PRABHU L K Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) Sustainability of the verdict passed by the Company Court, fixing the liability on the appellant in a misfeasance proceedings under Section 543 of the Companies Act read with Rule 261 of the Company Court Rules forms the subject-matter of this Appeal.

(2.) With regard to the factual scenario, it is to be noted that the concerned Company by name Premier Steels (P) Ltd., was sought to be wound up in CP. 23 of 88 and as per the order dated 20-7-1988, the Official Liquidator was appointed as the provisional liquidator. Subsequently, the Company was wound up as per the order dated 7-10-1988 and the provisional liquidator was appointed as the Liquidator of the Company. It is stated that the appellants herein were holding the office as the Directors of the said Company at the relevant time. But subsequently, after assuming charge by the Official Liquidator, it was found on verification that the relevant Books of Accounts 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. A-1 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 absolutely no situation to have initiated any proceedings under Section 543 leading to misfeasance; that the Company was being run even by procuring funds from their own pockets and that no loan was procured from any other source and there was absolutely no diversion of funds from the Company.