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TMI Blog1971 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant cannot escape liability for the entire amount for which an order has been made against him by the High Court. Appeal dismissed. - 1791 OF 1967 - - - Dated:- 9-2-1971 - K.S. HEGDE AND A.N. GROVER, JJ. D.P. Singh, V.J. Francis and Suresh Prasad Singh for the Appellant. Arun Bahadur Saharya, Vishnu Bahadur Saharya, Miss Y. Kushalani and K. Jayaram for the Respondent. JUDGMENT Grover, J. This is an appeal by certificate from a judgment of the Madras High. Court. In October, 1950, the Malayalee Bank Ltd. (hereinafter called the "Bank") was ordered to be wound up. On that date there were only two directors, i.e ., respondent No. 3 and the appellant, P. K. Nedungadi. The second respondent, P. S. Mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1946, No. 1 (P. S. Mannadiar) amongst you took away and Nos. 2 to 5 (T. Eronanunni, V. K. Thirumalpad and V. Venugopal Thampan) permitted No. 1 to take away a sum of Rs. 14,623-4-2 from the bank under the guise of an overdraft. That No. 1 amongst you obtained and Nos. 2 to 5 amongst you sanctioned to No. 1 loan, aggregating to Rs. 34,863-6-0 (wherein the aforesaid sum of Rs. 14,623-4-2 was merged) on the supposed security of the Mannadiar Saw and Oil Mills Ltd., Palghat. That at the time the transaction was put through you knew or could with reasonable diligence have known that the security was wholly illusory and that was only a device to circumvent the provisions of section 20 of the Indian Banking Companies Act. That by this and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory and its business fell on evil days. M formed a public limited company and sold the mills and its property at an inflated price to the said company. This company was incorporated by the name of Mannadiar Saw Oil Mills Ltd. on January 31,1948, hereinafter referred to as the "Mills". The appellant was one of the directors of that company. This company was ultimately wound up in 1950. The bank had certain deposits to the extent of Rs. 50,000 with the Palghat branch of the Indo-Mercantile Bank. In the beginning of 1948 the Indo-Mercantile Bank got into difficulties and it closed its business from February 10, 1948. M had an overdraft account with Indo-Mercantile Bank at its Palghat branch. The agent of that branch was the appellant. M p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could have been realised from him but instead of doing that M was given a credit to the extent of Rs. 12,083 with a direction to him to realise Ravi Verma's dues to the bank himself. M was also indebted to Rukmini, the sister-in-law of the appellant. For wiping out this liability a fixed deposit account for Rs. 6,000 was opened in the bank in the name of Rukmini. Cash money was not deposited and the consideration for the deposit was an undertaking by M to pay to the bank and that liability was included in the total liability covered by the mortgage executed by the mills. Subsequently the fixed deposit amount of Rs. 6,000 was withdrawn by Rukmini. Thus the High Court found that the three items of consideration for the mortgage which had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant this is what was observed : "The fourth respondent, P. K. Nedungadi, was undoubtedly the guiding spirit for the fraud perpetrated by the first respondent. He obtained a benefit on opening a fixed deposit in favour of his sister-in-law, and realising the same while he was in active management as the managing director of the bank. But scruples were not amongst his virtues is plain from the fact that he who engineered the mortgage transaction described the same within the few months thereof in his report to the directors. He should be made liable to the entire extent. But for his help, the first respondent could not have avoided his liability or been permitted to realise the unpaid purchase money from the Mannadiar Saw Oil Mills Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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