9911796707
TMI Blog2016 (8) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... f the State Financial Corporation Act, 1951 on 25-11-2003. It is not in dispute that the registered office of the company in liquidation was the factory premises i.e. SP-9-B Khushkhera Industrial Area Alwar, where the books of accounts and other record of the company were to be kept as required by law. In the circumstances it is not incredible, as stated by the respondent directors that the books of accounts of the respondent company were at the registered office of the company. In the circumstances it cannot be discounted altogether that the respondent directors did not have the possession of the books of accounts and other record subsequent to possession being taken over by RIICO on 25-11-2003. As far as the issue of non filing of statutory returns by the respondent directors qua affairs of the company is concerned, I am of the considered view that this deficiency would be covered under Section 541 of the Act of 1956 and not be a matter of enquiry under Section 543 of the Act of 1956, which is in nature tortuous liability of the directors responsible for misfeasance, malfeasance or breach of trust. Consequently issues 1 to 4 are decided against the official liquidator. Guil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O.L. is maintainable in the absence of any specific allegations against the Ex-Directors/respondents ? - Held that:- No case of misfeasance, malfeasance or breach of trust is made out against the respondents Pawan Kumar Lath and Bimal Kumar Lath Ex-Directors of the company in liquidation. Consequently issue No.7 is decided in favour of the respondent directors and against the Official Liquidator. - S.B. Company Application No.52/2010 In (S.B. Company Petition No.4/1999) - - - Dated:- 8-7-2016 - MR. ALOK SHARMA, J. For The Petitioner : Ms. Sonal Singh, For The Respondent : Mr. Dinesh Bishnoi The matter has come up on an application under Section 543 of the Companies Act 1956 (hereinafter the Act of 1956 ). M/s. Lath Steels Private Limited (in liquidation) incorporated on 25-6-1996 in Rajasthan (Registration certificate No.12246) with its registered office at SP-9-B Khushkhera Industrial Area Alwar was wound up by this Court vide order dated 17-10-2003 in S.B. Company Petition No.4/1999 on a petition filed by M/s. Singhal Credit Management Limited Bhiwadi. Pursuant to the winding up order, the respondents promoter directors of the company in liquidation failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71/- in the hands of the directors in terms of the record of the company's turn over in 1997-98 along with interest thereon be recovered from the respondents as compensation. A preliminary objection has been raised by the respondents in their reply that the Official Liquidator's allegations of loss, misconduct, negligence, breach of trust against the respondents are hypothetical in nature and only on the basis of the report dated 20-9-2008 prepared by the Chartered Accountant. The allegations, contentions or insinuations based on the report have been denied. No specific act of omission or commission having been alleged against the respondents the very maintainability of the application under Section 543 has been questioned. It has been submitted that the applicant Official Liquidator has failed to discharge his initial burden of proof qua the allegations of omission and commission against the respondents and hence the application at his instance is liable to be dismissed. The respondents point out that the respondent company's factory was shut down on 1-10-1998 due to reasons beyond their control. It has been submitted that the entire records relating to the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilty of retaining the current assets amounting to ₹ 27,70,972.57/- and the surplus amount of ₹ 33,68,471/- aggregating to ₹ 61,39,443.57/- belonging to the company thereby causing breach of trust and loss to the company. 6. Whether RIICO had taken over the possession of the fixed assets only, not the books of accounts and records of the Company ? 7. Whether the application filed under Section 543 by the O.L. is maintainable in the absence of any specific allegations against the Ex-Directors/respondents ? The Official Liquidator in the affidavit in evidence reiterated the allegations in the application under Section 543 of the Act of 1956. He was cross examined, wherein he submitted that RIICO vide letters dated 18-2-2006 and 17-4-2006 informed that the record of the company was not at factory premises, when they were taken over on 25-11-2003. He submitted that the chartered accountant prepared the report on the basis of documents available in the office of Registrar of Companies. Mr. N.C. Jain Chartered Accountant was cross examined on his affidavit in evidence filed in support of the application. He admitted that no communication was made with the ex-dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t SP-9-B Khushkhera Industrial Area Alwar. The production at the factory started on 27-5-1997, but owing to adverse market conditions closed on 1-10-1998. It was stated that the balance sheet and annual return subsequent to 31-3-1997 could not be filed for the reason of disputes with the Chartered Accountant. It was stated that RIICO took over the factory cum registered office situate SP-9-B Khushkhera Industrial Area Alwar on 25-11-2003, where the books of accounts of the company were lodged and had to be so lodged as per law. RIICO however did not record the same in the inventory drawn in the absence of the company's representatives. It was further stated that the books of accounts of the company in liquidation were in the possession of the RIICO following its taking over possession of the factory/ registered office on 25-11-2003. This fact has also been adverted to in para 10 of the report dated 20-9-2008 submitted by the Chartered Accountant. Mr. Bimal Kumar Lath further stated that even otherwise the report dated 20-9-2008 prepared by the Chartered Accountant is on the face of it purely speculative, based on surmises and conjectures and impermissible deductions drawn from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, I am of the considered view that this deficiency would be covered under Section 541 of the Act of 1956 and not be a matter of enquiry under Section 543 of the Act of 1956, which is in nature tortuous liability of the directors responsible for misfeasance, malfeasance or breach of trust. Consequently issues 1 to 4 are decided against the official liquidator. Issue No.5: From the evidence on record it is apparent that allegation against the respondent directors with regard to retaining current assets of ₹ 27,70,972.57 and surplus amount of ₹ 33,68,471/- aggregating to ₹ 61,39,443.57 are based on the balance sheet of 31-3-1997 without reckoning for working of the company now in liquidation upto 1-10-1998. The Official Liquidator failed to discharge the burden on this count, more particularly with regard to specific action of the two directors. Evidence on record reflects that no enquiry from the respondent directors was made either by the Official Liquidator or the Chartered Accountant appointed by him only deductive inferences from the basis of allegations insufficient for discharge of the burden of proof on the Official Liquidator with refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is that no case under Section 543 of the Act of 1956 is made out. Allegations levelled against the respondents are vague, general in nature, not specific about incidences and against individual directors-which is contrary to the provisions of Section 543 of the Act of 1956. Reliance has been placed on the judgment of the Apex Court in case of Official Liquidator Vs. Raghava Desikachar [(1975)45 Com. Cases 136] wherein it was held in the context of Section 543 of the Act of 1956 proceedings that the application should contain a detailed narration of the specific acts of commission and omission on the part of each director quantifying the loss to the company arising out of such acts or omissions . Reliance has also been placed on the judgment in case of Official Liquidator of Gujarat Vs. Kavasaji Tehmures Modi [2003 (45) SCL 514 Guj.] to contend that the charges should be specific and not of vague and general nature, and when no specific or particular allegation was made in regard to any director/ officer so as to make him responsible for repaying or restoring the money, it would be difficult for the court to grant an appropriate relief in the matter. Reliance was then placed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h such loss . The allegation of misfeasance and misapplication has to be specifically pleaded with material particulars against each of the directors/ erstwhile directors of the company. The state of law having been thus detailed, the moot question is whether a case against the respondent directors is made out. The case as laid is based on the report dated 20-9-2008 prepared by the Chartered Accountant. The said report indicates that relies only on documents collected by the Chartered Accountant from the office of the Registrar of Companies. Amongst them is the balance sheet of 31-3-1997 which however does not reckon the company s functioning upto 1-10-1998 during which period its financials are likely to have been altered. Further no specific evidence obtains on record against any of the respondent directors having misappropriated or otherwise wrongly acted to cause loss to the company in liquidation to their corresponding enrichment/ benefit. In fact no allegation of the respondent-directors benefitting personally has been made at all. The High Court of Karnataka at Bangalore in the case of Official Liquidator of M/s Zenith Power Systems (I) Ltd. Versus Sri K. Venkatachal ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
