K. NARAYAN BHAT, ANANTH BHAT AND SRI K.T. VIJAYA KRISHNA Vs. OFFICIAL LIQUIDATOR OF M/S. KARNATAKA FINANCIAL SERVICES LTD. (IN LIQUIDATION)

JUDGEMENT

(1.) THIS appeal is directed against the order dated 14.3.13 passed by the learned Single Judge on C.A. No. 810/2011 in CA. No. 656/2010 in COP No. 178/2004 whereby the application filed by the appellants seeking discharge from the proceedings initiated by the official liquidator invoking Section 543 of the Companies Act, 1956 (for short the 'Act') has been rejected. It appears that the appellants sought discharge solely on the ground that they were not directors at the relevant time. The learned Single Judge having considered the provisions contained in Section 543 of the Act, rejected the application for the following reasons: The question as to, whether applicants arraigned as respondents 2, 3 and 6 in the petition are, as a matter of fact, liable for misapplication or retaining or accountable for any money or property of the company in liquidation while as Directors in the past, Manager or Officer of the company, requires an adjudication and a trial, whereafter an answer could be provided. In that view of the matter, merely because the applicants were not shown to be Directors on the relevant date, would not disentitle the Official Liquidator to prosecute them in a proceeding under Sec. 543 of the Act. Suffice it to mention that the proceedings under Sec. 543 and Sec. 538 being separate and distinct, the memo filed by the Official Liquidator in CC No. 36/08 in a complaint under Sec. 538 of the Act would not have the effect of permitting discharge of the applicants in this proceeding. (Emphasis supplied)

(2.) WE have perused the provisions contained in Section 543 of the Act, which provide that if in the course of winding up of 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 as stipulated in Clause (a) and (b) of sub -section (1), the Court is empowered to pass appropriate order as provided for in this provision. Thus, it is clear, merely because the applicants were not Directors at the relevant time, that by itself cannot be a ground to seek discharge. Learned single Judge has considered the prayer in proper perspective and has rightly rejected the application for discharge. We find no merit in the appeal. The appeal is dismissed. All contentions of the appellants on merits are kept open. In view of dismissal of the appeal, I.A. 1/13 filed for stay also stands disposed of.