1979 (5) TMI 108 - HC - Companies Law

Winding up Statement of affairs to be made to official liquidator, Powers of court to grant relief in certain cases

Issues Involved:
1. Applicability of Section 454(2) of the Companies Act, 1956 to ex-directors.
2. Requirement for the court to apply its mind before directing the filing of a statement of affairs.
3. Effect of previous orders relieving the appellant under Section 633(2) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Applicability of Section 454(2) of the Companies Act, 1956 to ex-directors:
The primary issue was whether an ex-director like the appellant falls within the ambit of sub-section (2) of section 454 of the Companies Act, 1956. The court held that an order under section 454 can be passed in respect of persons who were directors of the company even more than one year prior to the passing of the winding-up order. The court agreed with the learned judge's interpretation that sub-section (2) of section 454 speaks of two categories of persons: first, persons who are, on the relevant date, the directors or other officers of the company; and second, such persons other than the first category whom the official liquidator, subject to the directions of the court, may call upon to submit and verify the statement of affairs. The second category includes persons who are or have been officers of the company. Therefore, ex-directors of the company who resigned even more than one year before the winding-up order could, in appropriate cases, be directed to submit a statement of affairs.

2. Requirement for the court to apply its mind before directing the filing of a statement of affairs:
The appellant contended that the official liquidator can only require such other persons to submit a statement of affairs, subject to the directions of the court, as are in a position to give relevant information. The court agreed with this submission, emphasizing that the court must apply its mind and decide in each case whether such direction should be given. The purpose of getting the statement of affairs is to enable effective and proper winding up of the company. The court is not required to give a direction which in effect would be infructuous. The court noted that the appellant was not in a position to know anything about the affairs of the company ever since he was ousted from the management in December 1966. Therefore, asking such a person to file a statement of affairs is an exercise in futility.

3. Effect of previous orders relieving the appellant under Section 633(2) of the Companies Act, 1956:
The appellant argued that the effect of the orders relieving him under section 633(2) of the Companies Act would bar calling upon him to discharge the same duties again. The court agreed, noting that the absolution or relief granted would bar calling upon the appellant to discharge the same duties again. The appellant had been exonerated twice, once by S.K. Kapur J. on January 13, 1969, and again by S.N. Andley J. on November 24, 1969. The appellant had resigned from the directorship on January 14, 1969, and the winding-up order was made on November 6, 1974. The court found it inconceivable that the appellant should be saddled with the responsibility of filing the statement of affairs, especially since he had been exonerated twice and had ceased to be a director.

Conclusion:
The court accepted the appeal, set aside the order of the learned company judge, and directed a re-hearing of the application of the official liquidator for directions under section 454 of the Companies Act. The court emphasized that the responsibility to file the statement of affairs should be fixed on persons capable of doing so, and a general order applicable to everyone connected with the management of the company would serve no useful purpose. The court stressed the importance of a full enquiry to determine who should be called upon to file the statement of affairs, ensuring that the exercise is meaningful and not merely academic.

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