VARKEY ZACHARIA Vs. OUSEPH MATHEN

JUDGEMENT

(1.) THIS is an application under section 543 of the Companies Act brought by a contributory of a banking company that is being voluntarily wound up against its liquidator who was its managing director until it went into liquidation.The allegation is that,instead of reali¬sing the assets of the company,the respondent voluntarily assigned them for much below their real value and thus caused loss to the company to the tune of about Rs.26,000.The final statement of account filed by the respondent shows that while all the creditors were paid in full,contributories to whom a total sum of Rs,20,876 was due were paid only a dividend of 7.3 naye paise per rupee.

(2.) IT is not necessary to go beyond the respondent's own evidence to condemn him.He subscribed to the declaration of solvency(Ext.P -1)registered under section 488(2)of the Companies Act,and,in Ext.P -1(a ),the statement of assets and liabilities attached thereto,he showed among the assets of the company a sum of Rs.19,062 -11 -8 as due on overdrafts,a sum of Rs.1,181 -11 -8 as due on(promissory notes,a sum of Rs.1,271 -12 -8 as due under decrees and a sum of Rs.592 as due on gold loans.Only a sum of Rs.989 -4 -3 was shown as due on bad and doubtful debts,the implication being that the other debts shown among the assets were good debts.Certain other assets were also shown in the statement,and,according to this statement,assets to the tune of a little over Rs.22,108.22 were prima facie realisable.Actually however only a sum of Rs.4,501.39 was realised,and,on the face of it,it is for the respondent to explain why he failed to realise the balance.As I have already remarked his own explanation is sufficient to condemn him.According to him the debtors were largely agriculturists who,though solvent took shelter under Act 3 of 1956 and Act 31 of 1958 which allowed agriculturists to pay their debts in instal¬ments.However he took no action for recovery.He never issued any written notice to any of the debtors but contented himself with making oral demands to which they pleaded the Acts.Since there was little prospect of speedy realisation he sold all the debts due to the bank by public auction on 28th July 1959 and Ext.P -4 is the minutes of that auction.He claims to have advertised this auction by publication in the Gazette and by affixture of notice in his own office(that is,in his house)and in the local market.But he produced no evidence whatso¬ever in support of this claim beyond his bare word of mouth.It was at this auction that debts due on over drafts,of a total sum of Rs.19,062.72,were sold for Rs.3,700.31,promissory note debts to the tune of Rs.1,181.72 were sold for Rs.316,and gold loan debts of the total of Rs.592 were sold for Rs.265.31.Decree debts of the total sum of Rs.1,271.78 were not sold at all.They were under execution at the time and the explanation of the respondent,which finds no place in the.minutes,Ext.P -4,is that no one would buy them at the auction.The respondent has suffered these decrees to become barred by time.

(3.) THE company being a banking company this matter falls within section 45 -H of the Banking Companies Act which says that once the applicant in misfeasance makes out a prima facie case the court shall make an order against the person charged with misfeasance to repay and restore the money unless he proves that he is not liable to make the repayment or restoration either wholly or in part.There is a difference between this provision and section 543 of the Companies Act in the matter of onus.Under both provisions it is necessary for the applicant to make out a prima facie case before he can get any relief.But under section 543 the result of the applicant making out a prima facie case is not to shift the burden of proof on the respondent;only the burden of adducing evidence shifts.The burden of proof always remains on the applicant and it is enough for the respondent to rebut the evidence adduced by the applicant.But in a case falling under section 45 -H of the Banking Companies Act,once a prima facie case is made out by the applicant,the burden shifts on the respondent and it is for him to establish affirma¬tively that he is not liable to make the repayment or restoration.In the present case the statement Ext.P -1(a)to which the respondent himself subscribed shows prima facie that the realisable assets of the company were Rs.22,108.22.What was actually realised was only Rs.4,281.62,and,far from furnishing any explanation for the short realisation,the evidence of the respondent himself goes to show that the difference was lost to the company by reason of the fraudulent manner in which he chose to dispose of its assets. In the result I direct the respondent to pay a sum of Rs.17,765.22 to the company with interest on that sum at six per cent per annum from 29th July 1959.The respondent will also pay the petitioner his costs.