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TMI Blog1999 (2) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... (Court) Rules, 1959 ('the Rules'). 2. Before we proceed to discuss the case on merits, let's have quick glance to the relevant provisions of the Act invoked by the petitioner in this petition, namely, sections 541, 542, 543, 406 and 402( f ), which are reproduced as under: "541. Liability where proper accounts not kept. (1) Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year. (2) For the purpose of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not been kept ( a )such books or accounts as are necessary to exhibit and explain the transactions and financial posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks just. 406. Application of sections 539 to 544 to proceedings under sections 397 and 398. In relation to an application under section 397 or 398, sections 539 to 544, both inclusive, shall apply In the form set forth in Schedule XI. 402. Powers of Company Law Board on application under section 397 or 3 98. Without prejudice to the generality of the powers of the Company Law Board under section 397 or 398, any order under either section may provide for ( a ) to( e )****** ( f ) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;" 3. Reading of section 541 makes it clear that it deals with the liability where proper accounts were not kept. These provisions are attracted where a company is to be wound up and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 and his legal heirs were brought on record. In CA No. 3 99 of 1990 vide order dated 12-2-1993 this Court constituted board of directors so as to include one person from each side beside a nominee of this Court. The said Board was directed to transmit the shares of Late Shri Damodar Dass to the present four petitioners and shares of Late Shri R.K. Sharma were transmitted to present respondents 1 and 2. Shares of Smt. Sharda Bhardwaj, as per the Resolution of the Board, were not allowed to be transferred in the Register of Members, on objection by respondent No. 1. In April, 1979 Smt. Chanderwati sold her shares to Smt. Sharda Bhardwaj and thus Late Shri R.K Sharma lost his majority. He, however, did not agree to leave the control and management of the company. He had a scheme to usurp all the assets of the company such as bus permits, buses as well as tenancy of the company. Late Shri R.K. Sharma abused his fiduciary position as trustee as well as son-in-law of Late Shri Damodar Dass. The grandfather of the petitioner being an old man was unable to do much business hence he left it to his son-in-law Late Shri R.K Sharma. The said Shri R.K Sharma thereby abused his fiduciary p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account could be drawn. Even otherwise since there does not exist any running concern no question of winding up would arise nor any question of punishment. Mehrauli Dehat Transport Co. (P.) Ltd. stopped functioning since 1988. It is no more in existence. Therefore, it has no creditors and in the absence of there being any creditor or any other person provisions of section 541 or for that matter of section 543 are not attracted. 6. In the absence of any business being run by the company this Court cannot regulate the affairs of the company. The petition is otherwise barred by time because it has been filed after seven years. The accounts of the company had always been maintained at the registered office of the company at Chirag Delhi under the control of Late Shri Damodar Dass, predecessor-in-interest of the petitioner and not at 18, Mehrauli, New Delhi. Respondent No. 1 denied that the entire ground floor of 18, Mehrauli, New Delhi was under the tenancy of the company. It was only a portion bearing No. 18/4, Mehrauli, New Delhi which was under the tenancy of the company. According to him portion belonging to Shri J.N. Bakshi was in the personal tenancy of Late Shri R.K. Sharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted to be impleaded as parties. According to them if an order under section 402 was passed for the purchase of shares as prayed, then such an order would affect the heirs and legal representatives of the deceased. It was urged that before any such order could be passed by the Court, the heirs and legal representatives of the deceased may be heard and the question may be considered and decided in the presence of the heirs and legal representatives of the deceased. The learned Company Judge rejected the application for bringing the legal heirs on record. But on appeal the Division Bench held that if, during the winding up proceedings, prima facieit is found that any such misconduct as mentioned in section 543 is committed, then, an application seeking relief is contemplated in the said provision can be made. Such a relief can be sought against the heirs and legal representatives of the deceased, director or other officer as mentioned in the said provision. The heirs and legal representatives can, however, be heard in the absence of an application with necessary prayer. It was further observed that "The existence of a prima facie case against the delinquent director, etc. in a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of pendency of winding up petition is concerned, that will be heard in CP. No. 91 of 1980. But if it is pointed out that assets of the company are in possession of someone else who is not supposed to have it, then a separate petition is maintainable whereby the Court can direct such a person to return the assets of the company. In this regard, reliance can be placed to the decision of the Supreme Court in the case of Smt. Abhilash Vinodkumar Jain v. Cox Kings (India) Ltd [1995] 84 Comp. Cas. 28. While interpreting the statute in regard to penal provision, the Apex Court observed that "the heirs and legal representatives of a deceased employee or officer in possession of the company's property would restore it back to the company. The Court would not be powerless to declare the wrongful withholding of the property of the company to be an offence. It is immaterial whether wrongful withholding is done by the employee or officer or the past-employee or past officer or the heirs of deceased employee or the officer or anyone claiming their right of occupancy under such an employee or an officer. It cannot be ignored that the legal heirs or representatives in possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord that Late Shri R.K. Sharma, father of the respondent No. 1 was permitted to stay and live only in the premises in question till the disposal of the main petition, i.e., the portion of Shri J.N. Bakshi. Late Shri R.K. Sharma was, however, restrained to carry on commercial activity. It would be difficult in view of the above circumstances to hold that the company is not in existence or for that matter to hold that respondent No. 1 can withhold the assets of the company particularly when the new board of directors have already resolved that the tenanted premises of the company be restored to it. Therefore, I find no merits in the defence of respondent No. 1 in this regard. The other grounds taken by the respondent No. 1, namely, the petition is barred by time, nothing has been pleaded nor the counsel for respondent No. 1 could point out how the petition is barred by time. Even otherwise on this point the counsel for respondent No. 1 did not address any arguments. On merits also respondent No. 1 has not been able to say that he has a legal right over this property, i.e., one half portion of 18, Mehrauli, New Delhi belonging to Mr. J.N. Bakshi, the landlord. 11. So far as t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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