1978 (5) TMI 95 - HC - Companies Law

Issues Involved:
1. Dismissal of the petition under Section 543 of the Companies Act, 1956.
2. Alleged breach of trust or misfeasance by respondent No. 1 in encashing five cheques.
3. Alleged misfeasance in the realization and distribution of Rs. 88,637.41 by respondent No. 1.
4. Acts done without the consent and connivance of respondent No. 4 and their effect.
5. Alleged breach of trust or misfeasance by respondent No. 1 in giving up the office of the company.
6. Relief to be granted to the petitioner and against which respondents.

Detailed Analysis:

1. Dismissal of the Petition under Section 543 of the Companies Act, 1956:
The court examined whether the petition should be dismissed on the grounds that no case was made out under Section 543. The court noted that the petition raised purely legal questions and was set for arguments without any evidence. The primary consideration was whether, on the undisputed facts, a case for action under Section 543 was established. The court concluded that the section is meant to address misfeasance or breach of trust as normally understood, and found no harm caused by the acts complained of, thus not justifying resort to Section 543.

2. Alleged Breach of Trust or Misfeasance by Respondent No. 1 in Encashing Five Cheques:
The petitioner claimed that the encashment of five cheques amounted to misfeasance. The respondent contended that the cheques were used for legitimate company purposes, such as paying creditors, rent, and telephone bills. The court concluded that if the money was used for legitimate company purposes, it did not constitute misfeasance. The court noted that the ex-managing director ceased to be a director after the resolution for voluntary winding up and had to return the property to the liquidators. Since the money was not misappropriated or misused, the court found no justification for action under Section 543.

3. Alleged Misfeasance in the Realization and Distribution of Rs. 88,637.41 by Respondent No. 1:
The petitioner alleged that respondent No. 1 committed misfeasance by distributing Rs. 88,623.03 without respondent No. 4's consent. The court acknowledged that joint liquidators must act jointly, but found no loss to the company as the money was distributed to creditors. The court noted that the creditors had passed a resolution for respondent No. 1 to act alone, which was invalid as only the court could remove a liquidator. The court determined that the question of fraudulent preference and misapplication of funds was premature and should be addressed by the official liquidator during the winding-up process.

4. Acts Done Without the Consent and Connivance of Respondent No. 4 and Their Effect:
The court found that the joint liquidators' inability to act jointly led to irregularities. However, the court concluded that the official liquidator should investigate these matters further during the winding-up process. The court emphasized that the official liquidator should ensure the proper distribution of assets among creditors and take necessary actions if any over-payments or irregularities are found.

5. Alleged Breach of Trust or Misfeasance by Respondent No. 1 in Giving Up the Office of the Company:
The petitioner claimed that respondent No. 1 gave up the company's office with ulterior motives, causing financial loss. The court found that surrendering the office saved the company a significant amount of rent and arrears. The court noted that while there was suspicion of improper conduct, no monetary loss was established. The court concluded that the charge was not sufficient to warrant action under Section 543.

6. Relief to be Granted to the Petitioner and Against Which Respondents:
The court rejected the petition, noting that the official liquidator might take action based on better material during the winding-up process. The court made no order as to costs.

Conclusion:
The court dismissed the petition under Section 543 of the Companies Act, 1956, finding no sufficient evidence of misfeasance or breach of trust by the respondents. The court emphasized that the official liquidator should investigate the matters further during the winding-up process and take necessary actions if any irregularities are found. No costs were awarded.

← Previous Next →