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TMI Blog1999 (2) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 and 11(19) of the Companies (Court) Rules, 1959 ( the Rules ). 2. Before we proceed to discuss the case on merits, let us have a quick glance at the relevant provisions of the Act invoked by the petitioner in this petition, namely, sections 541, 542, 543, 406 and 402( f ) of the Act, which are reproduced as under : "541. Liability where proper accounts not kept. (1) Where the 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 purposes 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with interest at such rate as the court thinks 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 398. 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. A reading of section 541 of the Act makes it clear that it deals with the liability where proper accounts were not kept. These provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sharma were taken on the board of directors by an order of this Court dated 21-3-1974. Shri R.K. Sharma died on 11-4-1990, and his legal heirs were brought on record. In C.A. No. 399 of 1990, vide order dated 12-2-1993, this Court constituted the board of directors so as to include one person from each side besides a nominee of this Court. The said board was directed to transmit the shares of the late Shri Damodar Dass to the present four petitioners and the shares of the late Shri R.K. Sharma were transmitted to the present respondent Nos. 1 and 2. The 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 the late Shri R.K. Sharma lost his majority. He, however, did not agree to leave the control and manage-ment 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. The late Shri R.K. Sharma abused his fiduciary position as the trustee as well as son-in-law of the late Shri Damodar Dass. The grand father of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took preliminary objections regarding the maintainability of this petition. According to him, the provisions of sections 541 to 543 cannot be invoked by filing a separate petition. Moreover, only when a company is being wound up the liability of not filing the proper books of 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. The Mehrauli Dehat Transport Company (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 the provisions of section 541 or for that matter of section 543 are not attracted. 7. 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 the late Shri Damodar Dass, predecessor-in-interest of the petitioner and not at 18, Mehrauli, New Delhi. Respondent No. 1 denied that the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application to be impleaded and allowed to contest because if the allegations relating to misfeasance, mis-application of funds, breach of trust are prima facie found true, then an application under section 543 would be moved for getting necessary relief for assessment of damages. It was in this background that the heirs of the deceased wanted to be impleaded as parties. According to them, if an order under section 402 of the Act 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 facie it is found that any such misconduct as mentioned in section 543 is committed, then, an application seeking relief as contemplated in the said provision can be made. Such a relief can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 543 can be given. Whereas our own High Court in the case of Rajendra Nath Bhaskar ( supra ) opined that it is only after a prima facie view is formed in a petition under section 397/398 that a separate application under section 543 can be filed. For the reasoning given by our own High Court the objection raised by the respondent in this regard is without force. 12. So far as the question of pendency of winding up petition is concerned, that will be heard in C.P. No. 91 of 1980. But if it is pointed out that the assets of the company are in the 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 on the decision of the Supreme Court in the case of Smt. Abhilash Vinodkumar Jain v. Cox Kings (India) Ltd. [1995] 84 Comp. Cas. 28/4 SCL 167. While interpreting the statute in regard to penal provision, the Apex Court observed that (page 36): "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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eking a restraint order which was declined, vide order dated 12-5-1995, and the Court gave the clarification mentioned above. Therefore, it cannot be said that the petition as such is not maintainable because the company is not running. On the contrary, a perusal of the Company Court orders passed on 27-4-1995, in C.A. No. 1140 of 1994 in C.P. No. 91 of 1980 and on C.A. No. 372 of 1995 in C.P. No. 91 of 1980, proves the defence of respondent No. 1 to be without merits. It has, however, come on record that the late Shri R.K. Sharma, father of 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. The 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady observed that Shri J.N. Bakshi had not presented the correct facts in his affidavit. Even respondent No. 2, Shri Phool Kumar has admitted that both portions of 18, Mehrauli, New Delhi, were under the tenancy of the company belonging to Shri Ram Dayal and Shri J.N. Bakshi. The entire premises bearing No. 18, Mehrauli, New Delhi, is under the tenancy of the company. 16. For the reasons stated above, I find that the petition by the petitioner seeking restoration of the property of the company is maintainable. Accordingly, order has to be passed that respondent No. 1 should restore the assets of the company but before doing so the petitioner has to get clarification from the Company Judge in C.P. No. 91 of 1980, because in that petition dispossession of the late Shri R.K. Sharma was stayed till the disposal of that petition. Since respondent No. 1 is claiming through the late Shri R.K. Sharma hence, to my mind, that order will apply in his case also till vacated or clarified by the Court in C.P. No. 91 of 1980. Respondent No. 1 shall not use this premises for commercial purpose. He can use it only for residential purpose till the petitioners get the above clarification or vaca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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