@JUDGMENTTAG-ORDER
A.S. Bopanna, J.@mdashThe Official Liquidator has filed the instant application u/s 543 (1) of the Companies Act against the erstwhile Directors of M/s. Kamadhenu Leather fashions Private Limited (hereinafter referred to as the ''company-in-liquidation''). By the said application, the applicant has alleged misfeasance on the part of the erstwhile Directors. Further, with reference to the statement of affairs which was filed by the respondents, have claimed the amount under different heads, in all amounting to Rs. 1,87,43,810.96 ps. as indicated in the application. The respondents on being served have appeared and filed their objection statement and have disputed the claim put forth in the application. In that view, the matter had been set down for evidence and Sri M. Ramamurthy, working as Upper Division Clerk in the office of the Official Liquidator was examined as P.W.1 and the documents as at Exhs.P1 to P11 were marked. On behalf of the respondents, Sri M.R. Harish, erstwhile Director of the company-in-liquidation was examined as RW1 and the documents at Exhs. D1 to D19 were marked.
2. In the light of the pleadings put forth and the evidence tendered by the parties, I have heard the learned counsel appearing for the respective parties and perused the application papers.
3. The company in liquidation was ordered to be wound up by this Court by the order dared 02.06.1998 passed in Co P. No. 122/95. The first respondent herein filed the statement of affairs on 11.08.1998 and the other two erstwhile Directors are stated to have concurred with the said statement of affairs filed by the first respondent. Even though it is contended on behalf of the applicant that Form No. 58 had not been filed and proceedings u/s 454 of the Companies Act was also initiated against the respondents, however, insofar as the instant proceedings u/s 543(1) of the Companies Act, the nature of the claim made in the instant application and the allegation would require to be noticed keeping in view the legal position enunciated with regard to the strict pleadings and the evidence to alleged misfeasance on the part of the erstwhile Directors.
4. In that regard, it would also be necessary to refer to the order passed by this Court in C.A.No. 888/2006 on 23.02.2012 (Official Liquidator of Ideal Jawa (India) Ltd. v. Sri Tehmton Rustom Irani, wherein this Court had an occasion to consider the scope of the proceedings of the present nature. In that light, I have perused the pleadings and the affidavit evidence available on record.
5. In that background, the claims made in the instant application are as follows:
(a) As per Annexure-I to the statement of affairs, the stock of raw materials, cash in hand, cash at bank. NSC and deposits were mentioned at Rs. 2,66,695/-. It is alleged that the same has not been handed over to the Official Liquidator.
(b) As per Annexure-I list B to the statement of affairs, the land, building and machineries at Vaniyambadi unit, shares, cash at bank, deposits valued at Rs. 1,60,99,295/- is indicated and the same is not handed over to the Official Liquidator is the allegation.
(c) As per Annexure-1 to statement of affairs, the hypothecated plant and machinery at Bangalore unit were valued at Rs. 4,00,000/- whereas the amount realised was only Rs. 1,75,000/- and as such, it is alleged that the respondents are liable for the balance of Rs. 2,25,000/-, being the difference.
(d) As per the balance sheet as on 31.03.1997, the office, investments, current assets, loans and advances were valued at Rs. 9,93,661.46 ps. But the supporting documents and other information were not handed over to the Office of the Official Liquidator is alleged.
(e) As per the balance sheet as on 31.03.1995, the debtors were valued at Rs. 11,59,159.50 ps. but in the subsequent balance sheet, it was mentioned as Nil and the documents for realization has not been produced is the allegation.
It is under the above heads, the amounts have been claimed from the erstwhite Directors on the allegation that they are responsible for the same.
6. The respondents by their objection statement have referred to each of the contentions put forth in the application and have contended that the entire situation had arisen due to the fact that there was an order by the Hon''ble Supreme Court with regard to closure of certain industries and therefore, the activities of the company which had been planned could not be taken up and has resulted in loss. Insofar as the claim relating to the company''s property in Vaniyambadi. it is contended that the property was hypothecated to SIDBI and the said financial institution had taken over the properties being the secured creditors. Insofar as the property of the Bangalore unit is concerned, it is contended that the Karnataka State Financial Corporation to whom the property was hypothecated has taken over the same and in any event, the seized unit was ultimately auctioned with the cooperation of the Official Liquidator and the amount realized in the public auction was in a sum of Rs. 1,75,000/-, which was the value of the property. Therefore, the question of paying the balance does not arise. It is their further contention that in any event, the amount outstanding to the KSFC has been thereafter settled by the Directors themselves as they were personally liable which is a relevant conduct to indicate that the respondents had not utilized the company''s funds for their personal benefits. Insofar as the other claims, it is the specific contention that the same have been made over to the Official Liquidator and there is nothing retained by the respondents so as to handover and in that regard they cannot be held responsible.
7. As noticed, Sri M. Ramamurthy, Upper Division Clerk was examined as P.W.1 and his affidavit evidence was taken on record. The same would indicate that the said witness has reiterated the contents of the application. A perusal of the said affidavit would indicate that, except referring to the details taken from the statement of affairs, there is no pleadings or evidence to the effect that the office of the Official Liquidator has made separate inquiries with regard to the misfeasance committed by the erstwhile Directors clue to which amounts remained outstanding to the company. A letter which was addressed to the Ex-Directors relating to filing of the statement of affairs was marked as Ex.P1 the statement of affairs based on which the claim has been made in the application has been marked as Ex.P2 and the notice and acknowledgment issued to the erstwhile Directors have been marked at Exhs.P3 to P11. The said witness P.W.1 has been extensively cross-examined on behalf of the respondents. At this stage, without making specific reference to the answers elicited from the said witness, suffice it to notice that the contention as put forth in the objection statement with regard to different items of claim has been suggested to the said witness who has accepted the same and insofar as the other items under which the claims have made relating to the raw materials and other immovables of the company and the receipts of the amount available in the bank, the said witness has admitted that it has been furnished to the office of the Official Liquidator. Even with regard to the manner in which the property at Vaniyambadi and in Bangalore has been taken over by SIDBI and the KSFC has been suggested to the said witness and the said witness has accepted the same.
8. Before referring to the specific answers elicited, it would be appropriate to refer to the evidence tendered on behalf of the respondents through RW1. A perusal of the affidavit of the said witness would make specific reference to each of the items, which have been initiated. Prior to the same, detailed reference is made to the manner in which the company-in-liquidation had began its activity and the order of the Hon''ble Supreme Court dated 08.09.2005 in the public interest litigation directing the closure of the industries has been produced and marked. The letters addressed by the respondents with regard to the filing of the statement of affairs and also furnishing the details relating to the aforesaid materials with the respondents have relied and produced at Exhs. D4 and D9. The order relating to the closure of the industries starting from the interim order have been produced and marked as Exhs.D10 to D12. The reply relating to filing of the statement of affairs and the affidavit of concurrence filed by other two Directors are marked at Exhs.D13 and D14 and the receipt is marked at Ex.D15. The said receipt is the one issued by the Office of the Official Liquidator with regard to the realisation of the cash balance. The correspondence relating to settlement of amounts outstanding to KSFC even after the company was ordered to be wound up is produced at Exths.D8 and D19 to indicate that the entire amount outstanding to KSFC has thereafter been settled by the respondents.
9. For better appreciation of statement made by the respondents relating to items other than the property has been explained in paragraphs 32 to 35 of the affidavit evidence of RW1, which reads as hereunder:
32. Towards this claim, the Official Liquidator has on 13.8.98, acknowledged receiving personally, stock of raw materials (accessories) valued at Rs. 2,20,000/- along with stock statement, books, records of the company.
32. The respondents have paid a sum of Rs. 137/- being the cash on hand, with the Official Liquidator on 16.7.2004. The receipt is marked OS Ex. D.15.
33. I further state that regarding the balance amount, a sum of Rs. 46,558/- shown in the Statement of Affairs, towards cash in hand, deposits and National Savings Certificate, while the deposits and NSC are pledged with SBI for the loan provided to the Company.
34. The sum of Rs. 14,508/- representing cash at Bank, the said amount is still with the SBI and the directors are not entitled to deal with it, after the winding-up order. The Official Liquidator has to get the amount from the Bank.
10. Insofar as the factory belonging to the company-in-liquidation which was situated at No. 3, 24th A Cross, 5th Main Road, BSK 2nd Stage, Karesandra Village. Bangalore 70, it has been clearly indicated that the same was hypothecated with all its assets and the possession of the same had been taken over by the KSFC u/s 29 of the Act on 26.12.1996. The fact that the assertion made in the affidavit is to be accepted is borne out from the cross-examination of P.W.1, wherein he has admitted this aspect of the matter and has also admitted the fact that the property was brought to auction by KSFC with the concurrence of the Official Liquidator and the price realised from the said property was in a sum of Rs. 1,75,000/-. Even with regard to the said amount, the witness has admitted that the said amount is still available with the Official Liquidator and the same has not been paid to the respondents, though they have settled the claim with KSFC. The company being in the process of liquidation, the said amount would in any event be available with the Official Liquidator. Therefore, to the said extent, it was contended that though a higher value was indicated, only a sum of Rs. 1,75.000/- was realized and as such, the contention that respondents are liable to pay the balance amount as a shortfall cannot be accepted.
11. With regard to the property of the company situated at No. 39, Kailasa Giri Road, C.V. Pattetai, Udayendriyam, Vaniyambadi, Tamil Nadu, the details with regard to the finance made by the SIDBI is stated in the affidavit and the fact that the same was hypothecated to SIDBI along with the assets, stocks and raw materials is also asserted and the same has been accepted by P.W.1 in his cross-examination. Therefore, insofar as the said property, when the same was hypothecated to SIDBI and when it is not in dispute that the SIDBI has taken possession of the said property, the question of respondents handing over the same to the Official Liquidator would not arise since ultimately this is a matter to be sorted out between the Official Liquidator and the SIDBI. If at all the question relating to hypothecation of properties belonging to the company-in-liquidation is to be considered in an appropriate proceedings and if it is not handed over, the same would not make the respondents liable for misfeasance since it is not shown that the respondents have appropriated the said properties to themselves so as to cause loss to the company-in-liquidation. Therefore, if these aspects are kept in view and the evidence tendered by the parties is looked into, it would be clear that there is no specific evidence to indicate the involvement of the respondents in a manner which was prejudicial to the company-in-liquidation so as to allege misfeasance since the allegations made in the application have been sufficiently answered by the respondents and there is no other act attributed to them to arrive at a different conclusion. Hence, in the facts and circumstances, when the allegations do not lead to the act of misfeasance alleged to have been committed by the respondents, the prayer made in the application cannot be granted.
The application is accordingly dismissed.
