Sunil Ambwani, J. - (1.) M /s. Parasrampuria Trading and Finance Ltd. was wound up by this Court on March 25, 1998, in a creditors' winding up petition No. 58 of 1997, filed by M/s. GTC Industries Ltd. The official liquidator has been appointed as liquidator of the company, the statement of affairs have been filed.
(2.) PRIOR to the winding up of the company the Central Government appointed Shri BKL Srivastava, inspecting officer to inspect the books of account and statutory records of the company under Section 209A of the Companies Act. He carried out inspection for the period March 31, 1990 to March 31, 1994, and submitted his report dated July 31, 1995, to the Registrar of Companies, Regional Director, Company Affairs and the Central Government. He found that the directors of the company have committed several contraventions, namely, that the funds of the company were regularly being used by the directors for their personal gains, and that Shri S.K. Parasrampuria withdrew during the financial year March 31, 1993, an average amount of more than Rs. 2 lakhs and thereafter, in the year 1993 -94 more than Rs. 5 lakhs for his personal use without paying any interest. He made several investments in other group concerns, namely, M/s. Tirupati Roller and Flour Mills P. Ltd., Kalpana Mercantile Ltd., Macro International Ltd., and Radha Roller and Flour Mills Ltd., without charging interest. He also found that various activities were made in the company without furnishing any statutory information. The company became a public limited company under Section 43A of the Companies Act, 1956 ("the Act") with effect from October 1, 1985, but the company did not make any disclosure and it is only when the matter was taken up with the company by the Central Government on March 24, 1995, that the turnover has increased beyond Rs. 1 crore, the company made the disclosure. The inspector further found that the appointment of the directors and their remuneration after the company became public limited company was not approved by the Central Government. The inspector also reported contraventions of Sections 211 and 227 of the Companies Act, 1956, and concluded as follows: Conclusion. - -The inspection has revealed that the directors have treated the company as their own establishment and have not been honouring the corporate personality. The funds of the company has been used by the directors for their personal gains and withdrawal of the funds have been made even without approval of the board of directors, general meeting or the Central Government as required under the Act. Serious departures from the compliance of provisions of the Act are there while preparing the balance -sheets. Auditors have not cared even for the converted status of the company and have audited balance -sheet of private limited company even after conversion on October 1, 1985. The misuse of funds by the directors and their relatives to the tune of the such extent which is three four also be considered as sufficient and just and fair for petition under Section 433/439 also. It may be supported by the facts that agency of the company with GTC Industries has now come to an end and company has no proposal for diversification or adoption of new business. The specific contraventions of the Act have already been discussed in paras above. However, the facts remains that the company is a closely held company of the Parasrampuria family members. The inspection of group companies as suggested at para. 5.1 may also be considered.
(3.) IT appears that the report was not acted upon for a very long period of time until the company was wound up. The Central Government started again on this report only on December 19, 2001, when it sent a letter to the official liquidator to initiate proceedings under Sections 542 and 543 of the Companies Act, 1956. The official liquidator received the letters of the Central Government dated December 19, 2001 and March 11, 2001, and filed application for cognizance and prosecution for misfeasance. According to the official liquidator the proceedings under Section 543(2) of the Act were within limitation.;