OFFICIAL LIQUIDATOR Vs. P.A GEORGE

JUDGEMENT

(1.) This is an application filed by the Official Liquidator of the Kerala Water Transport Corporation Ltd. in liquidation, against the former directors of the company for a declaration that they are liable to contribute to its assets on account of breach of trust, misfeasance, negligence, want of care, etc. There were 33 respondents in the application as originally framed, and most of them filed counter affidavits/objections; but in the amended application filed in July, 1970 there are only 28 respondents. The prayers in the points of claim filed in June, 1972 are:

(2.) Certain facts are not in dispute. At the beginning of 1958, there were about 145 private boats belonging to 42 different owners plying in the Kuttanad area and connecting places like Quilon and Ernakulam, with Alleppey at the centre. These boats had their own licences, route permits and timings and were catering mostly to the needs of passenger transport. There were about 2,000 employees organised into two or three trade unions, and the most influential was the one affiliated to the A.I T.U.C. The late Mr. T. V. Thomas was its President till he became a minister after the 1957 elections. There were disputes between the boat owners and the employees and an award had been passed by the Industrial Tribunal granting additional benefits to the employees including gratuity. To the owners most of whom were operating on loss, the award proved to be the last straw on the camel's back. A few of them issued notices of closure. Others represented to Government that steps be taken for taking over all the boat services through a corporation. Threatened with a break down of water transport facilities in an area where other forms of transport were then practically unknown, the Government decided to move in, and move in swiftly. The circumstance that Sri T. V. Thomas who had intimate knowledge about the industry and its problems had become the Minister for Transport and Labour in the meanwhile, proved helpful. On 11th February 1958 a conference of the interested parties was convened, and on 19th February 1958 Government issued an order embodying its decision to form a company with 51 per cent of the shares for itself, 40 per cent for the boat owners, and 9 per cent for the employees. Boats plying:

(3.) The company (Water Transport Corporation) was registered on 18th April 1958 with five officers of the Government, four representatives of the boat owners and two representatives of the workers as directors. The valuation committee had submitted its report in the meanwhile; and at the first meeting of the Director Board held at the Government Secretariat at Trivandrum on 19th April 1958, the report was "perused and recorded subject to the Government's approval". Government approved the valuation on 17th May 1958. On 30th May 1958 the Director Board accepted, in anticipation of Government approval, the valuation of three other boats, and this too was approved by Government on 10th July 1958. In June, 1959 the Deputy Comptroller (Kerala) submitted to Government an "Inspection Report on the accounts of the Kerala Water Transport Corporation relating to the payment of compensation to the boat companies", indicating that the value fixed was excessive. It appears that there was a change in Government by about this time or soon thereafter. On 15th October 1959 Government appointed Sri A. G. Menon, then Additional Chief Secretary to Government, to examine the working of the Corporation and to suggest measures for its improvement. He submitted his report to Government on 28th January 1960 assessing the extent of excessive valuation as Rs. 11,44,032 and suggesting measures for the improved working of the company. In the meanwhile, Government had appointed Sri Menon as Chairman of the company, hoping that under his leadership its affairs would improve. On 4th November 1959 Government had also "remitted" the valuation committee's report to the same committee, for review/revaluation, on the basis of the Comptroller's report. The revaluation report was made on 23rd May 1960 substantially reaffirming the original report and disputing the approach made by the Comptroller. It is not known what further steps the Government or the Corporation had taken in respect of this report. The Corporation continued to work on heavy loss year after year (except for a nominal profit during one) and was ultimately ordered to be wound up, on an application made by the Government, on 20th March 1955. At that time, Government was the biggest creditor and shareholder of the Corporation.