OFFICIAL LIQUIDATOR Vs. RAM SWARUP

JUDGEMENT

(1.) Company Application No. 15 of 1977 has been filed by the Official Liquidator under Sections 542, 543, 468, 469 and(1 466 of the Companies Act, 1956 against Ram Swarup, Exdirector of M/s Ram Chand and Sons Sugar Mills (P) Limited (in liq.) (in short Company in liq.) Company Application No. 16 of 1977 has been filed under similar provisions against Raj Rajeshwar Swarup and 3 others who are the heirs of Late Lala Roshan Lal, one of the directors of the Company (in liq.). Substantially the points involved in the aforesaid cases are almost same and as such are being decided by a common judgment.

(2.) The relevant facts, in brief, are that Panna Lal and Roshan Lal were two brothers. In the year 1932 a registered partnership Firm was started of which Roshan Lal and his son Ram Swarup and his two nephews namely, Purshottam Dass and Jugal Kishore (sons of Panna Lal) were the partners. In the year 1951 the partnership Firm was converted into a Private Limited Company of which the four partners mentioned above were the first directors. Purshottam Das died on 31-10l960 and by are solution of the Board of Directors his widow, namely Smt. Padmavati, was inducted as a Director. On 28-4-1963 Roshan Lal also died and his grandson Raj Rajeshwar Swarup was inducted as a director. The Company which was carrying on the business of manufacturing sugar at Barabanki in the State of Uttar Pradesh suffered heavy loss and proceedings for winding up were initiated against the company in the year 1968 by filing Company Petition No. 9 of 1968. By an order dated 22-8-1972 passed in Company Petition No. 9 of 1968 the Company was ordered to be wound up and the Official Liquidator, High Court, Allahabad, was appointed the Liquidator. On the date of the winding up order the four directors of the company were (i) Jugal Kishore, (ii) Smt. Padamavati, (iii) Ram Swarup and (iv) Raj Rajeshwar Swarup. The Liquidator called upon the directors to submit the statement of affairs under Section 454 of the Act. In response to the same initially an affidavit was filed by Ram Swarup and other directors, inter alia, admitting that as per the books of account of the Company certain amounts specified in the said affidavit were received by the directors. Subsequently, a revised statement of affairs as required under the Act was filed on 23-12-1975 with the Official Liquidator. This discloses that about rupees Forty Lacs were due to the Company from the Exdirectors of the Company who had withdrawn the said sum from time to time from the Company. The statement further reveals that this money had been taken by the directors as interest free loan but had not been returned to the Company despite the fact that the financial condition of the Company was in a dire state and huge amounts were due towards Income-tax, Provident Fund of the work men and other dues. The Official Liquidator served notices individually to the Ex-directors and the heirs of the deceased directors calling upon them to pay back the amount withdrawn by them from the Company prior to the date of the winding up order alongwith interest. However, as there was no response from the said parties Company Application No. 31 of 1976 was filed against Smt. Padmavati and others in their capacity as the heirs of deceased director Purshottam Das under Sections 542, 543, 468, 469 and 466 of the Companies Act, 1956 on the ground that the money had been unlawfully retained and had been misapplied by holding it without paying any interest and applying the same for the personal gain. Therefore, a charge of misfeasance and fraudulent trading is made out against the said parties. Similarly, under the same provisions of the Act, Company Application No. 32 of 1976 was filed against Smt. Padmavati in her capacity as director of the Company; Company Application No. 34 of 1976 was filed against Jugal Kishore, another director and Company Application No. 33 of 1976 was filed against one Tirath Ram, who had also withdrawn certain sum of money as one of the heirs of late Ex-director Purshottam Dass, praying for the same relief. Similarly, Company Application No. 15 of 1977 was filed against the Ex-director Ram Swarup and Company Application No. 16 of 1977 was filed against Raj Rajeshwar Swarup and other heirs of late Ex-director Roshan Lal. Company Applications Nos. 31, 32, 33 and 34 of 1976 were contested by the said opposite parties by filing counter affidavits. Vide the order dated 11-12l978 Company Judge dismissed Company Application No. 31 of 1976 by relying upon the Supreme Court decision in the case of Official Liquidator Supreme Bank v. P. A. Tendulkar, reported in AIR 1973 SC 1104 on the ground that to order under the aforesaid sections could be passed against the heirs of a deceased director. Similar order was passed by the Company Judge while dismissing Company Application No. 33 of 1976 filed against Tirath Raj. However, vide other orders of the same date Company Applications Nos. 32 of 1976 and 34 of 1976 filed against Smt. Padmavati and Jugal Kishore (Ex-directors) were decreed and the said directors were ordered to refund the amount withdrawn by them to the Official Liquidator alongwith interest @ 12% per annum. Against the said orders 4 Special Appeals were filed before this Court. Special Appeal No. 7 of 1979 was filed by Smt. Padmavati, Special Appeal No. 8 of 1989 was filed by Jugal Kishore whereas the Official Liquidator filed Special Appeal No. 9 of 1979 against the dismissal of Company Application No. 33 of 1976 and Special Appeal No. 10 of 1979 against the decision in Company Application No. 31 of 1976. Vide the orders dated 24-9-1982 the Division Bench dismissed Special Appeals No. 7 and 8 of 1979 filed by the Ex-directors Smt. Padmavati and Jugal Kishore and upheld the decision of the Company Judge in Company Applications Nos. 32 of 1976 and 34 of 1976. By a separate judgment of the same date Special Appeal Nos. 9 and 10 of 1979 filed by the Official Liquidator against the judgment of the Company Judge in Company Application Nos. 31 of 1976 and 33 of 1976 were also dismissed not on the ground that the proceedings against the heirs of the deceased directors were not maintainable but on the ground that in the facts and circumstances of the case interest of justice would be met by exercising the discretion of the Court in favour of the Ex-directors in dropping the proceeding. The said orders passed by the Special Appeal Bench have become final.

(3.) The present company Applications Nos. 15 of 1977 and 16 of 1977 to which we are concerned at present, could not be heard alongwith Company Applications of 1976 and were got separated for the reasons that to counter affidavits were filed in the said cases either by the Exdirectors Ram Swarup or Raj Rajeshwar Swarup or other heirs of late Roshan Lal. The Company Judge vide the order dated 6-2-1978, therefore, allowed the Company Application No. 15 of 1977 ex parte and directed the Ex-director Ram Swarup to pay a sum of Rs. 9,78,711.20 along with interest @ 12% per annum to the Official Liquidator. Vide a similar order dated 19-4-1978 passed in Company Application No. 16 of 1977 Raj Rajeshwar Swarup and 3 other heirs were directed to pay a sum of Rs. 12,34,020.31 P. alongwith interest @ 12% per annum in the Official Liquidator. After the said decrees were passed the opposite parties appeared and filed applications for recalling the ex parte orders passed against them. The said applications were rejected by the Company Judge. Against the said orders Special Appeals were filed before the Division Bench which were also rejected. Thereafter the opposite parties filed Special Leave Petitions before the Supreme Court which were allowed subject to the condition that the said opposite parties shall deposit a sum of Rs. 11,00,000.00 with the Official Liquidator. On the said amount being deposited this Court vide the orders dated 8-7-1992 recalled the two ex parte decrees dated 6-2-1978 and 19-4-1978 and directed that company applications Nos. 15 and 16 of 1977 be listed for hearing afresh. Thereafter the opposite parties filed their counter affidavit to the said Company Applications. The main standof the opposite parties was that the amounts were not withdrawn by the said parties but the dues shown against them were actually the dues of the partners in the erstwhile partnership Firm which after the incorporation of the Company were carried over in the Accounts Book of the Company. Consequently, the provisions of Sections 542 and 543 of the Act were not attracted in the present case. Besides, a Receiver was appointed over the properties of the Company in proceedings taken under Section 182 A of the Land Revenue Act in the year 1969 and subsequently on 3-7-1991 by virtue of the notification issued under Section 3 of the U. P. Sugar Undertaking (Acquisition) Act, 1971 the Company vested in the U. P. Sugar Corporation Limited. The dues, if any, shown against the directors were actually incurred at the time when the Receiver had taken over possession of the Company and, therefore, also the provisions of the Act were not attracted against the said opposite parties. In Company Application No. 16 of 1977 Raj Rajeshwar Swarup and other heirs of late Roshan Lal stated that they had never actively participated in the functioning of the Company and they cannot be made liable for any misfeasance or breach of trust committed by the Ex-director. Apart from the aforesaid objections the jurisdiction of the Court to hear these Company Applications were also challenged as the registered office of the company was at Barabanki and consequently the Lucknow Bench of the Court could only hear the matter. A detailed rejoinder affidavit has been filed on behalf of the Official Liquidator to the allegations made in the counter affidavit and reiterating the case as set out in the aforesaid Company Applications.