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TMI Blog2009 (10) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, after assuming charge by the Official Liquidator, it was found on verification that the relevant Books of Account and other records subsequent to the period 1982 were not handed over to the Official Liquidator, despite the many a request made in this regard. However, in connection with the inspection done by the departmental authorities of the Sales Tax Department in some other sister-concern and other establishments, it was brought to light that the Company in liquidation was doing business even after 1982, till 1988. By virtue of the said business stated as conducted by the Company and the substantial loss resulted in this regard, the Official Liquidator filed a petition under section 543 of the Companies Act in respect of 'misfeasance' and 'breach of trust', based on Ext. A1 report submitted by one Chartered Accountant by name T.N. Radhakrishnan (engaged by the Official Liquidator, after obtaining necessary permission from the Company Court) claiming a sum of Rs. 77,87,939 with interest thereon. 3. On entering appearance, the respondents 1 and 2, who are the appellants before this Court contended that they were not the Directors for the whole period; that there was absolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide, the despite many an opportunity given by this Court). However, since no serious objection is made from the part of the Official Liquidator as to the acquittal in the above complaint, for non-production of the accounts, the very same reasoning is liable to be adopted in the present case as well; submits the learned counsel for the appellants. 8. It is revealed from the discussion made by the learned Company Judge that the report submitted by the Chartered Accountant by name T.N. Radhakrishnan, which forms the basis for mulcting the liability upon the appellants, was prepared solely based on the sales tax assessment records. It is also revealed that no other document was made available to the said Chartered Accountant before arriving at the 'profit margin' as well, while fixing the extent of liability, that was sought to be realised from the appellants. After analysing the materials on record, the Company Court held that even after 1982, the Company was pursuing its business till 1987-88; that the appellants had failed to produce the relevant documents and that when the Company was doing the business, it was for the Company to produce the books of account, registers and to esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales tax authorities, the failure of which has resulted in the 'best judgment' order passed by the said authorities, adding substantial amounts towards the deemed turnover in respect of the period in question, which in turn has attributed to the alleged loss to the Company under liquidation. As stated already, it is the specific case of the appellants that, after the winding up order passed by this Court and after taking charge by the Official Liquidator, it was the duty of the Official Liquidator to have contested the matter before the sales tax authorities as well. Though there is a contention for the respondents that the Official Liquidator has already issued notice to the Directors, who are the appellants herein, to produce the books of account and to challenge the proceedings pursued by the sales tax authorities, absolutely no material/proof has been produced before this Court to show that any such notice was given to the Directors making them aware of the necessity to file the appeals, which is more so, when the Directors have already made their position clear that they were not in possession of the records. 11. The sequence of events is very much discernible from the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port No. 1 in report No. 4 with a prayer to set aside the ex parte assessment order passed by the Sales Tax Officer-I, III Circle, Kozhikode for the year 1985-86 and to direct the Sales Tax Authorities to prefer their claim before the Official Liquidator with respect to the dues prior to winding up. 12. Paragraph No. 4 of the very same report reveals that the stand taken by the Official Liquidator was to the effect that the demand made by the sales tax authorities in respect of the years 1973-74 and 1974-75 would not stand as per the Board Circulars bearing No. C-4-39808/76 dated 29-1-1979 and hence that the amount of Rs. 1,97,511.70 claimed by the Sales Tax Officer was liable to be rejected. However, observing that the assets of the Company under liquidation would not even be sufficient to pay off the secured creditor and the workmen in full, despite the lapses (factual as well as legal) on the part of the sales tax authorities as mentioned above, the Official Liquidator, as stated in paragraph No. 7 of the said report, had sought for permission of the Company Court to 'admit' the amount of Rs. 11,56,897.03 claimed by the Sales Tax Department in respect of the years concerned, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence in this regard, no such finding could have been rendered, merely on the surmises and conjectures. The manner in which the proceedings have been finalised by the Company Court, is very much discernible from the penultimate paragraph of the impugned verdict, wherein it has been observed as follows : "When the Company was wilfully avoiding the registers without producing before the Official Liquidator, an element of guesswork has to be adopted in fixing the income on the basis of the available documents." But whether the Company was wilfully avoiding production of registers is not seen properly considered, particularly in view of the specific case of the appellants that they were not in a position to produce those records, which were stated as stealthily removed by the employees and for the very same reason, the Company Court had acquitted the very same Directors in the relevant proceedings filed by the Official Liquidator seeking to prosecute them for non-production of the records; the finality of which verdict is not seen disputed from the part of the Official Liquidator. That apart, the proceedings under section 543 of the Companies Act is rather 'quasi-criminal' in nature, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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