HIGH COURT OF KARNATAKA
Official Liquidator of Zenith Power Systems (I) Ltd. (In Liqn.)
Versus
K. Venkatachalam
Aravind Kumar, J.
C. O. P. No. 138 of 2000
C.A. No. 752 of 2007
JANUARY 21, 2013
ORDER
1. This application by the Official Liquidator is filed under Section 543 of Companies Act, 1956 alleging that respondents being Directors of the company M/s. Zenith Power Constructions (I) Limited (company in liquidation) have abused their fiduciary position, committed breach of trust by non-furnishing the books of account for completing winding up proceedings and on account of such omissions and commissions committed by respondents-1 to 3, it has resulted in loss being caused to the company (in liquidation) under the following heads:
|
(1) |
non-recovery of Sundry Debtors |
-Rs. 32,28,542/- |
|
(2) |
towards cash at Bank |
– Rs. 14,583/-; |
|
(3) |
non-recovery of loans and advances |
– Rs. 12,88,742/- |
| Total: |
– Rs. 45,31,865/- |
2. I have heard the arguments of Sri Jayaram, learned Advocate appearing for official liquidator and Sri Rajeshwar, learned counsel appearing for respondent Nos.1 and 3 and Sri Rajendra, learned counsel appearing for respondent No.2. Perused the pleadings, records, depositions of the witnesses and exhibits marked thereto.
3. Company in liquidation came to be ordered to be wound up in Co. P. 138/2000 by order dated 25.07.2002. It is alleged in the application that respondent Nos. 1 to 3 were Directors of the company in liquidation and they are jointly and severally responsible for the assets, properties and effects of the company which has been ordered to be wound up and after collecting details from Registrar of Companies, Bangalore, letters to the Ex-Directors came to be issued to submit the statement of affairs and handover books and accounts including statutory records of the erstwhile company and in response to the said letter, respondents filed statement of affairs belatedly. It is further contended that balance sheet of the company as on 25.07.2002 which was filed along with statement of particulars reflected that sundry debtors owed a sum of Rs. 37,22,034/- to the company (in liquidation) and official liquidator could recover only a sum of Rs. 4,93,492/- and non-recovery of debts was due to non-availability of details of whereabouts of the debtors and it ought to have been furnished by the respondents-Directors and on account of non-furnishing of these details and particulars which they ought to have, official liquidator has been unable to recover the said amount of Rs. 32,28,542/-.
4. Sri Jayaram, learned counsel appearing for official liquidator would fairly concede that insofar as claim made in part 8(b) is not pressed since P.W.1 has admitted in his cross examination receipt of the said amount. His submission is placed on record.
5. It is also contended that as per the balance sheet of even date, it has been reflected that loans and advances made by the company in liquidation was to the tune of Rs. 12,88,742/- and on account of non-furnishing of the details of the persons to whom said amounts had been advanced and their whereabouts being not known to the official liquidator which is attributable solely to the Ex-Directors of the company, respondents-directors have to make good the said loss occasioned to the erstwhile company to the extent of Rs. 12,88,742/- with interest thereon at 18% p.a. He would also draw attention of the Court to the evidence of R.W. 1 wherein it has been admitted in his cross-examination dated 14.12.2010 that official liquidator had issued several notices seeking particulars of the sundry debtors and in view of the same, adverse inference has to be drawn that they have not produced the said details and as such, respondents holding the post of Directors of the erstwhile company in fiduciary capacity and as trustees of the company in liquidation, they have to be made answerable to the claimants and render themselves liable to make good the loss sustained by the company and body of contributories. It is also contended that they have not discharged their obligation in protecting interest of the company as well as its contributories and thus committed acts of misfeasance namely, committed breach of trust in relation to the company.
6. Per contra, Sri Rajeshwar, learned Advocate appearing for respondent Nos.1 and 3 would reiterate the contentions raised in the statement of objections as well as evidence tendered before this Court and also drawing attention of the Court to the cross examination of the applicant’s witness to contend that there is no wilful withholding of any information to the official liquidator and at all points of time, they have co-operated with the official liquidator and question of these two respondents committing any breach would not arise. He would also elaborate his submission by contending that discrepancy that has occasioned in the statement of particulars filed by respondents-1 and 3 is with reference to the revised amount which relates to the margin money paid by the erstwhile company while obtaining bank guarantee and this has also been reflected in the statement as per Ex.R-22 which came to be certified by the State Bank of India vide their communication dated 09.10.2007 and as such there is neither misrepresentation nor wilful withholding of any documents from production before official liquidator and as such, there is no act of misfeasance committed by respondent Nos.1 and 3. On these grounds he seeks for dismissal of the application.
7. Sri Rajendra, learned Advocate for respondent No.2 would also support the arguments of Sri Rajeshwar and he would further contend that application against respondent No.2 itself was not maintainable inasmuch as, respondent No.2 he had tendered resignation on 17.12.2001 as per Ex.R-2 which came to be forwarded to the Registrar of Companies, Bangalore on 03.01.2002 and same is evidenced from the minutes of the meeting held on 29.10.2002 as per Ex.R-2 and submits that since company in liquidation was ordered to be wound up subsequent to said resignation letter namely on 25.07.2002, second respondent is not answerable to any claim since he discontinued to be the Director of erstwhile company as on date of winding up order came to be passed. He would also bring to the notice of the Court cross examination of P.W.1 wherein it is admitted that official liquidator had signed Ex.R-1 and R-2 which would clearly go to show that as on the date of preparation of said Minutes on 29.10.2012 itself official liquidator was aware of the resignation having been tendered by respondent No.2 way back on 17.12.2001 and as such, there are no acts of misfeasance and respondent No.2 cannot be held responsible. He would also submit that respondent No.1 has filed statement of particulars and he has also filed the said particulars based on the records and there is no suppression of facts from the official liquidator and there is no act of misfeasance and any amount due to the erstwhile company cannot be recovered from respondent Nos. 1 to 3 particularly as there is no wilful act attributable to any of the Directors of the erstwhile company.
8. Having heard the learned Advocates appearing for the parties and on perusal of the depositions, exhibits and after considering arguments advanced by respective learned Advocates, I am of the considered view that following points would arise for consideration:
