OFFICIAL LIQUIDATOR Vs. PARTHASARATHI SINHA
LAWS(SC)-1982-12-27
SUPREME COURT OF INDIA (FROM: CALCUTTA)
Decided on December 17,1982

OFFICIAL LIQUIDATOR Appellant
VERSUS
PARTHASARATHI SINHA Respondents

JUDGEMENT

Venkataramiah, J. - (1.) The short question which arises for decision in this appeal by special leave is whether the proceedings initiated against a director of a company under Section 543 of the Companies Act, 1956 (hereinafter referred to as 'the Act') can be continued after his death against his legal representatives and whether any amount declared to be due in such proceedings can be realised from the estate of the deceased in the hands of his legal representatives.
(2.) The facts of the present case may be briefly stated thus:Ballygunge Real Property and Building Society Ltd. (hereinafter referred to as 'the Company in liquidation') was ordered to be wound up by the High Court of Calcutta on January 8, 1958. On Jan. 2, 1963, the Official Liquidator took out summons under See, 543 (1) of the Act against its directors including Dr. S. N. Sinha for a declaration that the said directors were guilty of misfeasance and breach of trust and also for an order directing them to repay or restore the money or property of the Company in liquidation which they were alleged to have retained wrongfully. During the pendency of the said proceedings, Dr. S.N. Sinha died on November 16, 1969 intestate leaving behind his son, Parthasarathi Sinha and two married daughters, Maya Bose and Mira Mitra as his heirs and legal representatives. On February 12, 1970, Judges summons was taken out at the instance of the Official Liquidator for leave to continue the said proceedings against the said heirs and legal representatives, The learned Company Judge passed an order on November 9, 1970 for substitution of the said heirs and legal representatives in place of Dr. S. N. Sinha, the deceased. Against that order, the heirs and legal representatives of Dr. S. N. Sinha preferred an appeal before the Division Bench of the Calcutta High Court under Sec. 483 of the Act. That appeal was allowed by the Division Bench on August 1, 1975 and save and except that the death of Dr. S. N. Sinha was recorded, the order of the Company Judge was set aside. This appeal is filed against the order of the Division Bench.
(3.) Before the Division Bench of the High Court, the principal contention urged on behalf of the heirs and legal representatives of Dr. S. N. Sinha, since deceased was that in view of the decision of this Court in Official Liquidator, Supreme Bank Ltd. v. P. A. Tendolkar, (1973) 3 SCR 364 no further action in the misfeasance proceedings could be taken against them and we are concerned only with that contention in this appeal. Since the effect of the above decision is understood in one way by the High Court of Calcutta in this case and differently by the High Court of Kerala in Aleykutty Varke Tharakan v. Official Liquidator, (1978) 48 Corn Cas 472 and by the High Court of Punjab and Haryana in Shiwalik Transport Co. Ltd. (in liquidation) v. Thakur Ajit Singh, (1978) 48 Com Cas 465 we shall proceed to discuss the decision in Tendolkar's case (supra) at some length. Before doing so, we shall refer to the relevant provisions of law and the specific averments made in this case by the Official Liquidator. Section 543 of the Act reads as follows: "543. Power of Court to assess damages against delinquent directors, etc.- (1) If, in the course of winding up a company, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, managing agent, secretaries and treasurers, manager, liquidator or officer of the company - (a) has misapplied, or retained, or become liable or accountable for, any money or property of the company; or (b) has been guilty of any misfeasance or breach of trust in relation to the company; the Court may, on the application of the Official Liquidator, of the liquidator, or of any creditor or contributory, made within the time specified in that behalf in sub-section (2), examine into the conduct of the person, director, managing agent, secretaries and treasurers, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively, 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, misfeasance or breach of trust, as the Court thinks just. (2) An application under sub-section (1) shall be made within five years from date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer. (3) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.";


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