1978 (8) TMI 150 - HC - Companies Law

Summary

Issues Involved:
1. Whether the legal representatives of deceased directors can be impleaded in misfeasance proceedings initiated under section 543 of the Companies Act, 1956.
2. Whether the maxim "actio personalis moritur cum persona" applies to proceedings under section 543.
3. Whether the delay in filing applications for impleading the legal representatives and setting aside the abatement can be condoned.

Issue-wise Detailed Analysis:

1. Impleading Legal Representatives in Misfeasance Proceedings:
The primary issue was whether it was legally permissible for the company court to direct the impleading of the legal representatives of deceased directors in proceedings initiated under section 543 of the Companies Act, 1956. The court referred to the Supreme Court's decision in Supreme Bank Ltd. by Op. Liquidator v. P. A. Tendolkar [1973] 43 Comp. Cas. 382, which clarified that the court has jurisdiction to continue proceedings against the legal representatives of a deceased director provided it is satisfied that no injustice would be caused by such a course. The court emphasized that such proceedings can only result in a declaration of liability and no compulsive orders can be passed against the legal representatives under section 543.

2. Applicability of Maxim "Actio Personalisis Moritur Cum Persona":
The appellants contended that the maxim "actio personalis moritur cum persona" applies to proceedings under section 543, meaning that personal actions do not survive the death of the wrongdoer. The court, however, noted that the Supreme Court in the Tendolkar case had concluded that this maxim does not generally extend to cases involving breaches of fiduciary duties or where the personal conduct of the deceased director has been fully inquired into. The court highlighted that the maxim's application is generally confined to actions for damages for defamation, seduction, inducing a spouse to remain apart, and adultery, and does not apply to actions based on contract or where a tortfeasor's estate has benefited from a wrong done.

3. Condonation of Delay and Setting Aside Abatement:
The official liquidator filed applications for impleading the legal representatives of the deceased directors and for condonation of delay and setting aside the abatement. The appellants resisted these applications, arguing that sufficient grounds were not shown for condonation of the inordinate delay. The court found that the three directors had died at an early stage of the proceedings before the company court, and they had not been examined nor had they an opportunity to present their evidence. Given these circumstances, the court concluded that it would not be just, fair, or equitable to continue the misfeasance proceedings against the legal representatives. Consequently, the court set aside the orders under appeal and dismissed the petitions filed by the liquidator for impleading the legal representatives.

Conclusion:
The appeals were allowed, and the court held that the proceedings under section 543 of the Companies Act, 1956, could not be continued against the legal representatives of the deceased directors in this case. The court emphasized that such proceedings should only be continued where the deceased director had a full opportunity to present his case before his death. The parties were directed to bear their respective costs.