9911796707
TMI Blog1978 (2) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... yable to the company between the years 1958 and 1966. The case of the official liquidator is that each of the respondents were directors on the date when the order of wincing up was passed on July 28, 1972 and that on a scrutiny of the books of accounts and on a perusal of the statement of affairs as disclosed by the directors, coupled with the balance-sheet perused by him, he found that a sum of Rs. 27,464.27 was noted in the balance-sheet as debts considered doubtful, and another sum of Rs. 5,399.39 was noted as sum total of advances considered doubtful by the officers of the company. The case of the official liquidator is that once such amounts are shown in the books of account as recoverable from third parties and so long as those amounts were not recovered and there is evidence to show that genuine and sincere attempts were not made to recover such amounts in a manner known to law, the officers of the company including the respondents as directors cannot escape the statutory liability to account for such sums under section 543(1)( a ) of the Companies Act. The fifth respondent is reported to be dead even on the date when the summons was taken out. He is, therefore, taken out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r recovery of such doubtful debts, it would further involve the company in unnecessary expense. The same explanation is given by the third respondent but he would also plead that he was an out-of-station director and that it was the first respondent, who was the director-in-charge of the company in liquidation and, therefore, in any event, he should be exonerated under any account. The official liquidator, on the other hand, would say that in the absence of any reasonable explanation for not having taken any action for recovery of the debts, the mere assertion by the company in liquidation, though through the voice of the board that it was an irrecoverable debt, and that it was assented to by the shareholders at its general meeting, cannot bind the third party creditor after liquidation. In fact, he would go to the extent of saying that recording of such amounts in the books of accounts, as if they were amounts recoverable by the company was, to some extent, an attempt to mislead the creditors as a body. In these circumstances, the summons is pressed into service and a direction as prayed for is asked. Section 543 of the Companies Act which enumerates the power of court to asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance of the prayer in the summons only if he proves that the respondents 1 to 4 as quondam directors of the company have become liable or accountable for the money which was due to the company. Certainly, this is not a case where monies have been misapplied or monies have been retained by the directors including the respondents 1 to 4. The question, therefore, is whether, in the circumstances of the case, respondents 1 to 4 or any one or more of them are accountable for the monies claimed in the judge's summons. We will take up for the purpose of elucidation and illustration the amount of Rs. 21,642.93 claimed in the judge's summons said to be due from E.I.D. Parry Ltd. On an enquiry made by the official liquidator in the course of the winding-up of the company, he was informed by the E.I.D. Parry Ltd. by its letter dated 11th May, 1976, that no amount was due to the company in liquidation. This letter produced before me is marked as Ex. C-1. The further admitted facts are that all the amounts shown as doubtful debts or doubtful advances were carried in the books of account for well over three years and it is also not in dispute that on the date when the order for winding-up wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their criticisms having accepted the report that such debts are irrecoverable should be deemed to have considered that it would be a further waste of the company's funds to file suits or take appropriate legal proceedings to recover such amounts. It is in this view that the circumstances of the case in question have to be viewed. I agree with the official liquidator that such ought not to be the general impression or conclusion in all matters, for it would highly prejudice the creditor. But, in a case like this where debts were outstanding from 1958 to 1966 or 1967, it cannot be said that the company as a whole, and the respondents 1 to 4 in particular, avoided their duty or responsibility in not taking steps to recover them, knowing that they could be recovered in a manner known to law. In the peculiar circumstances of the case, it should be held that the directors cannot be said to be responsible to answer a case of accountability laid by the official liquidator. The Calcutta High Court in In re Central Calcutta Bank Ltd [1959] 29 Comp. Cas. 437 apparently falling in line with the ratio in Dovey v. Cory [1901] AC 477 (HL), cited above, observed that it is also settled t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
