1974 (4) TMI 43 - HC - Companies Law

Summary

Issues Involved:
1. Whether the application by the official liquidator is barred by time.
2. Whether M/s. Hindustan Lever Ltd. can be summoned and examined under section 477 of the Companies Act, 1956.
3. Whether the directors of the company in liquidation were negligent in recovering the amount due.
4. Whether the directors misapplied or retained the amount due to the company.

Detailed Analysis:

1. Whether the application by the official liquidator is barred by time:
The respondent raised a preliminary objection, asserting that the application by the official liquidator is barred by time. However, the court noted that there is no limitation period prescribed in the Companies Act, 1956, for applications under section 477. Therefore, the application cannot be treated as being barred by time.

2. Whether M/s. Hindustan Lever Ltd. can be summoned and examined under section 477 of the Companies Act, 1956:
The court examined the applicability of section 477 of the Companies Act, 1956, which allows the court to summon any officer of the company or person suspected to have in his possession any property or books or papers of the company, or known or suspected to be indebted to the company. The court concluded that while M/s. Hindustan Lever Ltd. is theoretically a person indebted to the company, the difficulty lies in the fact that the court can only summon a person capable of being examined on oath. As M/s. Hindustan Lever Ltd. is a juristic person, it cannot be examined on oath. The court also rejected the alternative suggestion to examine an officer or director of M/s. Hindustan Lever Ltd. on the grounds that such an examination would not lead to any positive order against the company. Consequently, the application against M/s. Hindustan Lever Ltd. was dismissed.

3. Whether the directors of the company in liquidation were negligent in recovering the amount due:
The official liquidator claimed that the directors, respondents Nos. 2 and 3, were negligent in not recovering the amount from M/s. Hindustan Lever Ltd. before the company was ordered to be wound up. The court found no substance in this claim, as the claim was not barred by time and there was no evidence of negligence in the recovery process.

4. Whether the directors misapplied or retained the amount due to the company:
The official liquidator also alleged that the directors had received the money but had not paid it to the company, which would constitute a breach of trust. However, the court noted that other proceedings under sections 542 and 543 of the Companies Act, 1956, were already pending against the directors, which included similar allegations. Therefore, it was deemed unnecessary to proceed against the directors in this application. The court dismissed the application against the directors without prejudice to the pending proceedings.

Conclusion:
The court dismissed the application against M/s. Hindustan Lever Ltd. and the directors of the company in liquidation. The official liquidator was advised to pursue other proceedings for the recovery of the alleged debt. The parties were ordered to bear their own costs.