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Judgment
H.N. Nagamohan Das, J.—This application is filed by the Official Liquidator u/s 543(1) of the Companies Act, 1956 for a direction to the
Respondents to pay a sum of Rs. 1,87,80,899.87 under different heads.
The Company in liquidation was floated in the year 1984 and commenced its operation from the year 1985. In the year 1997 the BIFR referred
the matter to this Court for winding up of the company in liquidation. This Court vide order dated 7-1-2000 passed an order to wind up the
company in liquidation. On 7-9-2000 the Directors of the company in liquidation filed their statement of affairs and produced the balance sheet up
to the end of 31-12-1995. It is on the basis of the statement of affairs and the balance sheet filed by the Directors the present application is filed
for a direction to the Respondent-directors to pay the amount as claimed in the application.
The Respondents entered appearance and filed statement of objections inter alia opposing the claim in the application.
During the pendency of this application first Respondent who was the Director of the company in liquidation died. Official Liquidator examined
one witness as PW. 1 and got marked Ex.P1 and P2. Respondents examined three witnesses as RW.1 to 3 and got marked Ex.R1 to R8.
Heard arguments on both the side and perused the entire material on record.
The claim of the Official Liquidator is under the following heads:
(i) Trade Debtors Rs. 6,53,248
(ii)Loans & Advances Rs. 16,54,372
(iii)Miscellaneous expenditure Rs. 2,52,870.45
(iv)Profit & Loss Account Rs.
1,62,20,409.42
Respondents in their statement of objections admit sum of Rs. 6,53,248 towards trade debts. As on the date of passing of the order of winding
up the trade debts are time-barred. The explanation of the Respondents that they did not had necessary funds with them to initiate legal action for
recovery of the trade debts and as such they became time-barred is not an acceptable explanation. Therefore, the Respondents are liable to pay
this amount under the head ''trade debts''.
Respondents in their statement of objections admit that they have paid a sum of Rs. 16,04,000 to one Ekadanta Industrial Estates Private
Limited, Bangalore for purchase of industrial shed. Further the Respondents in their statement of objections contend that they tried to recover this
money from Ekadanta Industrial Estates Private Ltd. but they threatened the Respondent with dire consequences and as such the same was not
recovered. Respondents have failed to take necessary steps to recover this money from the said Ekadanta Industrial Estates. On account of
latches and lapses on the part of the Respondents this claim is time-barred. Therefore, the Respondents are liable to pay this amount.
The Official Liquidator claimed Rs. 2,52,870 under miscellaneous expenses on the ground that the same is not properly explained. Respondents
in their statement of objections explained that they incurred a sum of Rs. 8,33,407.33 towards pre-operative expenditures. This expenditure was
given set off in the subsequent years @ Rs. 82,160 p.a. Under this head as on the date of filing of the balance sheet in the year 1995, the
outstanding balance was Rs. 2,52,870. In support of this contention the Respondents have marked in their evidence Ex. R4 and R5. This evidence
on record establishes the fact that there is sufficient material on record explaining the outstanding balance of Rs. 2,52,870 under the head
''miscellaneous expense''. Therefore, the Respondents are not liable under this head.
The Official Liquidator claimed a sum of Rs. 1,62,20,409 under the head ''profit and loss account''. The Official Liquidator contends that this
huge loss is on account of failure of the Respondents in mismanaging the affairs of the company in liquidation. In support of this contention except
the oral interested testimony of PW. 1, there is no other evidence on record. As against this oral evidence of PW. 1 Respondents in addition to
their oral evidence produced Ex.R6 to R8. A reading of Ex.R6 to R8 manifestly makes it clear that the Respondent-Directors had taken necessary
steps to mitigate the losses of the company in liquidation. Despite the efforts made by Respondents they have to incur huge losses on account of
trade difficulties. Therefore, from the explanation and the documents produced by the Respondents it cannot be said that on account of
mismanagement of affairs of the company in liquidation by the Respondents, losses are caused. Therefore, Respondents are not liable to pay the
amounts claimed under the head ''profit and loss account''.
For the reasons stated above, the following order:
(i) Application is partly allowed.
(ii) It is declared that the Respondents are liable to pay a sum of Rs. 6,53,248 under the head ''trade debts'' and another sum of Rs. 16,54,372
under the head loans and advances.
(iii) Remaining all other aspects, the application is hereby rejected.