Kerala High Court
Kuriakose vs P.K.V. Group Industries on 12 April, 2002
Equivalent citations: [2002]111COMPCAS826(KER), (2005)6COMPLJ305(KER)
JUDGMENT S. Sankarasubban, J.
1. These two appeals are filed against the interim orders in O.S. No. 33 of 1998 on the file of the Principal Sub Judge, N. Paravur. C.M.A. No.247 of 1998 is filed against the order in I.A. No. 303 of 1998 in the same suit. That is an order by which attachment before judgment of certain properties was made absolute. In A.S. No. 1020 of 1998, the order challenged is the order in I.A. No. 736 of 1998, which is a claim petition filed by the appellant regarding the properties attached and made absolute as per the order in I.A. No. 303 of 1998. The claim petition was dismissed. Hence the appeal is filed.
2. First respondent in A.S. No. 1020 of 1998 and the respondent in C.M.A. No. 247 of 1998 - P.K.V. Group Industries - is the plaintiff. The suit was filed for realisation of balance amount from the defendant Jikku Chit Fund (Pvt) Ltd. According to the plaintiff, ah amount of Rs. 3,83,250/- is due from the defendant. A petition for attachment was filed on the ground that the property in the schedule belongs to Jikku Chit Fund. Jikku Chit Fund is a Company incorporated under the Indian Companies Act. In the objection to the attachment, among other things, it was contended that the schedule property belongs to the Managing Director Kuriakose and it cannot be attached for the debts of the company. The learned Sub Judge, who heard the matter, took the view that under Section 322 of the Indian Companies Act, the liability of the Director is unlimited and hence held that the property can be attached. It was at that time that the claim petition was filed by the Managing Director - Kuriakose.
3. In the claim petition, evidence was adduced to show that the property was purchased personally by Kuriakose. Ext. A1 is the copy of the sale deed in favour of the appellant. Ext. A2 is the certificate issued by the Federal Bank showing that the title deed is deposited in the Bank as security for the purpose of the loan granted to the appellant. It is dated 5.5.1986. Ext. A3 is the tax receipt for the payment of tax of the property in the name of the appellant. Ext. A4 shows that the Chit Fund was incorporated as a Company under the Companies Act and the Certificate was issued by the Registrar of Companies, Delhi & Haryana. Thus, the Exhibits clearly shows that the property belongs to Kuriakose and the Chit Fund is a company incorporated under the Companies Act.
4. The question is whether the property of the appellant in A.S. No. 1020 of 1998 can be attached for the purpose of debts of the Jikku Chit Fund. There is no dispute that the company is a separate legal entity and the liability of the Company cannot be imposed on its officers or Directors. The lower Court went wrong in relying on Section 322 of the Companies Act. It is only with regard to the liability of the shareholders towards the Company and it is not for the outsiders.
5. The decisions reported in Ramachandran v. State of Kerala, 1983 KLT 1024 and Punalur Paper Mills Ltd. and Anr. v. District Collector, Quilon 1985 KLT 758 were cited for the proposition that unless by special law, the Managing Director is mulcted with personal liability he is not liable. In Kundan Singh v. Moga Transport Co. (P) Ltd. and Ors., 62 Company Cases 600, the question arose under the Industrial Disputes Act. There is no provision in the Companies Act or the Industrial Disputes Act making the Managing Director personally liable. The Punjab and Haryana High Court held that there is no provision either in the Companies Act or in the Industrial Disputes Act, which makes the Managing Director of a Company personally liable for recovery of dues against the company. In an another decision reported in H.S. Sidana v. Rajesh Enterprises, 77 Company Cases 252, the same High Court has held that where there was a decree for recovery of sums due to a bank from a Company in a suit against the Company and its Managing Director, the liability to discharge the decretal amount was that of the Company and not of its Managing Director. The Executing Court could proceed against the Managing Director of the judgment debtor Company only if it came to the conclusion that the Managing Director was personally liable to discharge the decretal amount. Learned counsel for the respondent argued that as a matter of fact, the company is only a camouflage. The entire thing is run by the appellant. It may be so. But so long as the defendant is the Company, it is the liability of the Company and not the person. Learned counsel for the respondent brought to our notice the decision reported in Santanu Ray and Ors. v. Union of India and Ors. (1988) 3 Comp LJ 259. It only says that in certain circumstances, the court may disregard special legal entity of the Company, if it was formed or is used to facilitate evasion of legal obligations where individual Directors of a Company were sought to be proceeded against for evasion of excise duty, corporate veil was directed to be lifted to determine whether a particular director could be proceeded against or whether he was liable for payment of all duties. That question does not arise in this case, because admittedly the suit was filed against the Company for realisation of the balance amount. If that be so, only the Company is made liable for the amount.
6. In the above view of the fact, we don't find any jurisdiction in the orders passed by the Court below and the orders passed are set aside. A.S. No. 1020 of 1998 and C.M.A. No. 247 of 1998 are allowed. I.A. No. 303 of 1998 is dismissed, while I.A. No. 33 of 1998 is allowed.