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TMI Blog1980 (7) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... dents 10-A( i ), ( ii ), ( iii ) and ( iv ) are the widow and minor children of the deceased partner, S.M. Parkhe. Similarly, respondents 10-B( i ), ( ii ), ( iii ) and ( iv ) are the widow and minor children and mother, respectively, of the deceased partner A.V. Kavathekar. The allegation by the official liquidator against respondent 10, the partnership-firm, is that at the relevant time the partnership firm, M/s. Parkhe Associates were the lessee of the company in liquidation under an agreement dated July 17, 1964; that the respondents had managed the affairs of the company in terms of the agreement and in the course of such management, the lessee-firm caused loss to the extent of Rs. 4,44,534 to the company by selling the product of the company to a favoured buyer at a discount, over a period of five years. It is further alleged that the lessee-firm favoured, in the course of the management, M/s. Ganesh and Company, Poona, who had other connections with the firm by buying raw material for the business of the company in liquidation at a higher rate than what was paid to local buyers for the raw materials. In this behalf, it is claimed by the official liquidator that the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s who had participated in the management of the company in liquidation at any point of time and, therefore, while in appropriate cases the contention advanced for the official liquidator would readily be accepted by court, in the instant case it cannot be so. This takes us to the next question as to whether legal representatives of a company's director or other persons named in section 543 of the Act or the legal representatives of persons covered under section 542 of the Act can be proceeded against for misfeasance. Sri B.V. Krishnaswamy Rao, learned counsel appearing for the legal representatives-respondents, has strenuously contended that both under sections 542 and 543 of the Act, legal representatives cannot be proceeded against at all and more so, when the concerned director or person, participating in the management of the company, had died even before he had an opportunity of meeting the case of misfeasance against him. In support of his proposition, he has depended on a catena of decisions of the High Courts of India before and after the partition. He has also placed reliance on certain observations and rulings of the Supreme Court in the case of Official Liquidator, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of the Peerdan Juharmal Bank Ltd., In re [1958] 28 Comp. Cas. 546; AIR 1958 Mad. 583 has held thus: "The proceedings taken under section 235 against a director of a banking company, ordered to be wound up, cannot be continued after his death, and the liability, if any, of such a director cannot be enforced against his legal representative in those proceedings. It is the language of section 235 of the Act that decides the issue. It is a limited right that is conferred by the section. It ends when the director dies and does not survive after his death." In doing so, the Bench relied upon a number of English cases as well as the decisions of other High Courts, notably the decision of the Bombay High Court reported in Manilal Brijlal v. Vandravandas C. Jadav [1944] 14 Comp. Cas. 147 ; AIR 1944 Bom. 193, S.B. Billimoria, Offl. Liq. v. Cecilia Mary De Souza, AIR 1926 Lah. 624 and Mufassil Bank Ltd. v. Jugal Kishore [1938] 8 Comp Cas 300 ; AIR 1939 All. 1. In Tendolkar's case [1973] 43 Comp. Cas. 382 (SC) Beg J., as he then was, speaking for the court, after reviewing all the English and Indian decisions on this question, in para. 28 (as reported in AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nued against the legal representatives. After the Calcutta decision above mentioned was rendered, in the case of Shiwalik Transport Co. Ltd. ( In liquidation ) v. Thakur Ajit Singh [1978] 48 Comp. Cas. 465, a Division Bench of the Punjab and Haryana High Court expressly disagreed with the ruling of the Calcutta High Court. Chinnappa Reddy J., as he then was in that High Court, relying upon para. 33 of the judgment in Tendolkar's case (as reported in AIR 1973 SC 1104; 43 Comp. Cas. 382, 397, 398), held that proceedings under section 543 of the Act could be continued against the legal representatives of the deceased director against whom it was initiated. A Division Bench of the Kerala High Court in the case of Mrs. Joselin v. Official Liquidator, Alwaye Chit Funds ( P. ) Ltd. [1979] 49 Comp. Cas. 170 , held that the three directors therein had died at an early stage of the proceedings before the company court and none were examined in the misfeasance proceedings nor had they opportunity to defend prior to their death and on that account it would not be just, fair or equitable to continue the misfeasance proceedings against the appellants who were the legal represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken out of context failing to notice the preceding paragraph. This can only become clear if that portion of para. 33 which is as follows (p. 398 of 43 Comp. Cas.) : "It may be possible (though we need express no final opinion on the matter) where a proceeding under section 543 is covered also by the terms of section 542 of the Companies Act of 1956, to give directions to persons other than those whose conduct is enquired into, including directions to heirs and legal representatives, for the purpose of enforcing a declaration. But we think that the power under section 235 of the Act of 1913, which corresponds to section 543 of the Act of 1956, would not extend beyond making a declaration against a deceased director provided he, in his lifetime or his heirs, after his death, have had due opportunity of putting forward the case on behalf of the allegedly delinquent director. If either a liquidator or the heirs of a delinquent director, against whom a declaration of liability has been made, can question the determination of liability of the deceased delinquent, who was alive at the time of the judgment against him, it is obvious that the appellate court could give a declaration ei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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