9911796707
TMI Blog1970 (9) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... When the country was partitioned into the dominions of India and Pakistan, the incorporation of the company was transferred to Jullundur and it may appear that the books and records of the company had been brought to this side of the Indo-Pakistan border and that some of these books of the company had been produced before a civil court in Delhi in or about the year 1950 during the hearing of a suit filed by one Bine Chand, a creditor of the company, for the recovery of the price of coal gas plants supplied by him in the years 1943-44 for being installed on the vehicles of the company in the days of shortage of petrol during the Second World War. Shri Bine Chand had been, granted a decree by the civil court on March 28, 1951, for the recovery of a sum of Rs. 27,000 with costs and future interest. The company continued functioning and carrying on business of goods carriers after the partition of the country in Meerut Division until the decree-holder filed a petition for the compulsory winding-up of the company in December, 1958. The winding-up proceedings of the company continued for about 5 years and the judgment-creditor, Bine Chand, along with the official liquidator, filed a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the three directors named above at the total sum of Rs. 26,600 and made them severally liable for varying amounts. Sarvshri Mulkh Raj and Dewan Chand who had held the office of managing director during certain separate periods were made liable for a sum of Rs. 10,000 each while Gian Chand who had been assisting them was made liable for the smaller amount of Rs. 6,600. This judgment does not appear to have satisfied any of the parties and aas led to two cross-appeals. The three directors who are inter-related have filed one joint appeal while the cross-appeal has been filed by the official liquidator and the judgment-creditor, Shri Bine Chand. The same type of criticism may appear to have been levelled against the impugned order of the learned company judge in both these appeals. It has been alleged that the assessment of quantum of damages has proceeded, more or less, on a rule of thumb and that the same could be said about the manner of the liability over the three directors. The party who may appear to have benefited by this so-called adoption of a rule of thumb cannot make any valid grievance of it and the fact that the parties express dissatisfaction may, in fact, be an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been adopted as the measure for assessing the sale proceeds and profits of other vehicles. Where the lowest measure has been adopted as the quantum of damages or compensation in respect of acts of misappropriation of the price of other vehicles or for assessing the profits made by the running of other vehicles which could not have been as bad as junk which had necessarily to be sold within a few months, the real grievance may appear to be of the party defrauded that a low measure had been adopted. The party who has been guilty of misappropriating the sale proceeds of the other vehicles or the profits accruing from running them would not have any valid grievance that in other cases also they had been made liable for the rock bottom assessment of sale proceeds and profits. The argument that the route-permits were allowed to be used by others without getting any substantial return also does not appeal to me and there was no fun in keeping the route permits alive if no profit was expected to be made from these route-permits. If in the bargain the directors of the company were breaking the law, it can very well be presumed that they were not doing so for the mere fun of it. Entries a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain appear to be that of the creditor of the company and not of the directors. In Peninsular Locomotive Co. Ltd. v. H. Langham Reed [1837] 7 Comp. Cas. 212 ; AIR Pat. 293 it was held that even though the position of the directors differs from the trustees in some respects yet to the extent of their being entrusted with moneys of the company, they are jointly and severally liable for the breach of trust. When the assets of a company are entrusted to the directors to be applied to certain defined objects, then they would be liable for breach of trust if they applied these assets to other objects. The finding was that these three members were acting in concert and that is why Shri Gian Chand who had never worked as a managing director was made liable for a substantial part of the damages. He was made liable simply because he had been attending certain meetings of the board of directors. If in his case the principle of vicarious liability had to come in, then there was no reason why the other two who had acted as managing directors should not have been made severally and jointly liable in respect of the entire amount. If they were taken to have incurred a higher liability because ..... X X X X Extracts X X X X X X X X Extracts X X X X
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