LAWS(MAD)-1949-8-15

M A MALIK Vs. V S THIRUVENGADASWAMI MUDALIAR

Decided On August 23, 1949
M.A.MALIK Appellant
V/S
V.S.THIRUVENGADASWAMI MUDALIAR Respondents

JUDGEMENT

(1.) In misfeasance proceedings taken by the liquidator during the course of a winding up of a company of which the appellant was a Director for a year or so, this Court on the Original Side directed that the appellant do pay the Official Liquidator the sum of Rs. 2991-14-0 and Rs. 4866-6-0 "being the amounts of loss occasioned in respect of the share brokerage, preliminary expenses and investments in unauthorised banks respectively." The respondent having taken an assignment of the decree proceeded against the appellant in execution and applied to the Court, for his arrest. The question arose whether under Section 51, Civil P. C., the respondent was liable for arrest. He pleaded that he was a pauper and was quite unable to raise the money to discharge the decree. The Court, however, found that since he was a director and it was on account of his breach of duty that the loss had been sustained by the company, Clause (c) of the proviso to Section 51 applied, and "that the decree is for a sum for which the judgment-debtor was bound in a fiduciary capacity to account."

(2.) It is not contended by the respondent that a Director is an express trustee of the property of the company; but it has always been held that the relationship between a Director and a member of a company is that of trustee and cestui que trust, and Directors have been described as commercial trustees, quasi trustees, and the like. In Cavendish Bentinck v. Fenn, (1887) 12 A. C. 652 at p. 669: (67 L. J. Ch. 552) Lord Macnaghen said that the expression "misfeasance" in Section 165, Indian Companies Act was not misfeasance in the general sense of the word but as being in the nature of a breach of trust. The learned advocate for the appellant has attempted to draw a distinction between misfeasance, or active wrong doing, and nonfeasance, or mere negligence. One does not find in Section 235, Indian Companies Act the word "nonfeasance". A Director is under an obligation to assist in the management and supervision of the affairs of the Company; and if a breach of his duty to the company results in a loss to the company, he is bound to make compensation to the company in respect of the "misapplication, retainer, misfeasance, or breach of trust". A failure on the part of a person to do his duty with regard to the property of a company over which he has control by virtue of his being a Director amounts to misfeasance within the meaning of Section 235, Companies Act.

(3.) Mr. Gopalswami Iyengar for the appellant has sought to take us through the facts of the case in an attempt to prove to us that the appellant was in no way responsible for the loss that occurred; but we cannot, as the learned District Judge pertinetly pointed out, go behind the decree itself. The judgment of this Court also shows that the appellant failed to do his duty.