1969 (4) TMI 58 - HC - Companies Law

Summary

Issues Involved:
1. Misapplication or retention of funds by the respondent.
2. Rate of interest on the misapplied or retained funds.
3. Maintainability of the petition due to dismissal of previous civil suits.
4. Maintainability of the petition due to delay in filing.

Issue-wise Detailed Analysis:

1. Misapplication or Retention of Funds by the Respondent:
The court examined whether the respondent, as the managing director of the company, misapplied or retained Rs. 2,07,832 and Rs. 19,588-4-6 during his tenure. It was established that the respondent was in a position to manage the company's affairs and had indeed withdrawn the amounts in question. The respondent admitted to taking Rs. 2,07,832 and transferring it to his father's account, and also acknowledged the execution of a document confirming his liability. The court found that the respondent misapplied or retained the sum of Rs. 2,07,832, which had not been repaid. Similarly, the respondent withdrew Rs. 20,000 from the company without proper authorization, claiming it was against his commission, which was not due at the time. The court held that the respondent was not entitled to this amount and had misapplied or retained Rs. 19,588-4-6.

2. Rate of Interest on the Misapplied or Retained Funds:
The official liquidator provided evidence that interest at 6% per annum was charged on the initial withdrawal of Rs. 1,00,000, which rose to Rs. 2,07,832. The court saw no reason to disallow this rate of interest and held that the respondent should pay interest at 6% per annum on both amounts from the respective dates of misapplication until realization.

3. Maintainability of the Petition Due to Dismissal of Previous Civil Suits:
The court examined whether the dismissal of Civil Original Suits Nos. 20 and 21 of 1953 barred the present application under section 543 of the Companies Act, 1956. It was determined that the present application was not a "suit" within the meaning of Order 9, Rule 9, Civil Procedure Code, as it was not instituted by presenting a plaint but was an application by the official liquidator. The court held that the application under section 543 was based on the alleged misconduct of the respondent and not merely on a monetary claim. Therefore, the bar under Order 9, Rule 9, did not apply, and the application was maintainable.

4. Maintainability of the Petition Due to Delay in Filing:
The objection regarding the delay in filing the petition was not pressed by the respondent's counsel. The court noted that section 543(2) of the Companies Act provides a limitation period of five years from the date of the winding-up order. Since the winding-up order was made on 9th March 1960 and the application was filed on 5th November 1963, it was within the prescribed period. Therefore, the objection was deemed futile.

Conclusion:
The court declared that the respondent misapplied or retained Rs. 2,07,832 and Rs. 19,588-4-6, totaling Rs. 2,27,420-4-6. The respondent was ordered to repay this amount with interest at 6% per annum from the respective dates of misapplication until payment. The respondent was also directed to pay the costs of the application to the official liquidator.