Karnataka High Court
Official Liquidator Of M/S Alliance ... vs Nishath Patel on 3 September, 2009
Author: Anand Byrareddy
Bench: Anand Byrareddy
"IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 3*" DAY OF SEPTEMBER
BEFORE: A' 'C
THE HON'BLE MR. JUSTICE ANAND A 1'
COMPANY APPLICATIONNO, A1g;;§;oE(2QQg_. ' 'A
COMPANY PETITION No.36 OF EQ94;
BETWEEN:
Officiai Liquidator of ;. ,
M/s.AHiance Leathers Private I__,,_i11r'1'_iVte{d, ._
(in Liquidation) »; I
Attached to High Cfifiuift . Kéxrfiataka,
"D" wing, 4'? "F1?:or',"~
Kendriya' o'ar.1EIi,
Koramaingala, ' H.
Banga1o'rg~«34.' 1 APPLICANT
(By Shr_i.DCépa1g', Atlvbcfitej
.....
T1 f A A ST:£;1\:IisfTaflT_i.Pate1, A "VI/B,' Amt»; Park, Canon [Shed Road, Kog_hi«682 011.
V ""~_.Smt.Zeenat N.PateI, A "I/B, Amber Park, Canon Shed Road, Kochi-682 0} 1. RESPONDENTS 2 (By Shri.L.N.Ramaiah Gowda, Advocate for Respondent} and Respondent.2) This Company Application is filed under Section i'3%t§3(p'l')A'of the Companies Act, 1956 read with Rule 260 of_;th'e« (Court) Ruies, 1959, praying to summon the respondent».Nofl 2 therein for the purpose of Examination in regard' to: t.he"matter__ as 2 0 specified therein in the application and etc}; « h_ This Company Application coining'-on day, the Court made the followi'1:g:"'"=._ R'I)'1'»:
«nun- The p1'esent:'ap__p1ication' 543(1) of the Companies alleged that by an order dated 1.12.1999' no.26/E994, the cornpany--in--
liquidation. was dorderefld to be wound--up and the Official I.,iqt1idato1<.Wa:s"~-appointed as the liquidator. He had issued letters to thet'e)ti--di'rectA'ors to hand over the assets, books and records of T_the cornpainpiwhich they failed to do. The Statement of Affairs 0 "ii the ex.--diIectors with the Official Liquidator on 5.12.2000 ' " was defective and the same has not been taken into account. The 8 Official Liquidator had issued several reminders to rectify the deficiencies, which they had failed to do. According~.._to.._ the Official Liquidator, figures shown in the statementlof by the respondents indicated a sum of .--lIa4sl.re.a_li,sab,lell ' i. under the head -- balance at bank. ;l'h_e:"-dyirectorsihad efforts to furnish the name and the landlldellails of the account. Hence, the could take steps to recover the money. "."l"l,iEu. 'contention that the ex- directors or breach of trust in causing v ltis that a sum of Rs.7,68,652.88 is shown as head -- Trade Debtors. No efforts ,.v'ha\.j¢!.3'befl_fi taken "to«r..ea.lise the sarne. In the absence of material "the Official Liquidator was also helpless in this regayrd. Sirn'ill__ar;ly, under the head of loans and advances, a sum of l"*»Rsy.72,'93__,lJ78.55 was shown as realisable and in the absence of if ~.rnaterial being produced, no steps could be taken to recover the O ~~--Same.
€ 7.11.1996, without notice to the directors. It is subsequent thereto that the Winding--up order has been passed and statement of affairs has been filed on the basis of the material availablelildvaithdllthe directors as on 5.12.2000. The books of accouti'ts:.anfd:
which had been seized by the s,ub_se'que_ntly'~ and produced before the Officia}. Litjuidator However, on 10.3.2000, the eX~direcators. had intirnatedvfthe Official Liquidator of the action taken_ 'by tlitevv having taken over the assets of the cornpany' having these records and therefore, ex_--d_ire'ctors_._.__Were capable of furnishing the particulars readilj};.':'w-.r .0 In theabovellbacfcgrolund, it cannot be brought home that the v respohdents have bee._n__..gui1ty of any act of rnisfeasance or breach of the applicant's case that the non~realisation of antounts shovantlnunder various heads was intentional or on account V'-of wgiilfuldor culpable negligence. There is no allegation that the _"1o'ss. caused to the company results in wrongful gain to the directors. In the face of the admitted circumstance that the 3 properties of the company were seized by the KSFC , the invocation of Section 543(1) of the Companies Act, l9j36,p was misconceived. Reliance is placed on several contend that the ingredients of section 543_..calnnot':.f.:be._ iriadeu applicable in the facts and circumstances:-ttapsfiv stated.' ahovie-,__'in,thle absence of the applicant having':fail_Ved to'establish:'that..._there willful misconduct or breach of_ll'tt=u_st;_s_v or iculpableii or willful negligence, nor that thereliwas of the assets of the company. The pleagiiugs 'th'e..__materi'al evidence did not establish miisfeasafiCel3'aga'iust§ the *respondents. C0unsle.lf~.fort ,tlh'e_TOfficial Liquidator in support of the application" the tenor of Section 543 would
-'Hp_Vindi_eate:thatp notu'/ith.sta.:tding the seizure of the assets of the a duty was cast on the respondents to secure the ,partic_ularls and enable the Official Liquidator to salvage the V'-assets o.f__ithe company and it was the duty of the respondents _ l' the-mslelves to initiate proceedings wherever possible to safeguard l assets of the company. This admittedly not having been done, Z the respondents, who are certainly accountable under section 543, could be held guilty of rnisfeasance and notwithstanding', the circumstances narrated, it cannot be said that the"'respe_ndents_ would not be liable under Section 543, In the above facts and circums;tanc..§g;~ asirightlny by the Counsel for the responden;t's,._nit is."no__t 'rnerely'..:sh'ffic:ient to V allege that since the statementi"'of"affairs would indicate that monies were due to the co1npa1iy7l'ti'nd_e.r"--seVe1*al heads, and on- account of the iiiaction on the -Vipiartsoif lt.lie,_ir¢:iS§pondents, they would be guilty of iriis«:-fleasance acceptable. Apart from want of diligence on thtfpart exédirectors, it ought to be alleged and established that a willful and culpable negligence on v thei_r§a.art_iiapart from there being acts of breach of trust, resulting in g_im:is}feasance;'i» [The circumstance that the entire assets of the com_i;iany_wcije*i:;taken over by the KSFC alongwith the material W.docurn"en__ts and records, would certainly place the respondents at a i' disadyantage in taking steps to recover the monies that may have been due to the company. There is no serious dispute in this 5