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TMI Blog1982 (12) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... idator took out summons under section 543(1) of the Act against its directors including Dr. S. N. Sinha for a declaration that the said directors were guilty of misfeasance and breach of trust and also for an. order directing them to repay or restore the money or property of the company in liquidation which they were alleged to have retained wrongfully. During the pendency of the said proceedings, Dr. S. N. Sinha died on November 16, 1969, intestate leaving behind his son, Parthasarathy Sinha, and two married daughters, Maya Bose and Mira Mitra, as his heirs and legal representatives. On February 12, 1970, judge's summons was taken out at the instance of the official liquidator for leave to continue the said proceedings against the said heirs and legal representatives. The learned company judge passed an order on November 9, 1970, for the substitution of the said heirs and legal representatives in place of Dr. S. N. Sinha, the deceased. Against that order, the heirs and legal representatives of Dr.S. N. Sinha preferred an appeal before the Division Bench of the Calcutta High Court under section 483 of the Act. That appeal was allowed by the Division Bench on August 1, 1975, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt thinks just. (2) An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding-up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer. (3) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable . Section 634 of the Act reads : 634. Enforcement of orders of courts.-Any order made by a court under this Act may be enforced in the same manner as a decree made by the court in a suit pending therein . Section 2(11) of the Code of Civil Procedure defines the expression legal representative as a person who in law represents the estate of a deceased person and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued . Section 50 of the Code of Civil Procedure reads : 50. Legal representative.-(1) Where a judgment-debtor dies before the decree has been fully satisfied, the hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentatives of the two deceased directors was not questioned by any party. In those appeals, the Division Bench reduced the total liability of the directors and the individual liability of the managing director though it placed a larger share of the burden of contribution on the managing director. Against that judgment, the official liquidator appealed to this court in respect of the liability of the managing director and two other directors. One of the two directors namely, P.A. Tendolkar, died pending the grant of his own application for a certificate under article 133 of the Constitution. His heirs got themselves impleaded and contended that the proceedings against them could not be continued and also that the claim against the deceased director was untenable on merits. Dealing with the liability of the heirs and legal representatives of persons against whom action was taken under sections 542 and 543 of the Act, this court observed at pages 395-396 (of 43 Comp. Cas.) thus : The maxim actio personalis moritur cum persona as pointed out in Winfield's Law of Torts, 8th Edn., pp. 603-605), was an invention of English common lawyers. It seemed to have resulted from the strong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings is discretionary and does not exhaust other remedies, although the court may, as a matter of justice and equity, drop proceedings against delinquent directors, managers, or officers who are no longer alive, leaving the complainant to his ordinary remedy by a civil suit against the assets of the deceased, yet where no injustice may be caused by continuing these proceedings against a past director, even though he be dead, the proceedings could continue after giving persons who may be interested opportunities to be heard. But, even such proceedings can only result in a declaration of the liability of a deceased director, because the language of section 235 of the Act of 1913, as already noticed, does not authorise passing of orders to compel heirs or legal representatives to do anything. Such compulsive proceedings as may become necessary against those upon whom devolve the assets or the estate of a deceased delinquent director, who may have become liable, could only lie outside section 235 of the Act of 1913 . (pp. 396-397) Again, in the same case, it was observed by this court at page 398 thus: It may be possible (though we need express no final opinion on the matter) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities determined above, but no such orders will be passed against the heirs and legal representatives of the deceased director, P. A. Tendolkar, under section 235 of the Act of 1913, although their liabilities are declared. The official liquidator and L. S. Ajgaonkar are, however, left free to seek such other remedies, if necessary, by appropriate proceedings under the law, against the estate or assets of P. A. Tendolkar, as may be open to them. (p. 14) Justice Masud of the Calcutta High Court, who heard the case under appeal, understood the above decision of this court thus : The observations of the Supreme Court give an indication that in a proper case the declaration of the liability of a delinquent director, who subsequently dies, is possible but no order for repayment or restoring the money or property lying in possession of the heirs can be passed against the heirs or legal representatives of such director. (p. 563) Justice Ghose, the other judge of the Division Bench, observed : In Official Liquidator, Supreme Bank Ltd. v. P. A. Tendolkar [1973] 43 Comp. Cas. 382 (SC), the Supreme Court held that where a delinquent director was examined in a proceeding unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with the decision in Tendolkar's case [1973] 43 Comp. Cas. 382 (SC), observed thus : Considerable argument turned on the scope and effect of the above decision of the Supreme Court, and, in particular, of the observations in the paragraphs that we have quoted above. As we understand the said judgment, we do not think that the decision or the observations made lend countenance to the proposition sought to be advanced before us that an order under section 543 of the Companies Act, passed against a director or directors cannot be executed in the modes known to and sanctioned by, the Civil Procedure Code, against his estate in the hands of his legal representatives. The proceedings before the Supreme Court, it should be remembered, arose by way of appeal against the proceedings started under section 543 of the Act itself, and, therefore, were a continuation of the said proceedings. No question directly arose before the Supreme Court as to whether an order passed under section 543 could, or could not, be executed against the estate of the deceased director in the hands of his legal representatives. In paragraph 22 of the judgment, the Supreme Court observed that the possible l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a deceased director against an order made under section 235. (p. 469) Having given our anxious consideration to the question before us, we are of the view that the Kerala and the Punjab and Haryana High Courts have applied the decision in Tendolkar's case [1973] 43 Comp. Cas. 382 (SC), correctly and that the two learned judges of the Calcutta High Court who delivered the judgment ([1976] 46 Comp. Cas. 555), under appeal, erred in its application. If this court had really come to the conclusion that on the death of a person against whom proceedings under section 543 had been initiated such proceedings could not be proceeded against his legal representatives, the final order would not have been what was actually made therein. The true doctrine is that whenever you find that the deceased person has by his wrong diverted either property or the proceeds of the property belonging to someone else into his own estate, you can then have recourse to that estate through his legal representative when he is dead, to recover it . The legal representative, of course, would not be liable for any sum beyond the value of the estate of the deceased in his hands. The liability arising und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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