselves of a plea of limitation, which would have been open if a suit had been filed. The court held that the words of limitation in Section 235(1) must govern all proceedings under the section, and a defense of limitation available in a suit would no longer be open in these proceedings. Conclusion: The court decided that the application by the liquidator was within the specified period under Section 235(1) and that the defense of limitation, which might have been available if a suit had been filed, was not applicable in these proceedings. The case was to be heard on the merits when the records were available. The costs of the hearing on this issue were to be costs in the cause.
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