- (1.) THE present Company Application is filed and Judge's Summons is taken out under Section 543(1) of the Companies Act, 1956 in making following prayers : (1) For a declaration that the respondent Nos. 1 to 5 and others as Directors of the Company were guilty of misfeasance, breach of trust, breach of duty, gross negligence in discharging their duties and in managing the affairs of the Company and guilty of fraudulent conduct in relation to the Company, (2) For a declaration that the respondents are liable and accountable for the non -recovery of loans and advances by the Company and also for interest at reasonable market rates on the loans and advances by the Company. (3) For an order against all of them or such of them as may be held liable jointly or severally to repay various loans and advances made to themselves and/or their friends and/or relatives and others with interest at reasonable market rate and to contribute such amount to the assets of the Company by way of compensation as may be determined. (4) For the purpose of ascertaining the liability of all or any of the respondents, necessary accounts and inquiries may be directed to be taken and made and they may be examined. (5) For an order that the respondents do pay the costs of and incidental to this application.'
(2.) BEFORE dealing with the aforesaid prayers, it is necessary to have some bare facts giving rise to the present application. The Company, namely, Gujarat Investment Trust Ltd., (in liquidation), was incorporated on 1st December 1934. The company was ordered to be wound up by this Court on 15th December 1976 and the Official Liquidator attached to this Court was appointed as the Liquidator of the said Company. The Official Liquidator vide his letter dated 28 -4 -1981 had retained M/s. Haribhakti and Co., Chartered Accountants to investigate the books of account of the said company for the purpose of initiating misfeasance proceedings under Section 543(1) of the Act and the said firm of Chartered Accountants had submitted its report to the Official Liquidator on 23 -11 -1981 and based on the said report, the Official Liquidator has filed the present application before this Court on 11th December 1981 which is filed within the time limit prescribed under Section 543(2) of the Act. The above firm of the Chartered Accountants in its report submitted to the Official Liquidator had scrutinized the books of account of the said company for the years from 1971 till the date of winding up order passed by this Court in respect of the said Company. The above firm of the Chartered Accountants, after discussing the various issues in its report, had given brief summary of the entire report in para 13 thereof which is as under : '13. Summary: Gujarat Investment Trust Co. Ltd. was ordered to wind -up by the order dated 15 -12 -1976 of the Hon'ble Gujarat High Court. 13.1 The Paid -up Share Capital was Rs. 2.5 lakhs as against Authorised Capital of Rs. 5 lakhs. Even though the Company was facing financial difficulties in repaying the deposits, the Company did not call for the unpaid portion of the Authorised' Capital instead of that they have contracted further liabilities by accepting further deposits from public and Share Holders. 13.2 The books of the accounts were not properly maintained and narration of the entries in the Books were not complete. 13.3 Mr. Sudhir V. Jadav, who was the Director of this Company, became the Secretary w.e.f. 22 -4 -1966 and he continued to be the Secretary till his death. After his death his wife Smt. Tarunika S. Jadav has been appointed as Secretary on the same terms and remuneration though she has no experience of such work. 13.4 As discussed in para (5), the Company has contravened the provisions of Section 58A of the Companies Act, 1956 and the directives issued by the Reserve Bank of India in accepting the deposits from the share -holders and from the public under the Investment Pool A/c. The Company has also contravened provisions of Section 205A(2) of the Companies Act in not depositing the unclaimed dividend in a separate Bank A/c. 13.5 The Investment as shown in the Statement of Affairs worth Rs. 5,99,280 are actually not realisable as discussed in para (5.7), as the Company has acquired shares of Rs. 4 lakhs of the subsidiary Company in settlement of the dues. Thus the funds of the Company have been invested in non -earning and not realisable assets as the subsidiary Company is also facing financial crisis and have incurred heavy loss. 13.6 As discussed in para (5.11), the Company has not charged interest on certain parties and have given undue advantage to the Secretary in granting remission and also not charging interest for a certain period on the advances granted to him. The Company has incurred heavy loss in not charging interest on Over -draft A/cs. from 1 -7 -1974 onwards. 13.7 As discussed in para (7.1), the Company has given interest -free advance of Rs. 1,24,322.70 on 23 -11 -1971 to the Broker M/s. Mansukhbhai Bhaidas with the intention of not recovering the said amount. 13.8 As discussed in para (8.1), the Company has not taken proper care in granting Over -draft and B.P. facilities to various parties and allowed the said debt to become doubtful of recovery by not taking any steps for recovery and thereby rendering heavy loss to the Company. 13.9 As discussed in para (9.1), the Company has utilised Suspense A/c. for giving facility of advances to certain persons including Secretary of the Company without charging any interest and without entering into any legal formalities. The Suspense a/c have also been utilised to reduce the losses as items of expenditures have been included in Suspense A/c. 13.10 As discussed in para (11), transactions entered with Gujarat Safe Deposit Co. Ltd. are not proper and the Current A/c have been utilised to accommodate certain fictitious entries.'
(3.) AFTER giving the above summary, the said firm of the Chartered Accountant had come to the conclusion that after considering the overall position of advances, deposits and losses, it became apparent that the liabilities were contracted with no intention to repay, as advances given were not recoverable and that the ex -directors and Secretary of the Company, Sudhir V. Jadav was benefited in getting remission in payment, waiver of interest for certain period, getting temporary interest -free advances through suspense A/c and getting undue credit against his debit balance in current A/c. The said firm of the Chartered Accountant had thereafter concluded his report by stating that the directors of the company continued to carry on the business, contracted the liabilities and incurred losses when they saw no reasonable prospects of the creditors of the company being paid.;