OFFICIAL LIQUIDATOR Vs. D.D. SINHA AND ORS.

JUDGEMENT

(1.) This company application was filed by the official liquidator way back on October 31, 1994, under section 543(1) of the Companies Act, 1956, inter alia, with the prayer that the conduct of the respondent ex-directors of the company (in liquidation) be examined and they be directed to handover the movable and immovable properties to the official liquidator along with records and books of account of the company and be further directed to make payment of interest at such rates as this court deem fit and to contribute such sums to the assets of the company by way of compensation in respect of retention, misfeasance and breach of trust together with interest at such rates as this court decides. The facts of the case briefly stated are that the Rajasthan Commercial and Industrial Finance Ltd., was ordered to be wound up by order of this court dated November 3, 1999, as voluntary winding up and the official liquidator was appointed as its liquidator. This court appointed Shri R.M. Khandelwal, chartered accountant on the basis of application submitted by the ex-directors of the company for preparation of statement of affairs under section 454 of the Companies Act. The statement of affairs as on December 31, 1987, was prepared by the said Shri R.M. Khandelwal. The said chartered accountant submitted his report on October 6, 1993. He has mentioned therein that he was not provided complete records and books of account, especially the records of the period from January 1, 1988 to November 3, 1989, were not available. Transaction during that period were in the nature of collection of money against deposits schemes, loan recovery and security deposits. Subsequently, this court appointed Shri N.C. Jain, chartered accountant to investigate the records, who in his report dated October 5, 1994, has stated that investigation of the accounts with respect to misfeasance could not be made unless the books of account and the other records of the company were made available. It was in these circumstances that the official liquidator filed the present application.

(2.) I have heard Shri G.K. Garg, learned senior counsel for the applicant assisted by Shri Gaurav Sharma on behalf of the official liquidator and Shri V.L. Mathur, learned counsel for the respondent.

(3.) Shri G.K. Garg, learned senior counsel for the applicant submitted that the winding up order was passed on the own request of the directors of company as voluntary winding up and that Shri R.M. Khandelwal, the chartered accountant was appointed on their own request for preparing the statement of affairs. He had to prepare report on the basis of whatever records were available. As no records for the period dated January 1, 1988 to November 3, 1989, were made available, in absence of that, it cannot be said that the statement of affairs prepared by him were having full particulars or gave true picture of assets and liabilities of the company. This fact has been proved by Shri R.M. Khandelwal, the chartered accountant in his affidavit/statement made before this court. M/s. N.C. Jain and Associates, the chartered accountant was appointed to investigate the accounts with respect to misfeasance, etc. He also in his report dated October 5, 1994, clearly stated that it was not possible for him to carry out the examination of books of account of company inasmuch as the ex-directors have not given charge of complete records of books of account, namely; the cash book, ledger, journal, bank book, asset register, bank statement of accounts, vouchers, etc., both of its headquarters and also for the 32 branches. The absence of so bulky record was the precise reason for preparing defective statement of affairs. Shri N.C. Jain has also in his affidavit before this court proved all these facts. Due to absence of records, it was not possible for the official liquidator to find out the exact instances of the misapplication or misfeasance. The ex-directors of the company are also guilty of retaining the records relating to both movable or immovable assets for which he has no information.