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In Re: Indo Burma Industries Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberMatter No. 210 of 1952
Judge
Reported inAIR1956Cal648
ActsCompanies Act, 1956 - Section 543; ;Companies Act, 1913 - Section 235; ;
AppellantIn Re: Indo Burma Industries Ltd.
Appellant AdvocateS. Roy and ;T.K. Bose, Advs.
Respondent AdvocateA.K. Banerjee, Adv.
Cases ReferredLondon Trust Co. Ltd. v. Mackenzie
Excerpt:
- orderp.b. mukherji, j. 1. this is an application under section 35, indian companies act by the official liquidator mr. ajoy kumar basu, barrister-at-law, for the examination of the conduct of manindra nath. ghosal, kanai lal tarafdar and sudhangsu kumar bose and for an order compelling these three persons to pay or restore certain sums of money belonging to the company with interest at such rate as the court thinks fit to the liquidator.2. the main allegations on which this application is made may be briefly set out. the company is alleged to have advanced loans to (1) ghosal biswas & co., (2) bhowanipur wayside garage and (3) electric corporation respectively the sums of rs. 54,477/12/-, rs. 46,397/8/3 and rs. 19,222/9/-. this allegation is to be found in para. 20 of the official.....
Judgment:
ORDER

P.B. Mukherji, J.

1. This is an application under Section 35, Indian Companies Act by the Official Liquidator Mr. Ajoy Kumar Basu, Barrister-at-Law, for the examination of the conduct of Manindra Nath. Ghosal, Kanai Lal Tarafdar and Sudhangsu Kumar Bose and for an order compelling these three persons to pay or restore certain sums of money belonging to the company with interest at such rate as the Court thinks fit to the Liquidator.

2. The main allegations on which this application is made may be briefly set out. The company is alleged to have advanced loans to (1) Ghosal Biswas & Co., (2) Bhowanipur Wayside Garage and (3) Electric Corporation respectively the sums of Rs. 54,477/12/-, Rs. 46,397/8/3 and Rs. 19,222/9/-. This allegation is to be found in para. 20 of the Official Liquidator's petition in support of the summons. No other allegation has been pressed and the enquiry therefore must be confined to these three concerns.

3. The three persons Manindra Math Ghosal, Kanal Lal Tarafdar and Sudhangsu Kumar Bose were intimately concerned with a company called Indo Burma Industries Ltd. Manindra and Kanai were the directors of the company & Sudhang-su Kumar Bose was its manager. This company was incorporated in 1945 as a public limited company. It failed to file its statutory report and an application was made in February, 1949 by one Kiron Kumar Majumdar and the said Manindra Nath Ghosal for directions for filing the statutory report, for an order directing the holding of the General Meeting of the company under Section 73(3), Indian Companies Act and alternatively for winding up of the company. The ultimate result was that by an order dated 30-3-1949 Sarkar J., wound up the company. On 20-4-1949 Mr. Basu was appointed the Liquidator and the order of his appointment gave him power to act as Liquidator without security and with a remuneration of 5 per cent. of gross realisation of the assets of the company.

3. On 19-8-1949, some contributors made an application for leave to be granted to the Liquidator to require Manindra, Kanai and Sudhangsu to file their statements of affairs under Section 177A, Indian Companies Act. The application was made by Profulla Kumar Chakraborty and others. Thereafter on 20-8-1949 an application was made by Manindra Nath Ghosal and Kiron Kumar Majumdar for an order granting liberty to the Official Liquidator to retain and engage the services of Mr. P. C. Chatterjee, solicitor, and to appoint en auditor for the purpose of auditing the accounts and preparing a balance sheet of the company and liberty to the Official Liquidator to engage a clerk and a peon. This application also asked for liberty to be given to the Official Liquidator to institute and/or defend suits and institute any other legal proceedings civil and criminal in the name and on behalf of the company and to do all other acts as might be necessary for winding up of the company. These two applications were heard together by Sinha J., who by his order dated 12-9-1949 dismissed the application of Manindra and Kiron with costs and ordered the Official Liquidator to be at liberty to ask Manindra, Kanai and Sudhangsu to file their statements of affairs and giving leave to the Official Liquidator to appoint Mr. S. C. Sen Gupta, a Registered Accountant, to get the books of account of the company audited and to pay him at the first instance his remuneration in respect thereof. This order of Sinha J., also gave him leave to appoint an attorney on the undertaking of the applicant Profulla Kumar Chakraborty and others to appear and bear his costs if the same were not recovered from the assets of the company.

4. The Official Liquidator received hardly any assets of the company. He could only get possession of (1) one table, (2) four chairs, (3) one easy chair, (4) a handsome cash of Rs. 7/14/3 at the Hindusthan Commercial Bank and (5) certain old and incomplete books of account. Mr. Sen Gupta completed his audit from 21-11-45 to 28-2-49 and made his report on 30-6-1950 which is marked as an exhibit in these proceedings. The auditor's report revealed for the first time that the company had advanced the above loans to those three concerns.

5. It is proved before me that Manindra Nath Ghosal and Kanai Lal Tarafdar were both directors of the company and at the same time partners in the firm of Ghosal Biswas & Co. to which they were lending money. It also is now proved that the business of Electric Corporation was from 24-7-1948 to 30-7-1948 carried on by the director Manindra Nath Ghosal as the sole proprietor thereof. Thereafter from 30th July to 17th December, 1948 the director Manindra Nath Gho-sal carried on the business of Electric Corporation as a partner with one Sachindra Nath Nandi. It is also proved now that director Manindra Nath Ghosal was at all material times the sole proprietor of the business of Bhowanipore Wayside Garage.

6. Naturally the Liquidator upon the discovery of these facts from the report of the auditor was of the opinion that a fraud had been committed by Manindra Nath Ghosal, Kanai Lal Tarafdar and Sudhangsu Kumar Bose and he duly filed his report under Section 177B (2), Indian Companies Act and was by an order made by this Court dated 3-4-1951 given leave to make an application under Section 196, Indian Companies Act. On 16-4-1951 this Court made an order on the Liquidator's application that Kanai Lal Tarafdar, Manindra Nath Ghosal & Sudhangsu Kumar Basu be publicly examined. The order was duly drawn up and served on these three persons. On or about 25-5-1951 when Sudhangsu Kumar Basu was being examined before Banerjee J., he did not fully answer some of the questions put to him and requested for inspection of the books of the com-pany. Banerjee J., on that day made an order adjourning his public examination till 27-6-1951 and granting the director and the manager to have inspection of the books, documents ancl papers as they wanted. A list of books, papers and documents had to be prepared and the said list was to be signed by the directors and the manager concerned. While this public examination was going on and was being- adjourned at the instance of Sudhangsu Kumar Basu under exa-mination, an application was made on 22-6-1951by Kalidas Nandi and Kaliprosonna Nandi for removing the Official Liquidator. That application, however, was naturally adjourned by Banerjee J., on 2-7-1951 until after the public examination was over. The public examination of Manindra Nath Ghosal, Kanai Lal Tarafdar and Sudhangsu Kumar Basu was completed by 8-3-1952. Although the public examination was over, the said Kali Prosonna Nandi and Kalidas Nandi never moved their application for the removal of the Liquidator taken out on 22-6-1951. It is now 1956; four years have passed. That application still remains unmoved. The Liquidator, after the public examination was over, presented this petition on 28-3-1952 noting it as made on that date.

7. It is the Liquidator's case that since the public examination under Section 196, Indian Companies Act, Sudhangsu Kumar Basu, Kanai Lal Tarafdar and Manindra Nath Ghosal must be taken to have admitted their guilt and the irregularities in respect of the said loans. He, therefore, now moves under Section 235, Companies Act to examine the conduct of the said three persons and to compel them to repay or restore such sums or moneys or part thereof with interest or to contribute such sums of moneys to the assets of the company by way of compensation in respect of the said misapplication, retainer and misfeasance mentioned in the petition. That is the allegation of the Liquidator in para. 37 of the petition.

8. The evidence given by these three persons under public examination has been duly tendered before me in these proceedings. These three persons Manindra Nath Ghosal, Kanai Lal Tarafdar and Sudhangsu Kumar Basu have also now given evidence before me, and their evidence has been cross-examined also. Kanai Lal Chat-terjee, Chartered Accountant of the firm of S. C. Sen Gupta, has also given evidence. He audited the account and made the report of Indo Burma Industries Ltd.

9. From the evidence of the auditor as well as of Sudhangsu Kumar Basu, Manindra Nath Ghosal and Kanai Lal Tarafdar it is now clearly established that the amount of the loan to Ghosal Biswas & Co. by the Indo Burma Industries Ltd. is Rs. 34,477/12/- being the difference between Rs. 54,477/12/- and Rs. 20,000/- repaid. It is also proved that the company gave a loan of Rs. 46,397/8/3 to the Bhowanipur Wayside Garage out of which it received back the sum of Rs. 5,564/5/- leaving outstanding a debt of Rs. 40,833/3/3 as due to the company. It is also proved that the company gave loan to the Electric Corporation to the extent of Rs. 19,222/9/- out of which it received back only Rs. 3960/-1/-, with the result that the outstanding amount due from the Electric Corporation to the company is Rs. 15,262/8/-. The auditor's report proves that altogether a sum of Rs. 90,573/7/3 is the loss caused to the company's funds and assets being made up of (1) Ghosal Biswas & Co. Rs. 34,477/12/-, (2) Bhowanipore Wayside Garage Rs. 40,833/3/3 and (3) Electric Corporation Rs. 15,262/8/-.

10. The evidence of Sudhangsu Basu, Manindra Nath Ghosal and Kanai Lal Tarafdar also clearly establishes the fact that although manin-dra Nath Ghosal and Kanai Lal Tarafdar were the directors of the company and Sudhangsu Kumar Basu was only the manager, it was Sudhangsu who really was the brain and the adviser and the real author of these illegal loans. The evidence of these three persons read with the auditor's evidence leaves no room for doubt about the facts of these loans and the constitution of these firms.

11. The defence that is taken on behalf of these persons is peculiar. It is said that these loans were not illegal or improper investment al-though undoubtedly they have caused loss to the company to the extent of Rs. 90,573/7/3. Section 86(D), Companies Act makes it clear that no company should make any loan to a director of the company or to a firm of which such director is a partner or to a private company of which its director is a member or director. In fact, sub-S. (2) of Section 86-D provides as follows:

'In the event of any contravention of Sub-section (1) any director of the company who is a party to such contravention shall be punishable with fine which may extend to five hundred rupees, and if default is made in repayment of the loan shall be liable jointly and severally for the -amount unpaid.'

Now it is proved that Manindra Nath Ghosal and Kanai Lal Tarafdar were partners of Ghosal Bis-was & Co. and as such partners they were taking the loan from the company of which they were both the directors. With regard to the two other concerns, namely, Bhowanipore wayside Garage and Electric Corporation, Manindra Nath Ghosal was the sole proprietor of the former and of the latter he was for sometime a sole proprietor and for sometime a joint proprietor or partner with a man called Nandi. In other words, he was taking a loan from the company of which he was a director. In fact, the auditors in their report make the comment that the constitution of these concerns makes it quite clear that the advance of loans by the company to Bhowanipore Wayside Garage and Ghosal Biswas & Co., owned by Main-dra Nath Ghosal either as a sole proprietor or as a partner arid himself being the director and the managing agent of the company itself was in contravention of Sections 86(D) and 87D and (E), Indian Companies Act. The remarkable feature further disclosed and proved before me is that that the concern by the name of Inland Traders happened to be the managing agent of the company but the Inland Traders was nothing else but a name for Manindra Nath Ghosal, so that the net result is that a director of the company, Manindra Nath Ghosal, was the managing agent of the company itself managed by himself as a director along with the other directors. My own view is that the manager and the director on the facts of this case committed acts of gross illegality not authorised and permitted by the provisions of the Indian Companies Act. On that ground I am satisfied that they are, and each one of them is, guilty of misfeasance and causing loss to the company.

12. The next defence is that the acts do not constitute misfeasance. These acts are defended on the ground that they are at best acts of indiscretion or bad management of the company and its finances. I am unable to accept that contention. The word 'misfeasance' in Section 235 has not been defined. The counter part of the English Companies Act making similar provisions for misfeasance has been, judicially noticed on a number of occasions. In re, Kingston Cotton Mill Co. reported in 1896-1 Ch 331 (A), 'Misfeasance' is said to cover every misconduct by an officer of a company, as such, for which he might, apart from Section 10, English Companies (Winding-up) Act of 1890, have been sued, and includes the case of an auditor who, either knowingly or through failure to use reasonable skill and care, certifies accounts which ought not to have been certified, provided the direct result is pecuniary damage to the company. If an auditor can be held liable in those circumstances then the manager of this company Sudhangsu Kumar Basu who really instigated and advised the commission of these illegal acts causing loss to the company, in this case, is all the more so. It was also said there in this case that the directors who paid away the funds of (their company honestly, and reasonably believing' in a state of facts which would justify the payment, were not bound to replace the funds because it subsequently turned out that on the true facts the payment was ultra vires. That principle is entirely different from the principle presented in the case before me. In no circumstances could the facts of this case justify the conclusion that the directors or the manager in this case honestly and reasonably believed that loans of this description were justified. In fact, the evidence of the manager Sudhangsu Kumar Basu is that he was advising the directors to commit these acts of illegality by entering into the loans in this case. His evidence went so far as to say that knowing that these acts were illegal, he advised the directors to commit those acts of illegality. Now that is a state of affairs very far from directors doing an act honestly and reasonably believing a state of facts as justifying the payment. No state of facts in this case justified such loans at any stage. Vaughan Williams J., delivering judgment in that case at page 344 says: 'It seems to me that the word 'misfeasance' covers every misconduct by an officer of the company as such for which such officer might have been sued apart from the section'. I respectfully agree with that definition of mis-conduct. In another case In re Oxford Benefit Building and Investment Society reported in (1887) 35 Ch D 502 (B), the directors, without the knowledge of the share-holders, voted and paid themselves out of the funds of the company commission on certain purchases and sales, and entered such payment in the books of the company, but made no mention of it in their reports or balance sheets, and it was held there that they were jointly and severally liable to repay that amount with interest at 5 per cent. This case is important because it has been contended here before me that at best the directors and manager did something bona fide and in good faith and in the belief that these loans will ultimately turn out to be for the good of the company. On this point Kay J., in that case at page 512 of the report observes:

'It has been argued that this was done bona fide, and that where directors in good faith have made an error in the computation on which their balance sheets are founded, the Court will not lightly visit them with the consequences of a bona fide mistake. I confess I hardly know what is meant by bona fides in such an argument. I inquired whether there was any evidence that the directors had considered the meaning of the articles or had taken any advice upon them. There is no suggestion that they ever did so. There is nothing obsecure or difficult in the construction, and it seems to me incredible that any man of business could suppose that this course of proceeding was a division of realized profits.' Kay J., quoted the Master of the Rolls in 'In re National Funds Assurance Co.', (1879) 10 Ch D 118 at p. 128 (C), where the learned Master of the Rolls had said:

'A man may not intend to commit a fraud, or may not intend to do anything which causists might call immoral, and he may be told that to misapply money is the right thing to do, but when he has the facts before him--When the plain and patent facts are brought to his knowledge -- as I have often said, and I say now again, I will not dive into the recesses of his mind to say whether he believed, when he was doing a dishonest act, that he was doing an honest one ..... It is impossible in a Court of Justice to call a particular act a bona fide act simply because a man says that he did not intend to commit a fraud. .... When a man misappropriates money with a knowledge of all the facts, I cannot allow him to say that he is not liable simply because some body or other told him that he was not doing wrong, or that somehow or other he convinced himself that he was not doing wrong.' This, in my view, is a complete answer to the argument put forward before me that the directors Manindra Nath Ghosal and Kanailai Taraf-dar did not understand very much of company management and left it to the manager Sud-hangsu Kumar Basu to guide them, and what the directors and the manager did in this case was at best either bona fide or that they honestly believed that they were doing something which did not amount to misfeasance. To the same effect are the observations of Wright J. in --'London Trust Co. Ltd. v. Mackenzie', reported in (1893) 68 LT 380 at pp. 383-84 (D). I therefore overrule this ground of bona fide mistake.

13. The next defence is really a corollary of the previous defence of a bona fide act. The defence is based on answer to question 36 of the evidence of Sudhangsu Kumar Basu, the manager of the company. The gist of that defence is that the company tried to bring into one system the various businesses that were being carried on by these persons. In fact, in 1946 they had four concerns, namely, Bhowanipore Wayside Garage, Chat-la Iron & Brass Works, Electric Corporation and Ghosal Biswas and Company, and in the year 1946 Indo Burma Industries Ltd. took the managing agency of these three concerns, namely, -the Electric Corporation, Chetla Iron & Brass Works and Bhowaniport Wayside Garage. In other words, the defence is that they were intended ultimately to come under the business of the company. But whatever the ultimate intention may be -- and that cannot be judged by any evidence, this much is clear that while these persons remained as directors they were lending money to concerns of which they themselves were either sole proprietors or partners. I, therefore, do not thing that a scheme that all these different businesses were ultimately to be put under the company's business can at all avail against the charge of misfeasance and misapplication of company's moneys.

14. It will be appropriate in this connection to refer to the provisions of Section 235, Companies Act of 1913. It is a section which has acquired the rather inadequate description of being called a 'misfeasance section'. The section, however, covers many acts other than misfeasance. To my mind, it is clear that this section covers misapplication of any money or property of the company or liability or accountability for any money or property of the company in addition to any act of misfeasance or breach of trust. It is plain and un-disputable in the facts of this case that certainly moneys of the company have been misapplied. It is plain also that such moneys have been retained by these persons on the ground that the directors Kanai Lal Tarafdar and Manindra Nath Ghose at any rate retained company's money because they took those moneys as loan for concerns in which they themselves were either sole owners or partners. I am also satisfied on the facts of this case that each one of these three persons is liable or at any rate accountable for such moneys. If that is so, then quite apart from misfeasance or breach of trust in the most technical sense conceivable, the directors and the manager in this case come directly under the language of this Section 235 which uses the express words 'misapplied' or retained or become liable or accountable for any money or property of the' company' apart from the words 'or being guilty of any misfeasance or breach of trust in relation to the company.' Now it can certainly be said that the manager Sudhangsu Kumar Basu has not been proved to have retained the money for himself. That to my mind does not matter. He has been responsible for mis-applying this money because it was he who advised the directors to do so and he, in my opinion, is accountable and liable for such money of the company even though he himself has not been proved to have retained any such money. The manager Basu certainly is the chief abettor of the misapplication of the company's moneys in this case. As an auditor who knowingly certifies accounts which should not be certified was said in (1396) 1 Ch 331 (A), to be liable for misfeasance so in this case Sudhangsu Kumar Basu the manager of the company who knowingly advised the perpetration of these illegal acts -causing damage and loss to the company must be held liable for misfeasance and to account for that loss.

15. The next defence on behalf of these respondents is based on the Articles and Memorandum of Association of the Company. Now they are Ex. 10 in this proceeding. Reliance was placed, first, on clause III(10) of the Memorandum of Association. That provision reads as follows:

'To carry on the business of carriers by land or water, of managing agents, secretaries, shipping agents, insurance agents, mercantile agents, and any kind of commercial, financial, and agency business.'

It is, therefore, argued before me that the objects as stated in the Memorandum of Association in that clause permit the company to carry on the business of managing agents and resolutions of the company are cited in support thereof, although my interpretation of the resolution relied on does not support the respondent's argument, No doubt that is the provision in the Memorandum. But the facts here show that the company was doing very much more than carrying on business of managing agents of the independent concerns. Indeed Resolution No. 3 of the meeting of the Board of Directors of 25-5-1946 purports to approve the action of the Managing Agents in accepting the managing agency of Bhowanipore Wayside Garage and of Chetla Iron & Brass Works' which is very different from the company Indo-Burma Industries Ltd. carrying on the business of Managing Agents. This was a case of the managing agent becoming itself the managing agent of some other concern. As I have already indicated, the position at best was that Inland Traders was the managing agent of the company, &the; company was the managing agents of Inland Traders, Electric Corporation, Bhowanipore Wayside Garage and Ghosal Biswas and Company. But 'Inland Traders' was nobody else other than Manindra Nath Ghosal who was himself the director of the company. So also was Manindra Nath Ghosal, a sole proprietor or a partner of the Electric Corporation and of Bhowanipore Wayside Garage. Now that is not the kind of business of managing agency which is permitted. In my view, of the construction of Clause III (10) of the Memorandum of Association of the company. What that clause permits the company to do is to become managing agents of independent concerns. In this connection reliance was also placed on Article 20 of the Articles of Association of the company which provides:

That the business of the company shall be managed by the managing agents subject to the supervision of the Board of Directors. Messrs. Inland Traders be appointed Managing Agents of the company from the date of incorporation of the company, and that firm or their successors or assigns in business whether incorporated or not, shall continue to be the managing agents of the company for twenty years certain from the date of incorporation unless they shall voluntarily re-sign or until they are removed under the provision of Section 87 (B), Indian Companies Act.' On the reasons which I have already stated, this does not permit the same man to be the managing agent of the whole company and at the same time to be the director of the company itself and. then lend money from one concern to the other. It is the loans which are illegal and which have caused loss to the company. In fact, the evidence of Manindra Nath Ghosal, Kanal Lal Tarafdar and Sudhangsu Basu clearly established that Manindra Nath Ghosal, for instance, was lending his own money to the company and taking it back from the company to the other concerns. Manindra's evidence establishes the fact that his money was not earning any interest in the concerns in which he was personally interested and by this device it appears that he got a monthly remuneration from the company of Rs. 250/-which was at least some profit for his money which otherwise it did not yield. This I consider to be certainly a breach of duty because he was profiting himself at the cost of company's funds and other share-holders.

16. Then the defence was that after all the entire money belonged to Manindra Nath Ghosal and Kanai Lal Tarafdar, the two directors, so far as the share capital of the company was concerned and they were lending their own money to their own concerns and there was nothing illegal in that transaction. I have already held that such lending is illegal and I am satisfied that it is so under the Indian Companies Act. But certain misconception about fact must here be cleared. It is not true to say that the entire share capital of the company belonged to Manindra and Kanai. The position is that Manindra and his wife held shares worth about Rs. 8,000/-, and Kanai and his wife held shares worth about RS. 15,350/- and Sudhangsu Basu held shares worth about Rs. 4,000/-. So between these three persons the total amount of share capital which they held was Rs. 27,350-. But the total share capital of the company was Rs. 72,270/-. Even adding shares held by the servants or employees or relatives of Manindra and Kanai to the extent of Rs. 16,050/-, the total amount of share capital held or controlled by Manindra and his wife, Kanal and his wife, Sudhangsu Bssu and the other servants or employees aforesaid would be about Rs. 43,400/-. There was another about Rs. 29,000/- worth of shares held by others. This argument, therefore, neither on law or on facts helps the cause of the respondents.

17. There is one other aspect of this case which requires a passing reference before I conclude. Now the relief that Section 235, Companies Act can grant is an order upon the respondents to restore this money to the company. Who is going to benefit by that order? A good deal of that benefit will enure in .favour of these very persons themselves because they and their supporters control Rs. 43,400/- worth of the share capital as against Rs. 29,000/- worth of shares held by others. I, therefore, see no reason why that order should not be made in this case.

18. It is contended on behalf of the respondents that no order should be made upon this application because the Liquidator has delayed these proceedings until almost the very last date of limitation and that he made this application while an application for the removal of the Liquidator was pending against him and that the Liquidator obtained no leave from this Court to institute the misfeasance summons which he should have done because in this case there were hardly any assets which could finance such proceedings of the Liquidator. I am not impressed by anyone of these arguments. A glance at the calendar of events in this case will dispel the force of these arguments.

19. The Liquidator was appointed on 30-3-1949. He took all necessary steps with such expedition as he could manage. In August, 1949 an application was made asking Manindra, Kanai and Sudhangsu for their respective statements of affairs under Section 177A of The Indian Companies Act and for other directions for the Liquidator to appoint a solicitor. Then the Liquidator had to appoint an auditor. The auditor made his report in June 1950. It was only thereafter that the Liquidator could move for public examination because the auditor's report disclosed grave illegalities and serious misappropriation of the company's moneys and funds. The public examination could not be concluded till 8-3-1952. The present application was noted as made on 28-3-1952 which was within three weeks of the conclusion of the public examination. The Liquidator was responsible and cautious as he should be. He did not rush to make this charge against the directors and the manager, but rightly relied first on the auditor's report and then on the evidence obtained by public examination. The fact that he took all this time is not his fault. I am, therefore, satisfied that this delay in bringing this proceeding has not only been explained, but legally and even technically it is not a defence to this application. Even though it is made on the last date of limitation, the Liquidator has the whole period granted by Section 235, Indian Companies Act within which to move.

20. The application for the removal of the Liquidator does not make this application bad. The application for the removal of the Liquidator was made on 22-6-1951 by Kalidas Nandi and Kali Prosonna Nandi who were in the company of Manindra and Kanai and their wives. The date of the application, RS I have already said, clearly indicates that it was an attempt, by Manindra and Kanai to stop their public examination which the Liquidator had already undertaken. In fact, this application for the removal of the Liquidator was made while Sudhangsu Basu was actually being publicly examined. But that is not all. This application on 2-7-1951 was adjourned by Banerjee J., until after the conclusion of the public examination. The reason for his Lordship's doing so is obvious as his Lordship thought that he would not permit the public examination to be stifled by this application for the removal of the Liquidator. But then what has happened thereafter is more interesting. Although the ap-plication for the removal of the Liquidater was adjourned till after the conclusion of the public examination and although such public examination was concluded on 8-3-1952, those applicants never moved that application for removal of the Liquidator within these last four years. The conclusion is irresistible that as the application for the removal of the Liquidator did not succeed in stifling the public examination and as the public examination had led to startling disclosures concerning these illegal loan transactions which supported the auditor's report, the real motive for the application for the removal of the liquidator was no longer present and the applicants therefore abandoned this application by their conduct of inaction. I am, therefore, satisfied that that application for the removal of the Liquidator was not bona fide because otherwise it would have been moved within the last four years and because I am satisfied that its very origin indicates that it was made with only one collateral purpose of stifling the public examination of the directors Manindra and Kanai and manager Sudhangsu Basu. I, therefore, hold that the pending application for the removal of the Liquidator is not an obstacle to this summons by the Liquidator. I am inclined also to think that the application should be taken as having lapsed under the Rules of this Court or at any rate abandoned by con-duct and cannot be regarded as pending.

21. The contention that the liquidator should have taken leave of the Court appears to me to be unfounded. Section 235 under which the Liquidator is making this application does not requite sanction or leave of the Court to make such application. It is said in argument on behalf of the respondents by Mr. Banerjee that the Liquidator at any rate has no assets and therefore he should not have launched on this summons. I do not appreciate that point. The Liquidator was appointed on a remuneration of 5 per cent. of the gross realisations and it is his duty to make every endeavour and to take every step to realise the dues of the company. Therefore if he succeeds, then he has the assets of the company coming into his hands from which he will have to pay the costs of these proceedings. I do not think that this is a legal objection to the application. When a Liquidator takes out a summons under Section 235, Companies Act and when he has asset of the company, in his hands, the charge usually made is that he is frittering away the assets of the company and I find that the charge now is being made that because he has no assets in the company, therefore he should not have taken out this summons. These are the arguments of despair with no merit behind them.

22. Finally it is said that the Liquidator took possession of the assets of these subsidiary concerns. Correspondence marked Exs. C, D, E and Exs. 8 and O indicate that there is no truth in such allegation. In fact, no receipt has been produced by any of the respondents to show that the Liquidator took possession of any and if so what assets of these subsidiary concerns. I am satisfied on the record that the Liquidator only took possession of the assets of the company at its registered office. The point of making this allegation against the Liquidator is that he could have realised all this money from such assets. But the fact remains that the Liquidator did not realise any asset whatever except one table, two chairs, one easy chair and Rs. 7/14/3 and certain old and incomplete books. I, therefore, overrule this objection.

23. The order that this Court is permitted to make under Section 235, Companies Act is to examine the conduct of the directors and manager and compel them to repay or restore the money or property or any part thereof with interest at such rate as the Court thinks just or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer and misfeasance. This power is irrespective of any criminal liability for such acts of the persons concerned. On the facts, therefore, I order (1) Manindra Nath Ghose, (2) Kanai Lal Tarafdar and (3) Sudhangsu Kumar Basu to jointly and severally pay and restore Rs. 90,573/7/3 with interest at 6 per cent, per annum from 1-4-1949 being a date after the order of liquidation made on 31-3-1949, to the assets of the company Indo Burma Industries Ltd., by way of compensation both in respect of the misapplication of that sum and misfeasance in respect thereof. The respondents will pay the costs of and incidental to this application as between attorney and client to the Liquidator applicant. In other words, there will be an order in terms of Clauses (a), (b), (c) and (g) with the direction upon the three respondents to pay the said sum of Rs. 90,573/7/3 with interest and costs as aforesaid. Certified for two counsel as of a hearing.


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