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TMI Blog1978 (5) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... e been removed because of the fact that they were at loggerheads and unable to function jointly and have been substituted by the official liquidator. The present petitioner claims to be a creditor of the company to the extent of Rs. 4,750 together with interest. If he is a creditor, he can move the petition. After the petition was filed, summons were served and points of claim and points of defence were filed. On the various questions raised, the following issues were framed : "1.Is the petition liable to be dismissed on the ground that even assuming the allegations no case is made out under section 543 of the Companies Act, 1956? 2.Did the encashment of 5 cheques as alleged in para. 9( a ) of the petition amount either to breach of trust or misfeasance by respondent No. 1? 3.Was the realisation of Rs. 88,637.41 by respondent No. 1 and the distribution of Rs. 88,623.03 as stated in para. 9( c ) of the petition misfeasance as alleged by the petitioner? 4.Were the acts mentioned in the last point done without the consent and connivance of respondent No. 1 and, if so, what is the effect? 5.Was the giving up of office of the company by respondent No. 1 an act amounting to bre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry liquidation, the ex-managing director could not operate the bank account. It is, therefore, said that this amounts to misfeasance. On the other hand, I come to the conclusion that section 543 of the Act is meant to deal with cases where there has been a breach of trust or misfeasance as normally understood. Assuming that the ex-managing director could not operate the account after the resolution sending the company into voluntary winding up, I fail to see that harm has been caused by the acts complained of. If money belonging to the company is used for legitimate purpose of the company, I fail to see why it is misfeasance, etc. However, the ex-managing director clearly ceased to be a director on the date of the resolution sending the company into voluntary winding up. Thereafter, he had to give back the charge of the property to the liquidators. Apparently, the cheques in this case were signed by Shri B L. Sharma as joint liquidator and Mukhi Radha Kishan as the ex-managing director. As the money can in no sense be said to be misappropriated or misused, I am unable to hold that there is any act justifying resort to section 543 on this complaint. Of course, if there is anything w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the fact that the creditors passed a resolution that respondent No. 1 should act alone and respondent No. 4 should be removed from the office of joint liquidators. This resolution is not a valid one, because under the Act only the court can remove a liquidator and not the creditors. The legal position is that the creditors can appoint a liquidator, they cannot remove him. However, due to the fact that the two joint liquidators could not act conjointly, the creditors apparently thought that one of them could act. As far as the misapplication of the money by making fraudulent preference is concerned, it is the case of the first respondent that the payments complained of are really book adjustments. In fact, in my view, this contention is premature, because till the final accounts are settled, it cannot really be determined whether there had been any over-payment to any creditor and what is the relief to be granted. The provisions of section 543 of the Act are so framed that in case it is found that any director, manager, liquidator or officer, etc., has been guilty of misfeasance or breach of trust or misapplication of the money or property of the company, etc., then the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it is much easier to make book adjustments between the debtors and creditors as otherwise realisations are difficult and the creditors may not get much. Rather than taking proceedings in court for the recovery of normal amounts from debtors, which may eventually prove to be fruitless, it is sometimes better to let the creditors and debtors to deal with each other. Though, on paper, some of the creditors seem to have been over paid in this way, in reality it often results in the creditors only getting paid a debt which is not normally realisable in the recovering process of a company in liquidation. In my view, this whole question is premature and incapable of decision in these proceedings, because there is no reasonable method of quantification available even if the company is said to have suffered a loss in this way. It will be for the official liquidator to take action on this question, if so advised. Subject to this reservation, I reject the contention of the petitioner. The next charge is that respondent No. 1 has illegally distributed money to about 300 different persons which is wholly illegal. This charge is opposed on the ground that it is wholly vague. I agree that it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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