9911796707
TMI Blog1998 (3) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... under creditors' voluntary winding up by a special resolution passed on March 24, 1980. Shri Gopal Krishan Monga, advocate, was appointed as its voluntary liquidator. The Registrar of Companies, Jalandhar, informed the official liquidator that certain irregularities in liquidation proceedings under the voluntary liquidator were being committed and a petition under section 440 read with section 515 of the Companies Act, 1956, for removal of the voluntary liquidator and for winding up of the company should be filed in the High Court. Consequently, a company petition, being Company Petition No. 24 of 1986, was filed in this regard. The Hon'ble company judge being satisfied with regard to the averments made in the report of the official liquidator, vide order dated September 8, 1988, directed the removal of the voluntary liquidator and directed the winding up of the company with consequential direction. The relevant extract of the order reads as under : "Consequently, I allow this petition and direct the winding up of the company respondent No. 1 under the supervision of this court and appoint the official liquidator attached to this court as the official liquidator by directing rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor and directors of the company were impleaded as respondents to this petition. As one of the directors, Sardara Singh, died during the pendency of the petition, his name was directed to be deleted, vide order dated March 18, 1993. In these circumstances, the official liquidator on the strength of the provisions of section 543 of the Companies Act, 1956, prayed for a direction in the form of recovery to restore the amount lost by the company due to the aforestated acts of omission and commission of the respondents-directors. All the respondents were served and a common reply was filed on behalf of respondents Nos. 1, 2, 4 to 6. The liability of the respondents was disputed. It was stated that the respondents cannot be called upon to restore the amount under the aforestated provisions as no misfeasance or negligence was attributable to them. It was stated that the pronotes placed on record were not genuine ones. On the merits, it was stated that Mr. Gopal Krishan Monga, the voluntary liquidator, had informed the official liquidator that the original pronotes had been eaten up by ants and the company had prepared fresh ones mentioning the old dates. Great emphasis has been placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d passed an order of payment directing the respondents to restore the amount to the company. However, these proceedings were set aside and as noticed above, the respondents were given opportunity to lead their evidence which they led as afore-indicated. P.W.-1 in his statement stated that after his appointment as official liquidator of the company in furtherance to the order of this court dated September 8, 1988, he had taken into custody the record of the company and the voluntary liquidator had submitted his affidavit dated September 10, 1991, exhibit P.W.-1/36 stating therein that the pronotes delivered by him in court were in the same condition as were handed over to him and also stated that the records were handed over to him by the directors after 2 years of his appointment as voluntary liquidator in the year 1980, and the pronotes had got barred by time before the records were received by him. The pronotes which are the subject-matter of the present petition are exhibit P.W.-7 to P.W.-1/33. They are the original pronotes and it needs to be pointed out that all these pronotes had been denied by the respondents. Exhibit P.W.-1/1 is the letter dated July 15, 1989, written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iquidator by the company. It is clear that money was due and payable on demand on the basis of these pronotes which had become barred by time due to inaction on the part of the respondents. The records of the company including these pronotes were handed over by the respondents who were the erstwhile directors of the company to the voluntary liquidator in the year 1982. Thereafter, the records were handed over to the official liquidator after he was so appointed by the company court in the year 1989 by the voluntary liquidator. Having looked into these records and the statement of affairs filed by the directors of the company, the official liquidator exchanged some correspondence with the voluntary liquidator to verify facts. Once the facts became clear to the official liquidator the present petition for restoration of the amount of the company under section 543 of the Companies Act was filed in the month of November, 1992. In the entire reply, there is no justification or explanation rendered by the respondents to show as to why the amount due on these pronotes to the company were not recovered within the period of limitation and even otherwise what efforts or steps were made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator had handed over to the official liquidator, vide exhibit P.W.-1/1. The discrepancy in regard to the number of pronotes is totally immaterial for two reasons which are apparent from the record. Firstly, 27 pronotes stated in P.W.-1/1, P.W.-1/2 and P.W.-1/3 are traceable in exhibit R.W.-1/2. For example, the names of Buta Singh, Mohinder Singh and Manjit Singh appear in both these documents along with other creditors of the company. Secondly, the 14 pronotes were handed over to the voluntary liquidator and as is clear from the statement of R.W.-1 he was also possessing records of the company and while handing over the complete records of the company he in turn had handed over 27 pronotes in all. For both these reasons, the dent sought to be created by learned counsel for the respondents in the functioning of the official liquidator is not well founded at all. The pronotes have been exhibited in accordance with law because the records were handed over by the respondents themselves to the voluntary liquidator who, in turn handed over the records to the official liquidator. In addition to this while providing a clarification as aforenoted, the voluntary liquidator had clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at stand because it is for them to prove that the alleged forgery was executed in exhibit P.W.-1/28 in so far as the signatures of Karam Singh were concerned, who was admittedly at the relevant time the managing director of the company and as such was responsible for the conduct of the business of the company. The pronotes relate to 1975-76, and a special resolution for the voluntary winding up of the company was passed on March 24, 1980, the date which would be relevant for such purpose. As such, it is clear beyond doubt that the debts had become barred by time even before the passing of the resolution for voluntary winding up of the company. No explanation has been tendered as to why action was not taken by the directors to recover the amount in time. The respondents have not even stated in their reply nor in evidence that they were not responsible for the conduct of the business of the company. Not even a suggestion was put to the official liquidator in this regard. Once they are responsible for the conduct of the business of the company then they owe an obligation to the company to recover its debts within the prescribed period of limitation. At least they were expected to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in P.K. Nedungadi v. Malayalee Bank Ltd., AIR 1971 SC 829 ; [1972] 42 Comp Cas 120 , wherein it was observed that misfeasance and breach of trust include breach of duty to the company resulting directly in misapplication or loss of the company's assets. Allegations or proof of fraud are not essential. It is immaterial that the offender is also criminally liable. Breach of such duty makes him liable to repay or restore the company's loss. From the aforesaid definition, it is clear that if the company suffers any loss on account of breach of duty on the part of a director, he is liable to reimburse the company to the extent of such loss. In the present case, the breach of duty on the part of the respondents is apparent from the facts of the case. Therefore, they are liable to reimburse the company to the tune of Rs. 4,056.77. The petitioner has further claimed interest on the said amount from the date of filing of the petition till the date of realisation of the amount at the rate of 12 per cent. per annum. In my view, this claim of the petitioner is justified." The case put forward by the official liquidator, petitioner herein, is well supported by the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has claimed interest on the amount payable to the company. These are commercial transactions and, therefore, some interest must be paid, may not be the interest at the rate of 18 per cent. on all pronotes. In these circumstances, I am of the view that the interests of justice would be met if the respondents are directed to pay a nominal rate of interest on the entire amount, i.e., interest at the rate of 12 per cent. from the date of institution of the petition till realisation. Accordingly, issues Nos. 1 and 2 are decided in favour of the petitioner against the defendants while issue No. 4 is decided against the respondents in favour of the petitioner. Issue No. 3: The submission of learned counsel for the respondent is that the present claim filed by the official liquidator is barred by time. The contention is that admittedly the company had passed a resolution for voluntary winding up on March 24, 1980, while the present claim has been filed on November 25, 1992. Under the provisions of section 543(2) of the Companies Act, the claim could be filed within three years from March 24, 1980, and as such the claim is barred by time. In order to find the correct precept which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly indicated in regard to the various stages of proceedings before the court of competent jurisdiction. In other words, the distinction is prescribed in regard to the scope of a petition, limitation of final stage ; petition of the official liquidator and the final dissolution of the company and the nature of the directions which could be passed by the company court under the provisions of this Act. In this background of the legislative scheme behind these provisions now reference should be made to the provisions of section 543 of the Companies Act with the interpretation of which the court is concerned. Section 543 of the Companies Act reads as under : " S. 543. Power of court to assess damages against delinquent directors, etc. (1) If in the course of winding up a company, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, manager, liquidator or officer of the company ( a )has misapplied, or retained, or become liable or accountable for, any money or property of the company ; or ( b )has been guilty of any misfeasance or breach of trust in relation to the company ; the court may, on the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied of such averments in the petition, an order against the erring person within the contemplation of section 543(1) for restoration of assets of the company could be passed. The acts of misfeasance or mismanagement or acts of breach of trust may result from any omission and/or commission as understood in its common parlance. Once it is established that misfeasance was attributable to such person, that would be the foundation for passing such an order. The reading of section 543(2) of the Companies Act makes it evident that the two most important expressions in the said sub-section are "the date of the order for winding up" and "whichever is longer". In other words, an application under sub-section (1) of section 543 can be filed within a period of five years from the date of order of winding up or the first appointment of the official liquidator, in the winding up or the date of misapplication, misfeasance, breach of trust, as the case may be, whichever is longer. In other words, the period of limitation would commence from the last date on which any of the above acts is traceable. The remedies available under section 543 of the Companies Act are in addition to and not in deroga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Official Liquidator v. Mathura Prasad, AIR 1963 All 55. Another way of examining this matter is to refer to the point of time when the cause of action arises. The cause of action could arise on the basis of any of the classes referred to in subsection (2) read with sub-section (1) of section 543. The purpose of the Legislature in providing an alternate basis for giving the cause of action is clear by the use of the expression "or" in sub-section (2). In other words, any one of the defined terms could give rise to an independent cause of action from where the limitation would be reckoned and the larger period so computed shall be the limitation for that purpose. In this regard, reference can be made to the judgment of the Delhi High Court in Official Liquidator, Milan Chit Fund and Finance P. Ltd. v. Joginder Singh Kohli [1978] 48 Comp Cas 357 . The relevant portion reads as under (headnote): "It would be safe to infer from section 543(2) that the right to apply would accrue when the order for winding up is made. The further right to apply would accrue as and when disclosures are made in the course of winding up which may enable the official liquidator or any cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed, in the case of jagdish Parshad Gupta v. Youngmen Benefit Chit Fund (P) Ltd. [1981] 51 Comp Cas 201 (Delhi) which reads as under (at pages 202, 204) : "Section 526(1) empowers the liquidator, subject to any restriction imposed by the court, to exercise all its powers without the sanction or intervention of the court in the same manner as if the company were to be wound up altogether voluntarily. Sub-section (2) of section 526, however, lays down that except as provided in sub-section (1) any order made by the court for a winding up subject to the supervision of the court shall, for all purposes.... be deemed to be an order of the court for winding up of the company by the court (emphasis supplied). It is apparent that sub-section (2) of section 526 creates a legal fiction to the effect that an order passed for winding up subject to the supervision of the court is to be deemed to be an order for the winding up of the company by the court. All the consequences, therefore, which flow from an order of the winding up of the company by the court must necessarily enure to such company which is being wound up subject to the supervision of the court... Here, in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisional liquidator may not be able to discover the acts of misfeasance at all in fact it is not his primary duty to discover such acts of misfeasance. To interpret the section as meaning that limitation should start even from the first appointment of the provisional liquidator would really defeat the purpose of the section. The object underlying this change could be subserved and promoted only by the construction we are placing on the section, viz., that the commencement of the period of limitation is the date of the appointment of the regular liquidator under section 175(1) and not of the provisional liquidator under section 175(2)." This view was also followed by the Andhra Pradesh High Court in Official Liquidator, High Court of Andhra Pradesh v. Chepur Ratnakar Rao [1992] 9 Corpt. L.A. 67 (AP). It may also be mentioned here that the judgment of the Madras High Court in K.N. Srinivasa Iyer v. Joint Official Liquidators of the Nurani Union Bank Ltd. (In liquidation) [1963] 33 Comp Cas 735 also took the view that the appointment of the liquidator in winding up means the date of the appointment of the official liquidator and not the provisional liquidator. Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les to the facts of the present case, the order of winding up on the report of the official liquidator is in regard to the provisions of section 484 of the Companies Act and the petition filed under section 440 of the Companies Act read with section 515 of the Act. The court vide its order dated September 8, 1988, had ordered the winding up of the company and appointed the official liquidator attached to this court as the official liquidator of the company. Thus, the period of limitation of five years as postulated under section 543(1) of the Companies Act shall commence from September 8, 1988, and as such the petition has been filed in time, i.e., on November 25, 1992. This, however, would be in addition to the plea of learned counsel appearing for the official liquidator at a subsequent date that the act of misfeasance and omission and commission or breach of trust of the respondent, came to the notice of the official liquidator only in the year 1991, i.e., after entering into the prolonged correspondence. The voluntary liquidator had given the complete information including the affidavit exhibit P.W.-1/36. As such the period of five years would have to be computed from that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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