1980 (4) TMI 237 - HC - Companies Law

Issues Involved:
1. Whether the application is maintainable under Section 446 of the Companies Act.
2. Whether the application is barred by time.
3. Whether the appellant has accounted for the vehicle or its value to the company.
4. To what relief the official liquidator is entitled.

Detailed Analysis:

1. Maintainability under Section 446 of the Companies Act:
The court examined whether proceedings could be held against the appellant under Section 446 of the Companies Act. The appellant argued that once the truck was handed over to respondent No. 2, his liability ceased. The court rejected this argument, stating that the appellant's liability continues as he ordered the transfer of the truck to respondent No. 2. The court held that Section 446 applies to claims against anyone in possession of the company's assets without the right to hold them, including directors. The court clarified that Sections 477, 542, and 543 of the Companies Act, which deal with fraudulent conduct and misapplication of company property, do not exclude the applicability of Section 446. Therefore, the court concluded that the application under Section 446 was maintainable against the appellant.

2. Limitation:
The court addressed the question of whether the application was barred by time. The learned judge initially found the claim to be within time under Section 10 and Article 70 of the Limitation Act. However, the court did not deem it necessary to decide on these provisions, as the claim was within time under Article 137 of the Limitation Act, which provides a three-year period for applications with no specific limitation period. The right to apply accrued on September 30, 1972, for respondent No. 2 and May 31, 1972, for the appellant, as there was no refusal to return the truck before these dates. The application filed in October 1973 was within the three-year period, thus within time.

3. Accountability for the Vehicle:
The appellant admitted that the truck was repossessed by the company and directed the chowkidar to hand it over to respondent No. 2. The court found that the vehicle was handed over under the appellant's instructions and that respondent No. 2 had not returned the vehicle or its sale proceeds to the company. The court held the appellant liable for not taking proper receipts and for the loss of the vehicle, making his liability subject to the non-realization of the amount from respondent No. 2. The court emphasized that the appellant's explanation of giving the truck to respondent No. 2 for selling did not absolve him of liability, as he failed to ensure the return of the vehicle or its proceeds.

4. Relief Entitlement:
The court directed that Rs. 10,500, including costs, was realisable from respondent No. 2 in the first instance. If the amount could not be realized from respondent No. 2, the balance or the whole amount could be realized from the appellant. The court found that the claim against the appellant and respondent No. 2 was rightly ordered by the learned single judge. The appellant's liability continued as he ordered the transfer of the truck to respondent No. 2, and the possession of the truck by respondent No. 2 was under the appellant's authority.

Conclusion:
The court dismissed the appeal with costs, upholding the learned single judge's order that Rs. 10,500 was realisable from respondent No. 2 in the first instance and, if not realizable, from the appellant. The court's reasoning was based on the maintainability of the application under Section 446, the application being within the limitation period, the appellant's accountability for the vehicle, and the entitlement to relief by the official liquidator.

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