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TMI Blog2010 (12) TMI 1059X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence the judge’s summons and the points of claim do not disclose any cause of action against the applicant. Continuance of such proceeding would be an abuse of the process of law and court. Therefore, on this solitary ground would allow this application. The above misfeasance proceedings are struck off against the applicant. Although refrain from making any comment regarding the pleadings concerning the other respondents, save and except what is made above direct the official liquidator to get the pleadings drafted in future proceedings in accordance with the observations above. - C.A. NOS. 14 OF 2008 AND 311 OF 2009 - - - Dated:- 7-12-2010 - I.P. MUKERJI, J. P.C Sen for the Applicant. A.K. Dhandhania and Biswapati Das for the Respondent. JUDGMENT Background : 1. This is an application by one ex-director of the company in liquidation. It is made after a misfeasance proceeding has been started against him. He is respondent No. 4 in the misfeasance proceedings which is numbered as C.A. No. 14 of 2008. He submits that the proceeding against him be dropped. 2. The grounds are two. The first is that the summons by which the misfeasance proceeding was started and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany (in liquidation) and are jointly and severally guilty of misfeasance . . ." Thereafter, each and every alleged loss of the company has been attributed to the directors jointly. Thereafter, orders are prayed for, for enquiry and accounts contribution and compensation against the directors jointly. 8. Points of claim were filed by the official liquidator where the above charges were replicated without any additional details. Arguments : 9. The first point raised by the applicant is that the summons and the points of claim do not disclose any cause of action against the applicant. Principles of Order 7, rule 11 of the Code of Civil Procedure, 1908, are invoked. It is said that as no cause of action is disclosed in the above pleadings, the proceeding against the applicant has to be dismissed. It is submitted that the allegation against the applicant had to be made separately, showing in detail, how the applicant as director had caused loss to the company. Further, even if the allegations arising out of such alleged loss were made against the directors jointly then it had to be pleaded with particulars how the directors acting jointly had caused loss to the company. 10. Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He has also repeated this fact in paragraph 7 of the said affidavit. There is no proper denial of this position in the affidavit-in-opposition, apart from a bare denial. Discussion : 16. The position of the directors of the company is variously described. They are trustees of the company. They are also its agents. If they draw salary, they are its servants as well. The board of directors take policy decisions for the company and administer it. But, I am yet to find a proposition of law which says that if any loss is caused to the company all directors are automatically jointly and severally liable. The Supreme Court decision in P.K. Nedungadi s case (supra), states the following in paragraph 5 (page 124) : "Under section 235 of the Indian Companies Act, 1913, which was in force at the material time, the court has been given the power to assess damages against the delinquent directors, etc. If the money or the property of the company has been misapplied or there has been misfeasance or breach of trust in relation to the company by a director, an officer or other person mentioned in the section the court, after examining the matter, can compel him to repay or restore the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r director will be liable accordingly. 19. The Supreme Court was dealing with the provisions of the Indian Companies Act, 1913. Section 235 of the Act corresponded with section 543 of the present Act, more or less. The part of the judgment reproduced above specifically states that misfeasance proceedings lie if money or property of the company was misappropriated or misapplied by a director or directors or an officer or officers. Therefore, the condition precedent for the court to exercise jurisdiction for misfeasance is loss of money or property of the company proved to be caused by these officers or any of them or some of them. The Supreme Court does not say that for any loss to a company in liquidation, there is a presumption of misappropriation or misapplication by the directors or officers or any director or any officer or some of them. On the contrary the said authorities say that if such case is made out it would be the duty of the court to determine whether that particular officer had acted reasonably and honestly. However, an observation in paragraph 40 of Official Liquidator, Supreme Bank Ltd. s case (supra), is of great importance and provides an exception to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of law. Hence frivolous claims not disclosing any cause of action should be nipped in the bud. He nipped the proceeding before him in the bud, on that ground. But I notice upon careful examination of the judgment that what were the exact pleadings in that case have not been narrated. The hon ble judge only observed that the points of claim were based on the auditor s report and attributed the loss of the company to the applicants before him. I have not been shown the pleadings in that case. So I do not know whether the points of claim in that case and this are similar. 24. Now I come back to this case. 25. Now let me examine the pleadings in this case. All loss of the company is attributable to the respondents in the misfeasance proceedings jointly. 26. Are the pleadings so defective that they do not disclose any cause of action ? 27. The Code of Civil Procedure, 1908, says that if the plaint is rejected on the ground that it does not disclose a cause of action, such a decision is a decree (see the definition of decree, in the Code). 28. Order 6, rule 4 of the Code says that where, inter alia, fraud and willful default are alleged particulars have to be furnished. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company to file with the Registrar of Companies a return of such resignation in a prescribed format within 30 days of such resignation. The format prescribed by the Central Government is Form No. 32. That was filed within those thirty days on January 22, 1996, though it appears that it was taken on record by the Registrar of Companies on March 30, 2000. In the affidavit of the official liquidator there is no specific denial of this. While arguing the matter, Mr. Dhandhania doubted the date of resignation of the applicant. Now, the question is that section 303 also provides for prosecution for late filing of Form No.32. Assuming Mr. Dhandhania s argument is correct and Form No. 32 was filed sometime just before March 30, 2000, why did the Central Government not prosecute the applicant ? Moreover, when such fact of resignation is alleged by the applicant, in my opinion, the official liquidator who has custody of all the records of the company ought to have shown association of the applicant with the company after December 28, 1995, to rebut the allegation. Nothing has been shown to this effect. Therefore, the resignation of the applicant on December 28, 1995, is accepted by this co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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