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Judgment
H.N. Nagamohan Das, J.—The Official Liquidator has filed this application u/s 543(1) of the Companies Act against the Respondents to declare that Respondents are jointly and severally liable to pay in all a sum of Rs. . 441.54 lakhs with interest.
Respondents are the Directors of the Company in liquidation. On 27.8.1999 this Court passed an order of winding up of the company in liquidation in Co. P. 107/1999. Subsequently, the Respondents filed statement of affairs. The Chartered Accountants examined the statement of affairs filed by the Respondents with reference to the books of accounts of the company and submitted a report on 17.8.2004 as per Ex.P1. In this report it is stated that as per the investigation carried out, the Respondent - Directors are accountable to the extent of Rs. . 441.54 lakhs under the following heads:
PARTICULARS Rs. In Lakhs
As per Para 18 Reg: loans & Advances (Debts expired under Limitation Act,) 31.28
As per Para 2C(A) Reg: Depositors/Scheme holders 211.60
As per Para 20(B) Reg: Canara Bank 3.98
As per Para 20(C) Reg: Income Tax dues 194.68
TOTAL 441.54
On the basis of the report of the Chartered Accountants, the Official Liquidator has filed this application u/s 543(1) of the Companies Act for a direction to the Respondents to pay the said amount.
Respondents have entered appearance and filed statement of objections interalia contending that they are not liable to pay the amounts specified in the application. It is contended that the Respondent - Directors conducted the affairs of the company in liquidation to its greatest advantage and intentionally they have not defrauded the company and further they have not made any personal gain for themselves. After completion of pleadings, the Official Liquidator examined the Chartered Accountant as PW.1 and got marked Exs.P1 to P5. The Respondent examined one witness as RW.1 and got marked Ex.R1 to R4.
Heard arguments on both the side and perused the entire application papers.
In respect of item No. 2, 3 and 4 referred to above, there is no pleading and there is no evidence. In the absence of pleading and evidence, the claim of Official Liquidator in respect of item No. 2 to 4 are liable to be rejected.
In item No. 1 the Official Liquidator has claimed a sum of Rs. 31.28 lakhs. It is seen from the evidence of PW.1 that the company in liquidation entered into a Memorandum of Understanding with one Mr. G.D. Oak as per Ex.R1 dated 18.10.1996. This Memorandum of Understanding was entered for the purpose of arranging a loan of Rs. 150 crores to the company in liquidation by Mr. G.D. Oak. In terms of Memorandum of Understanding, the company in liquidation has to pay a sum of Rs. 1,00,000/- as advance for performance of the agreement. Further it is seen from the agreement that in the event of Mr. G.D. Oak fails to perform his part of agreement within a time frame of 90 days, agreed to refund the advance amount of Rs. 1,00,000/-. Subsequent to Memorandum of Understanding - Ex.R1, Mr. G.D. Oak died. Thereafter, one Mr. Harish Patel had undertaken to continue the Memorandum of Understanding and to complete the obligations under Ex.R1 Further it is not in dispute that company in liquidation paid in all a sum of Rs. 29/-lakhs to Mr. G.D. Oak and also Harish Patel. Despite payment of this huge money no financial facility was arranged to the company in liquidation. Later it was found that Harish Patel played fraud and cheated the company in liquidation. Consequently, the company in liquidation initiated criminal proceedings by lodging a police complaint u/s 156(3) of Code of Criminal Procedure Since Harish Patel was absconding the investigation was not completed and charge sheet was not filed. The Respondents being the Directors of the company in liquidation paid amount of Rs. . 29/- lakhs contrary to the terms of the Memorandum of Understanding as per Ex.R1. Without ascertaining the antecedents of Mr. G.D. Oak and Harish Patel, Respondents paid a huge sum of Rs. 29/- lakhs. When Mr. Harish Patel absconded, there was no impediment for initiating civil proceedings for recovery of money. The contention of Respondents that they were under the bonafide impression that the complaint lodged by them with the police will also take care the recovery aspect, is unacceptable to me. It is needless to say that Respondents who are the Directors of the company in liquidation are dealing with hundreds and hundreds of lakhs of rupees and they are also assisted by qualified lawyers and chartered accountants. In such a situation it is unbelievable that the Respondents were under the impression chat lodging of criminal complaint will also take care of recovery of money. Therefore, I decline to accept the defense taken by the Respondents in so far as the advances made to an extent of Rs. . 29/- lakhs under the Memorandum of Understanding under Ex.R1. To this extent the Respondents are liable to pay to the Official Liquidator. The claim of the Official Liquidator to an extent of Rs. 162.91 lakhs against the Respondents is not pleaded in the application. Only on the basis of the evidence of PW.1, the Official Liquidator is making this claim. In the absence of any such pleading and opportunity to the Respondents. I refuse to concede the claim of Official Liquidator to an extent of Rs. 162.91 lakhs.
For the reasons stated above the following order:
i) The application is partly allowed.
ii) The application in so far as item No. 2, 3 and 4 referred to above is hereby rejected.
iii) The application in respect of item No. 1 is partly allowed declaring that the Respondents are liable to pay a sum of Rs. 29/- lakhs to the Official Liquidator. Ordered accordingly.