1975 (1) TMI 59 - HC - Companies Law

Summary

Issues Involved:
1. Failure to deposit provident fund contributions.
2. Failure to deposit Employees' State Insurance contributions.
3. Non-accounting of paper stock.
4. Removal of structural materials.

Detailed Analysis:

1. Failure to Deposit Provident Fund Contributions:
The official liquidator accused respondent No. 1 of failing to deposit the employees' and employer's share of provident fund contributions amounting to Rs. 16,279.62 with the Provident Fund Commissioner for the period from November 1963 to April 1966. The evidence showed that these contributions were entered in the company's books and remained in credit with the company. The court found no evidence that respondent No. 1 misappropriated or misapplied these amounts. Therefore, the non-payment simply exposed the company to a demand by the Provident Fund Commissioner but did not result in a loss to the company. Consequently, respondent No. 1 was not held liable for this amount.

2. Failure to Deposit Employees' State Insurance Contributions:
Similarly, the official liquidator claimed that respondent No. 1 failed to deposit Rs. 3,306.90 payable to the Employees' State Insurance Corporation from January 1, 1965, to the date of the winding-up order. The court found that the contributions were credited in the company's books but not paid due to a shortage of funds. There was no evidence that respondent No. 1 misappropriated these funds. Thus, the non-payment did not result in a loss to the company, and respondent No. 1 was not held liable for this amount.

3. Non-Accounting of Paper Stock:
The official liquidator claimed Rs. 1,19,862 for the price of paper stock not handed over to him. The auditors, due to incomplete records, calculated this amount based on the opening stock, acquisitions, consumption, and resulting balance. The evidence established that the company's consumption of paper was consistent with the sale price, and there was no other use for the paper. The court found respondent No. 1 liable for this amount, as his failure to account for the paper stock constituted gross negligence and non-feasance. The court held that the company suffered a direct loss due to the disappearance of the paper stock valued at Rs. 1,19,862.

4. Removal of Structural Materials:
The official liquidator claimed Rs. 15,000 for the cost of structural materials removed by respondent No. 1. The court found that the materials were removed by respondent No. 1 after the company went into liquidation. The original cost of the structures was Rs. 1,500, and the court did not accept the claim that the value had increased tenfold. Considering the rise in prices and depreciation, the court determined the reasonable value of the materials to be Rs. 3,000. Therefore, respondent No. 1 was held liable for Rs. 3,000.

Conclusion:
The court concluded that respondent No. 1 was guilty of misfeasance concerning the non-accounting of paper stock and the removal of structural materials. He was held liable for a total of Rs. 1,22,862 with interest at 6% per annum, along with the costs of the proceeding. The application against respondent No. 3 was dismissed without costs due to a lack of specific allegations and evidence against him.