1960 (10) TMI 39 - HC - Companies Law

Oppression of mismanagement Application of sections 539 to 544 to proceedings under sections 397 & 398

Summary

Issues:
Application under sections 397 and 398 of the Companies Act against company, managing agents, and directors. Impleadment of deceased director's heirs in the proceedings.

Analysis:
The judgment pertains to an application filed under sections 397 and 398 of the Companies Act against the company, its managing agents, and certain directors, including respondent No. 5. The application sought various reliefs, including termination of existing agreements and removal of directors. Some reliefs were specifically claimed against respondent No. 5 personally. However, during the pendency of the application, respondent No. 5, Sri Hari Shanker Bagla, passed away, leading to the issue of whether his heirs could be impleaded in the proceedings.

The applicants sought to bring on record five persons as the legal representatives of the deceased director, which was opposed on the grounds that the cause of action did not survive against the heirs. The court considered whether in proceedings under sections 397 and 398 of the Companies Act, it was permissible to implead the heirs of a deceased director and proceed against them. The court noted the absence of a will left by the deceased director, precluding representation by an executor or administrator.

The court referred to precedents establishing that proceedings under section 543 of the Companies Act cannot be continued against the heirs of a deceased director. The court highlighted the wide powers conferred by section 398(2) but emphasized that enforcing past liability of a director necessitated recourse to sections 539 to 544. It was clarified that liability could only be enforced against a living director and not against their heirs or legal representatives post-death.

Consequently, the court rejected the request to implead the heirs and legal representatives of the deceased director in the proceedings. The name of the deceased director was to be removed from the list of respondents, and the application to bring on record his heirs was dismissed with costs. The judgment underscores the limitations in enforcing past liability against deceased directors' heirs in proceedings under the Companies Act without following the prescribed statutory provisions.