Decided on October 29,1968

STATE Respondents


- (1.) The Popular Bank Ltd., now in liquidation, was incorporated in 1944 with head office in Alleppey. It established three branch offices at Vaikom, Shertalai and Kuthiathode respectively. The bank suspended business on the 16th August, 1956. A petition for winding up the bank was presented in this court and was ordered on the 19th December, 1956. Thereafter, two applications were made by the official liquidator of the bank. Application No. 1 of 1959, from which these appeals arise, was under Section 542(1) of the Companies Act, 1956 , read with Rules 260 to 262 of the Companies (Court) Rules, 1959. Application No. 2 of 1959, from which the connected appeals heard along with these arise, was under Section 543 of the Companies Act, read with Section 45H of the Banking Companies Act, 1949. These were disposed of by our learned brother, Raghavan J.
(2.) Except where expressly indicated, reference hereinafter would be to the ranks of the parties as in Application No. 1 of 1959 which appears to have been treated as the main application by the learned judge, and a copy of the judgment in which was ordered to be appended to the judgment in Application No. 2 of 1959. Respondents Nos. 1 to 8 and the deceased Damodara Pai were the directors of the Popular Bank Ltd. Of these, respondents Nos. 1 and 8 were in Trivandrum and the rest were in Alleppey. The 1st respondent was the chairman of the board of directors. The 9th respondent was appointed general manager of the bank on November 21, 1955, in pursuance of a resolution dated November 10, 1955. The 10th respondent was the manager of the bank from its inception till the appointment of the 9th respondent, after which he was made to work as secretary under the 9th respondent. The 11th respondent was a clerk under the 10th respondent. The 8th respondent is the son-in-law of the 1st respondent; the 5th respondent is the brother-in-law of the 1st respondent being the 1st respondent's wife's brother.
(3.) The learned trial judge, Raghavan J., found that the business of the bank was carried on with intent to defraud the creditors of the banking company, and, at any rate, for other fraudulent purposes as contemplated by Section 542(1) of the Companies Act, that respondents Nos. 1 to 8 and 10 and 11 were knowingly parties to the carrying on of the said business in the manner aforesaid, and that the 9th respondent was not a knowing party to such carrying on of the business. He further held that respondents Nos. 1 to 8 and 10 were personally liable without any limitation of liability for the debts of the company. The learned judge found that the Popular Bank is an insolvent company and the deficiency in its assets to pay the creditors in full is Rs. 6,50,000. He directed that the liquidator may sell by public auction or otherwise the assets belonging to the company which are considered unrealisable and that the amounts realised will be applied in reduction of the decree amount and in proportionate reduction of the liability of the directors as settled by the decree. Subject as above the learned judge found respondents Nos. 10 and 31 jointly and severally liable for the entire amount of Rs. 6,50,000. This was apportioned betwef n the various respondents as follows : The 3rd respondent was found liable for a sum of Rs. 2,00,000. Respondents Nos. 1, 4, 5 and 7 were made liable for a sum of Rs. 75,000 each, and respondents Nos, 2, 6 and 8 were held liable for a sum of Rs. 50,000 each. The liquidator was held entitled to his costs from the respondents in proportion to their liabilities.;

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.