Rajasthan High Court - Jaipur
Official Liquidator, Auto Electricals ... vs D.P. Gupta And Ors. on 1 October, 1997
Equivalent citations: [1999]98COMPCAS59(RAJ)
JUDGMENT N.L. Tibrewal, J.
1. The official liquidator of M/s. Auto Electricals (India) Pvt. Ltd. (in liquidation) has filed this application under Sections 542 and 543(1) of the Companies Act, 1956.
2. Company Petition No. 11 of 1985 for winding up of the company, M/s. Auto Electricals (India) Pvt. Ltd., was filed by the non-petitioner, Shri P. R. Mehta, the managing director of the company, and a winding up order was passed by this court on July 2, 1988. Prior to it, the official liquidator was appointed provisional liquidator of the company, vide order dated September 18, 1987. It appears that the ex-directors of the company (in liquidation) did not file the statement of affairs within time as required under Section 454 of the Companies Act. The present petition has been filed by the official liquidator on the basis of the report dated September 10, 1992, prepared by Shri N. C. Jain, chartered accountant, Jaipur, on the basis of books of account and other records of the company.
3. Learned counsel, appearing for the official liquidator, restricted his contention to the averments made in paras. 12 and 13 of the application. In para. 12 of the application, it has been stated that as per the last balance-sheet dated March 31, 1981, filed with the Registrar of Companies, there was a cash balance of Rs. 5,962.37 and furniture worth Rs. 5,202 with the company in liquidation and this amount and the furniture were not handed over to the official liquidator, as such, the ex-directors are guilty of committing breach of trust for the same. In para, 13, it is stated that as per the last balance-sheet as on March 31, 1981, the total value of the assets of the company (in liquidation) was of Rs. 1,35,066.95, but on sale by the official liquidator, they fetched Rs. 6,100 only. It was due to the fact that the ex-directors did not care to maintain the assets of the company properly and by their action they caused loss to the tune of Rs. 1,28,966.95.
4. The non-petitioners have denied to be guilty, of misfeasance or breach of trust in relation to cash or other assets of the company during the course of winding up. Non-petitioners Nos. 1 and 2 further contended that Shri R. P. Mehta was managing director till the year 1982 and as such, it was his responsibility about the cash and assets of the company. On behalf of the non-petitioner, Shri P. R. Mehta, it was stated that he had resigned as director of the company on October 20, 1982.
5. From the record it transpires that the assets of the company were hypothecated to the Punjab National Bank against cash credit hypothecation account and T/L account. The unit and assets of the company were taken in possession by the Punjab National Bank in the year 1982 and since then the assets remained in its possession. There is no material on record as to what was the condition of the furniture and other assets of the company when they were taken in possession by the bank and there is also no evidence on record as to how the bank managed and looked after those assets till they were taken in possession by the official liquidator. It also appears that the furniture and other assets of the company remained in the possession of the official liquidator for two years from the date he took them in his possession till they were sold by him. It further transpires that as per the statement of account which was prepared by Shri P. R. Mehta, the cash balance as on October 20, 1982 was Rs. 29.28 and this amount being a petty amount, was not disputed by non-petitioners Nos. 1 and 2 and they deposited the same.
6. Shri R. K. Agrawal, learned counsel appearing for respondents Nos. 1 and 2, further contended that the value of the assets as per the balance-sheet was as on March 31, 1981, while it was sold in the year 1991 and, if the deprecation is given set off, then on the date of sale the value of the assets was hardly a few thousands or even less than this amount. Shri Agrawal, therefore, contended that no case for misfeasance or breach of trust is made out against non-petitioners Nos. 1 and 2.
7. The question, therefore, calls for consideration, whether, in the facts and circumstances, any case of misfeasance or breach of trust is made out against the ex-directors or any one of them so as to make them liable under Sections 542 and 543(1) of the Companies Act ?
8. So far as the cash amount is concerned, by the subsequent report/ balance-sheet submitted by Shri P. R. Mehta Rs. 29.20 were in hand as on October 20, 1982. There is no material on record that this figure was wrongly arrived at. Even Rs. 29.28 have been deposited by non-petitioners Nos, 1 and 2 as they did not like to dispute being a petty amount. Hence, it cannot be said that any breach of trust has been committed in relation to the cash in hand.
9. For the furniture and assets of the company, admittedly they were in the possession of the Punjab National Bank since 1982 and remained in its possession for seven years and for two years, they remained in the possession of the official liquidator. The valuation pointed out by the official liquidator is as per book value as on March 31, 1981. No depreciation has been shown till the date it was sold. The furniture and other assets were sold in the year 1981 after taking all care, In these circumstances, it cannot be said that the non-petitioners acted dishonestly or abstained from acting in conformity with their plain duties, The burden to prove the charge/liability against the ex-directors was of the applicant. Unless a director has done something wrongly by misapplying or retaining in his own hands any money of the company or the director has done something by which the company's properties had been wasted resulting in actual loss to the company, there cannot be any misfeasance or breach of trust.
10. After going through the entire material on record, I am satisfied that no case of misfeasance or breach of trust is made out against any of the non-petitioners.
11. Consequently, the application filed by the official liquidator deserves to be dismissed and it is hereby dismissed.