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TMI Blog1984 (5) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... appa, S/o. Karibassappa, Landlord, Poddamagadi, Mayakonda Post. 3.Sri K. S. Chandrappa, S/o. K. S. Mahadevappa, Kasipura Village, Davanagere Taluk. The facts which are required to be stated and extracted in the report under consideration are as follows: In Company Petition No. 7 of 1981, this court by an order dated April 15, 1981, directed winding up M/s. Myleaf Tobacco Development Co. P. Ltd. on a creditor's petition. That order was made ex parte the respondent company or any other creditors, after due publication in the newspaper of the filing of the petition for winding up. The winding up order was received by the official liquidator on April 28, 1982. In pursuance of the provisions contained in section 454 of the Act, the ex-directors of the company in liquidation were required to submit to the official liquidator a statement of the affairs of the company in the prescribed form verified by an affidavit and containing the required particulars. The statement ought to have been filed within 21 days from the date of the winding up order or within such extended time not exceeding three months from that date as the official liquidator or the court may, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex-directors. Basappa and K. S. Chandrappa, the two ex-directors, entered their appearance through counsel and filed objections to the report on November 17, 1982. In the objection statement they have stated that they were not actually in charge of the day-to-day administration of the company and that D.L. Batcheler, who was the managing director and the chairman of the company, was entrusted with the day-to-day administration of the company in liquidation. They have also asserted that they resigned from their positions as directors with effect from December 1, 1980, and filed Form No. 32 with the Registrar of Companies in Karnataka to that effect. They also asserted that D.L. Batcheler had left the country without any intimation to the Board and without securing its consent and without leaving any information about his whereabouts In these circumstances, they co-operated with the official liquidator who had been directed to take charge of the company as they had no option but to exert themselves in order to see what they could do to provide the information required by the official liquidator. They have also asserted that the departure of Batcheler has exposed the company to serio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is that the limitation that can be read into the exercising of power by the liquidator in respect of classes of persons enumerated in clauses ( b ), ( c ) and ( d ) of sub-section (2) of section 454 of the Act is not available to the persons covered by sub-clause ( a ) of the said sub-section. In order to appreciate the contention, it is useful to extract sub-sections (1) and (2) of section 454 of the Act which read as follows: "454. Statement of affairs to be made to official liquidator. (1) Where the court has made a winding up order or appointed the official liquidator as provisional liquidator, unless the court in its discretion otherwise orders, there shall be made out and submitted to the official liquidator a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely: ( a )the assets of the company, stating separately the cash balance in hand and at the bank, if any, and the negotiable securities, if any, held by the company; ( b )its debts and liabilities; ( c )the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p order as per sub-section (8) of section 454 of the Act) were required to file the statement of affairs. He reached that conclusion though in an earlier case he had taken a more liberal view that one year limitation ought to be extended to persons mentioned in clause ( a ) of sub-section (2) of section 454 of the Act. In that circumstance, he directed some of the directors who had ceased to be directors some five or six years before the relevant-date to make out, a statement of affairs. One such director appealed against that order to a Division Bench of that High Court (see Devinder Kishore Mehra v. Official Liquidator [1980] 50 Comp. Cas. 699). Agreeing with the decision of the Calcutta High Court in the case of Sarkar Estates ( P. ) Ltd. v. Gostho Behari Sarkar [1967] ILR 1967(1) Cal. 60, the Division Bench of the Delhi High Court came to the following conclusions (headnote): "The statement of affairs postulated by section 454 of the Companies Act, 1956, is the very basis of winding-up proceedings and it is not a proceeding which can be called a fact-finding enquiry or a fishing enquiry as it is to obtain as full an information as possible, not piecemeal informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reached by the Division Bench of the Delhi High Court, I must now examine the facts of the case as pleaded and supported by separate affidavits of the ex-directors and a former employee of the company. Sri A. N. Jayaram, learned counsel for ex-directors, does not dispute that the two former directors were "officers" of the company. He only claims that they were nominal directors who were not actively associated with the day-to-day affairs of the company in liquidation. In that position it is claimed that these former directors are not in a position to file a proper statement of affairs. He firmly placed reliance on the observations and conclusions of the Division Bench of the Delhi High Court which have been extracted earlier in the course of this order. There is also no dispute that the official liquidator has conducted some preliminary enquiry before moving this court by the report under consideration. It is also not in dispute that the former managing director is not available in the country. Since when he is not available in the country is left blissfully vague in the affidavits of the directors. The court is compelled to draw an inference from the material placed before it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not paid his salaries. He has not disclosed when or in what month and year he ceased to be an employee of the company. Chandrappa and Basappa have repeatedly asserted that they are simple agriculturists who were at all times ignorant of the affairs of the company and pass the entire blame of mismanagement on to Batcheler, the managing director. All the affidavits conceal more than what they reveal. One has to be wary and cautious in accepting such affidavits. On receiving the notices from the official liquidator, Chandrappa and Basappa caused a reply to be issued through counsel baldly denying their legal liability to file the statement of affairs. After meeting the representative of the official liquidator, they have shown some diligence and change of heart. They located the ex-manager, Krishna Murthy, and recovered from him certain books and records of the company in liquidation and handed them over to the official liquidator with a covering letter from their counsel. The list attached to that letter and a copy of that letter is at annexure "B" to the statement of objections. In the letter they have taken the stand that from the available records and books, they cannot fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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