1967 (8) TMI 46 - HC - Companies Law

Summary

Issues Involved:
1. Mismanagement and improper accounting by the 2nd and 3rd respondents.
2. False returns submitted to the Registrar of Companies.
3. Improper convening of the extraordinary general meeting on February 26, 1967.
4. Fitness of the 2nd respondent to continue as voluntary liquidator.

Issue-wise Detailed Analysis:

1. Mismanagement and Improper Accounting:
The applicant alleged that the 2nd respondent, who was the secretary, and the 3rd respondent, who was the president-director prior to the voluntary liquidation, mismanaged the Nidhi and failed to keep proper accounts. They did not furnish annual returns to the Registrar as required under the Indian Companies Act and did not hold the annual general body meeting for the years 1963, 1964, and 1965. This issue was not pressed by the applicant during the hearing.

2. False Returns Submitted to the Registrar of Companies:
The applicant claimed that the 2nd respondent filed false returns with the Registrar stating that a general body meeting was held on July 11, 1966, and that balance-sheets and profit and loss accounts for the years 1963, 1964, and 1965 were passed. The 2nd respondent admitted to sending the returns but explained that he did so while he was ill and relied on other office-bearers for the information. The court noted that the explanation was served on the Registrar and no steps were taken against the 2nd respondent, indicating a lack of clear evidence of malfeasance.

3. Improper Convening of the Extraordinary General Meeting on February 26, 1967:
The applicant contended that the extraordinary general meeting held on February 26, 1967, was not properly convened and that the election of the 2nd respondent as the voluntary liquidator should not be implemented. The 2nd respondent countered that the meeting was properly convened, valid notices were sent, and the applicant was present but refused to sign the minutes book. The court found that the meeting was regularly called and held, and the 2nd respondent was elected unanimously or by a majority of votes.

4. Fitness of the 2nd Respondent to Continue as Voluntary Liquidator:
The primary contention of the applicant was that the 2nd respondent was unfit to hold the office of voluntary liquidator due to his involvement in sending false returns. The court emphasized that before condemning a person, they should be given an opportunity to explain (audi alteram partem). The court found no tangible evidence of deliberate misconduct by the 2nd respondent and noted that the general body of members, who were aware of his past actions, still elected him as the voluntary liquidator. The court held that the applicant did not show sufficient cause for the removal of the 2nd respondent under section 515 of the Companies Act, 1956, and that the decision of the members should not be lightly interfered with.

Conclusion:
The court dismissed the application for the removal of the 2nd respondent as voluntary liquidator, stating that there were no justifiable reasons to consider him unfit for the position. The court emphasized the importance of the members' decision in a voluntary liquidation and found no compelling evidence to override their choice. Both Company Application No. 120 of 1967 and Company Application No. 121 of 1967 were dismissed without any order as to costs.