JUDGMENT V.K. Mehrotra, J. - This application has been made by the official liquidator attached to this Court. It was presented on August 7, 1978 as company application No. 16 of that year. Subsequently, it came to be registered as company petition No. 8 in the year 1980. 2. Premier Credit and Motors Private Limited, a company (in liquidation) (which was formerly known as Premier Credit and Instalment Corporation Private Limited) was incorporated under the (Indian) Companies Act, 1956 with its registered office at 2 Madan Mohan Malaviya Marg, Lucknow. A petition for winding-up of the company was presented in this Court on March 29, 1973 and eventually, by an order of July 31, 1973, this Court directed its winding-up. The official liquidator was appointed as liquidator of that company. 3. In the company (in liquidation) and its sister units, namely, (1) Premier Motors (P) Limited; (2) Premier Motors (Workshop) (P) Limited; and (3) India Motor Corporation (P) Limited of Lucknow, late Sri P.N. Tandon, his wife Smt. Swaran Lata Tandon, his son Sri Piyush Tandon and Kumari Subra Tandon had substantial financial interest. In the company (in liquidation), out of 6,000, shares issued and fully paid-up to Rs. 100 each, the Tandon family held the following shares Name of shareholders No. of shares held 1. Smt. Swaran Lata Tandon 255 2. Sri Piyush Tandon 1,935 3. Km. Subra Tandon 35 4. Late Sri P.N. Tandon 5 4.Besides it, the India Motor Corporation (P) Limited and M/s Premier Motors (P) Limited also held 1,540 and 2,075 shares respectively in the company. 5. The company (in liquidation), which was carrying on the business of financing commercial vehicles on hire purchase basis, suffered huge losses and there was no capital left. The company had a large number of creditors who themselves formed an association known as "Premier Creditors' Association, Delhi and Lucknow" and became members of the board in majority and took control over the entire business of the company (in liquidation) and the other sister companies. The representatives of this association carried on the necessary transaction and the amount that they collected was distributed amongst the creditors pro rata till July, 1971 when they discovered that they were not able to realise any further dues from the hirers. One of the creditors, thereafter, approached this Court by filing the winding-up petition in the year 1973. 6. The representatives of this association carried on the necessary transaction and the amount that they collected was distributed amongst the creditors pro rata till July, 1971 when they discovered that they were not able to realise any further dues from the hirers. One of the creditors, thereafter, approached this Court by filing the winding-up petition in the year 1973. 6. The case which has been set up before this Court in the present proceedings on behalf of the persons who have been arrayed as opposite parties in this application, and who are former directors of the company (in liquidation), essentially, is that one of the employees of the company (in liquidation), Sri B.N. Lamba played foul with the company and embezzled amounts in respect of 45 vehicles which had been financed by the company to the tune of Rs. 14 lakhs. This happened within two years of the formation of the company and led to a financial crisis resulting in its eventual winding-up. Their case also is that originally, Sri B.N. Tandon, who was the managing director of the company, was looking after the affairs of the company by himself. He died in the year 1967. At that time, his son Piyush Tandon was a minor. Sri S.N. Tandon, opposite party No. 6 in this application, (a brother of Sri P.N. Tandon) was the director in-charge of the affairs of the company (in liquidation). He did not have any share either in it or the sister units. The other opposite parties (apart from Smt. Swarnlata Tandon, widow of Sri P.N. Tandon and Piyush Tandon, the son of Sri P.N. Tandon), according to the case set up in the Court, were employees of M/s Premier Motor (P) Limited and were working under the directions of Sri S.N. Tandon and used to do everything as directed by Sri S.N. Tandon. During the course of the winding up proceedings, a Statement of Affairs in Form No. 57 prescribed under the Companies (Court) Rules, 1959 was filed with the official liquidator by Sri J K Dhar and Sri S R Khan (the first two opposite parties) which was accompanied by an affidavit sworn by Sri J.N. Dhar, on December 19, 1973. During the course of the winding up proceedings, a Statement of Affairs in Form No. 57 prescribed under the Companies (Court) Rules, 1959 was filed with the official liquidator by Sri J K Dhar and Sri S R Khan (the first two opposite parties) which was accompanied by an affidavit sworn by Sri J.N. Dhar, on December 19, 1973. An unaudited copy of the statement of accounts of assets and liabilities in the form of balance sheet for the period June 17, 1972 to July 31, 1973 was also filed by the ex-directors of the company (in liquidation) with the official liquidator. The third ex-director Sri K R Srivastava (opposite party No. 3) concurred with the statement of affairs which had been filed before the official liquidator by filing an affidavit dated December 31, 1973. A.V. Srinivasan, the 4th opposite party, was the Secretary of the company (in liquidation) and also of M/s Premier Credit and Others (P) Limited. S P Langar, the 5th opposite party, was the Chief Accountant of the company (in liquidation). Smt. Swann Lata Tandon, the 9th opposite party, was a director from the inception of the company in liquidation and also in the three sister units. 7. The case of the official liquidator in the present application is that all these opposite parties (including one Sri U S Saxena who was impleaded as opposite party No. 8 and whose name was subsequently deleted from the array of opposite parties after his death at the request of the official liquidator) were knowingly parties to the carrying on of the business of the company (in liquidation) in fraud of its creditors and other persons having dealings with the company and for a fraudulent purpose. They were personally responsible without any limitation of liability for all or any other debts of the company and were also, therefore, liable to be directed to reimburse the company with an amount of approximately Rs. 37 lakhs with interest under section 543 of the Companies Act, 1956 and a declaration about their liability in terms of section 542 is also liable to be made. 8. 37 lakhs with interest under section 543 of the Companies Act, 1956 and a declaration about their liability in terms of section 542 is also liable to be made. 8. The claim of the official liquidator, as unfolded in the application which is said to be founded upon the figures of assets and liabilities as on July 31, 1973 disclosed in the statement of affairs filed before the official liquidator, is that against a paid-up capital of Rs. six lakhs of the company (in liquidation), the trade debts have been shown to the tune of about Rs. 15,25,000 and losses have been shown as a little over Rs. 37 lakhs. This disclosed that the company (in liquidation) was carrying on business on borrowed capital, substantial part of which had been taken in the form of fixed deposit from the public. The deposit liabilities, as on the date of winding-up of the company, amounted to Rs. 26,74,492.49. The statement of affairs showed that on the date of the winding-up, the company (in liquidation) had no furniture, fixtures, cash in security, bank balance, vehicles seized or otherwise of its customers. This clearly suggested that the business of the company (in liquidation) was conducted in a fraudulent manner and for a fraudulent purpose in relation to its creditors and other persons having dealings with the company. Besides, the statement of affairs did not reflect and state the correct position of all the assets and liabilities of the company (in liquidation) as on the date of winding-up as was clear from the discrepancies which have been detailed in paragraph 20 of the petition in various sub-paragraphs. The official liquidator says further that the company (in liquidation) had regular dealings with its sister units, namely, M/s Premier Motor (P) Limited, India Motor Corporation (P) Limited, Premier Auto Garrage and Tandon Brothers and the company's affairs were so managed that the interest of the sister units and the Tandon family did not suffer. Proper books of account had not been audited after the year ending May 31, 1972. Complete books of account had also not been handed over to the official liquidator. Proper books of account had not been audited after the year ending May 31, 1972. Complete books of account had also not been handed over to the official liquidator. The official liquidator further says that S.N. Tandon, Piyush Tandon and Swarnlata Tandon, who are opposite parties 6, 7 and 9, were persons having effective say and control in the management of the company (in liquidation) because of their holding substantial financial interest in the group of sister units and were managing the affairs of the company (in liquidation) through the appointment of their employees as directors on the board of directors of the company (in liquidation). The position and status of the various persons impleaded as opposite parties in this application, was not only that as ex-officers of the company (in liquidation), but was also that of an agent and trustee of the company (in liquidation). They are all liable to render full and complete accounts of all the assets, properties, record of the company as on the date of the winding-up as well as its liability and they are persons who should be held personally liable and accountable for it. Monies and properties which have been misapplied or retained by the opposite parties, who were guilty of misfeasance or breach of trust, were recoverable from them. 9. On a notice being given to the opposite parties, the appearance was put in by them. Affidavits in reply have been filed by Sarvsri S.N. Tandon, A.V. Srinivasan, Jitendra Nath Dhar and S P Langar. The issues which the Court framed on April 14, 1980, on the basis of the rival pleas, are these : 1. Whether the respondents No. 1, 2, 3, 6, 7 and 9 were ex-directors of the company known as M/s Premier Credit and Motor Private Ltd. and its sister units (i) Premier Motor (P) Limited; (ii) Premier Motor (Workshop) (P) Ltd. and (iii) India Motor Corporation (P) Limited of Lucknow, since their inception and had substantial powers in managing the affairs of the company. If so, its effect ? 2. Whether the company had suffered losses to the tune of Rs. 37,08,575.49 upto the date of the winding-up of the company, whereas it had paid-up capital of Rs. 6,00,000 only and whether the said sum is recoverable from the respondents? 3. If so, its effect ? 2. Whether the company had suffered losses to the tune of Rs. 37,08,575.49 upto the date of the winding-up of the company, whereas it had paid-up capital of Rs. 6,00,000 only and whether the said sum is recoverable from the respondents? 3. Whether the business of the company was conducted in a fraudulent manner and for fraudulent purpose in relation to its creditors and other persons having dealing with the company to invoke the powers of this Court under sections 542/543 of the Companies Act, 1956 ? 4. Whether the statement of accounts filed by the ex-directors of the company showed discrepancies as alleged in paragraph 20 of the petition and to which the respondents are accountable ? 5. Whether the respondents were not only the ex-directors and officers of the company; but also acted as agent and trustees of the company having effective control in the management of the company, and are liable under section 542/543 of the Companies Act, 1956? 6. Whether the respondents are liable to be summoned and examined under section 477/542/543 of the Companies Act, 1956 relating to the affairs of the company prior to its winding-up ? 7. Whether the respondents are liable to render true and correct accounts to the petitioner of all assets, properties and records of the company on the date of its winding-up as well as the liabilities to which the respondents are accountable and liable ? 8. To what relief, if any, is the petitioner entitled ? 10. Sri Prakash Gupta has, during his submissions, attempted to fasten the liability in respect of different periods upon different directors. According to him, Sri P.N. Tandon was in effective control of the affairs of the company till his death in March, 1967. Till then, therefore, the entire liability was of Sri P.N. Tandon. Since he is dead, his heirs Smt. Swaranlata Tandon as the widow and Sri Piyush Tandon as the son are liable for that period. Though there is no evidence of their direct involvement in any transaction, they are also liable as directors for subsequent periods. 11. Between 1967 and 1972, the liability is being fastened upon Sri S.N. Tandon who became the Executive/Managing Director in the year 1967 and had effective control over the affairs of the company till he retired in March, 1972. Though there is no evidence of their direct involvement in any transaction, they are also liable as directors for subsequent periods. 11. Between 1967 and 1972, the liability is being fastened upon Sri S.N. Tandon who became the Executive/Managing Director in the year 1967 and had effective control over the affairs of the company till he retired in March, 1972. AN Srinivasan, who was the Company Secretary during the period 1968 and 1973 and Sri S P Langar, the Chief Accountant, are also liable for this period, though S P Langar could only be held liable for the period ending September 30, 1971 when he left the company. 12. For the period between June 1, 1972 and July 31, 1973 (when the company was wound-up), Sri A.V. Srinivasan alone was liable. 13. At the time of the winding-up order in respect of the company, there were three directors in it. Opposite party No. 1, Shafiqur Rehman was made a director in the year 1970. Opposite party No. 2 Sri J N Dhar was appointed a director in the year 1971. Opposite party No. 3 K R Srivastava was appointed a director somewhere between 1970 and 1971. As mentioned earlier, opposite party No. 6, Sri S.N. Tandon was a director between 1967 and 1972 while opposite party No. 9 Smt. Swarnlata Tandon was a director between 1959 and April, 1971. 14. The liability which the official liquidator seeks to fasten upon the opposite parties is under section 542 of the Indian Companies Act as also under section 543 thereof. Section 542, in its material parts, says : "542. Liability for fraudulent conduct of business.-(1) If in the course of the winding-up of a company, it appears that any business of the company has been carried on, with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Court on the application of the official liquidator, or the liquidator ............ may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court may direct ........................ (2)(a). may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court may direct ........................ (2)(a). Where the Court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) .................. (c) .................. (d) .................. (3) Where any business of a company is carried on with such intent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to five thousand rupees, or with both. (4) This action shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matter on the ground of which the declaration is to be made. 15. Section 542 was introduced for the first time in the Indian Companies Act, 1956 with effect from April 1, 1956. There was no similar provision in the earlier Act of 1913. The language of sub-section (1) shows that where in the course of winding-up of a company, it appears that any business of the company has been carried on (a) with intent to defraud creditors of the company; (b) or any other person; or (c) for any fraudulent purpose, the Court may, if it thinks proper to do so, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid, shall be personally responsible for all or any of the debts or any liability of the company. The emphasis about the liability of a person who was knowingly a party to the carrying on of the business in the manner aforesaid is clear also from the provision contained in sub-section (3) of section 542. The enquiry has, therefore, to be confined to the purpose with which the business of the company had been carried on and about the persons who were knowingly parties to such carrying on of the business. The enquiry has, therefore, to be confined to the purpose with which the business of the company had been carried on and about the persons who were knowingly parties to such carrying on of the business. The, declaration may be made by the Court about the personal responsibility of such persons, if it appears to the Court that they had knowingly been parties to the carrying on of the business, inter alia, for any fraudulent purpose. 16. As presented before this Court, the case of the official liquidator is that in or about the year 1961-62, the company had become financially defunct on account of the embezzlement by Lamba of a sum of about Rs. 14 lakhs in respect of 44 vehicles which had allegedly been financed by the company. After this embezzlement, the company had become penniless because there were no other assets left with the company. The directors, thus, knew in the year 1961-62 that there was nothing left in the company. Yet, they made borrowings from the public for business of financing hire purchase of commercial vehicles upto the year 1967. For purposes of section 542, this conduct of the director would amount to "carrying on of business in a fraudulent manner for fraudulent purpose," the borrowing went on from 1959 to 1967 though, after 1967, no amount was borrowed from the public. The fact that borrowings were made from the public only till the year 1967 is not in dispute. 17. In William C. Leich Brother Ltd. (1932)2 Chancery Division 71 : (1932)2 of Indian Reports 893, Maugham J. dealing with a provision similar to section 542, laid down that : "If a company continues to carry on business and to incur debts at a time where there is, to the knowledge of the directors, no reasonable prospect of the creditors, ever receiving payment of those debts, it is in general a proper inference that the company is carrying on business," with intent to defraud." 18. This dictum was approved by a Division Bench of the Kerala High Court in K. Nagendra Prabhu and Others v. Popular Bank Ltd. and Others, AIR 1970 Ker 120 by saying (in paragraph 11 of the Report) that : "As an exposition of the parent section from which our provision has been copied, we feel, it is entitled to espect. This dictum was approved by a Division Bench of the Kerala High Court in K. Nagendra Prabhu and Others v. Popular Bank Ltd. and Others, AIR 1970 Ker 120 by saying (in paragraph 11 of the Report) that : "As an exposition of the parent section from which our provision has been copied, we feel, it is entitled to espect. We further feel that it lays down a safe working rule to go by, in applying the be provisions of the section." This Court, speaking through Banerjee, J., extended its concurrence to the dictum of Maugham, J. and to its approval by the Kerala High Court. This was in a decision dated December 11, 1978 in Company Application No. 32 of 1976 of Official Liquidator v. Smt. Padmawati and Others. A Division Bench of this Court affirmed this decision on September 24, 1982 in Special Appeal No. 7 of 1979. 19. If, therefore, it is found in this case, that there was nothing left in the company and that there was no reasonable prospect of the creditors ever receiving re-payment, yet borrowings were made from the public for the business of financing hire purchase of commercial vehicles after 1961-62, the director who knowingly did so, may be held liable under section 542. 20. Till his death in March, 1967, late P.N. Tandon was in effective control of the company. There is no dispute about it. In fact, it is clear beyond doubt from the statement of P.N. Tandon as D.W. 1 in the case. The borrowing, also, admittedly, from the public were made only upto the year 1967. There is no evidence of direct involvement of Smt. Swaran Lata Tandon, the widow of P.N. Tandon, Piyush Tandon, the son of Sri P.N. Tandon or of the three directors Sarvsri Shafiqur Rahman, J N Dhar and K R Srivastava (opposite parties Nos. 1, 2 and 3) in any transaction of borrowing from the public. The last named three persons became directors after the death of P.N. Tandon. Piyush Tandon was then a minor. Smt. Swaran Lata was, no doubt, a director since the year 1959; but on its terms, section 542(1) can only apply to a director who knowingly was a party to carrying on of business in a fraudulent. manner or for fraudulent purpose. 21. Piyush Tandon was then a minor. Smt. Swaran Lata was, no doubt, a director since the year 1959; but on its terms, section 542(1) can only apply to a director who knowingly was a party to carrying on of business in a fraudulent. manner or for fraudulent purpose. 21. Since late Sri P.N. Tandon was the only person concerned with the carrying on of the business of the company till his death in March, 1967, the question which remains still to be answered is : "Can his heirs Smt. Swaran Lata Tandon and Sri Piyush Tandon be held liable for the action of late Sri P.N. Tandon under section 542 for the period upto March, 1967." . 22. Two decisions of the Supreme Court were cited by Sri Prakash Gupta in support of his plea that if a deceased director is found liable under section 542, his heirs would be liable to the extent of the estate in their hands. The first of these is in the case of Official Liquidator, Supreme Bank Ltd. v. P A Tendolkar (dead) by L.Rs. and Others, AIR 1973 SC 1104 . The Supreme Court, after noticing that there was nothing in the (Indian) Companies Act, 1913 which corresponded to section 542 of the Companies Act, 1956, observed thus : (in paragraph 33 of the Report) : "... It may be possible (though we need express no final opinion on the matter) where a proceeding under section 543 is covered also by the terms of section 542 of the Companies Act of 1956 to give directions to persons other than those whose conduct is enquired into, including directions to heirs and legal representatives, for the purpose of enforcing a declaration. But we think that the power under section 235 of the Act of 1935, which corresponds Lo section 543 of the Act of 1956, would not extend beyond making a declaration against a deceased director provided he, in his lifetime, or his heirs, after his death, have had due opportunity of putting forward the case on behalf of the allegedly delinquent director.........." 23. The second case cited was the Official Liquidator v. Parthasarathi Sinha, ( AIR 1983 SC 188 ). There the proceedings were under section 543. The second case cited was the Official Liquidator v. Parthasarathi Sinha, ( AIR 1983 SC 188 ). There the proceedings were under section 543. The question before the Supreme Court was "whether the proceedings initiated against a director of a company in liquidation under section 543 of the Companies Act can be continued after his death against his legal representatives and the amount declared to be due in such misfeasance proceedings can be realised from the estate of the deceased in the hands of his legal representatives." The conclusion recorded by the Supreme Court, after noticing its earlier decision in Tendolkar's case ( AIR 1973 SC 1104 ), was that : "The true doctrine is that whenever you find that the deceased person has by his wrong diverted either property or the proceeds of the property belonging to someone else into his own estate, you can then have recourse to that estate through his legal representative when he is dead, to recover it. The legal representative, of course, would not be liable for any sum beyond the value of the estate of the deceased in his hands." 24. I will revert to this decision later while considering the case of the official liquidator under section 543 of the Companies Act. 25. In special Appeal No. 10 of 1979 Official Liquidator v. Smt. Padmawati decided on September 24, 1982, one of the questions which a Division Bench of this Court was considering was whether the heirs and legal representatives of a former director could be held liable in respect of the actions of the former director, after his death. The official liquidator, inter alia, relied upon the provision contained in section 542. The official liquidator, inter alia, relied upon the provision contained in section 542. The Division Bench, before which the judgment of the Supreme Court in the case of P.A. Tendolkar, ( AIR 1973 SC 1104 ) was relied upon, noticed the observations made by the Supreme Court in paragraph 32 of that judgment, while dealing with section 235 of the Act of 1913 which is equivalent to section 543 of the 1956 Act, to the effect that : "As the power of taking these special proceedings is discretionary and does not exhaust other remedies, although the Court may, as a matter of justice and equity, drop proceedings against delinquent directors, managers or officers who are no longer alive, leaving the complainant to his ordinary remedy by a civil suit......" The Bench felt that, in the circumstances of the case before it, interest of justice was not likely to be served if the proceedings were continued against the heirs; and that, therefore, the better use of discretion required the dropping of the proceedings on that basis. In coming to this conclusion, the Bench noticed the circumstance that section 542 (1) provides for declaration of the personal liability, for the debts and other liabilities of the company, of persons who were knowingly parties to the carrying on of the business of the company with intent to defraud creditors of the company or other persons or for any fraudulent purpose. Thus, fraudulent conduct had been made the personal responsibility of those who knowingly participated in such fraudulent activity. The Bench upheld the view taken by the learned Single Judge, against whose judgment it was hearing the appeal, that it would not be competent to pass an order against the heirs of the deceased-director under section 542 though on the ground that it would not be a sound exercise of discretion to permit the proceedings to be continued against the heirs. 26. An appeal against this judgment, according to Sri Prakash Gupta, is pending before the Supreme Court. 27. Coming now to the case of the official liquidator for action under section 543 of the Act : Section 543(1) is in these terms `543. 26. An appeal against this judgment, according to Sri Prakash Gupta, is pending before the Supreme Court. 27. Coming now to the case of the official liquidator for action under section 543 of the Act : Section 543(1) is in these terms `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, or 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) .................... (3) ...................... 28. The provision enables the Court to examine into the conduct of the director, manager or officer of the company to find out whether he has misapplied, retained or become liable or accountable for any money or property of the company or has been guilty of any misfeasance or breach of trust in relation to the company and where any such conduct is found attributable to any such person, compel him to repay or restore the money or property or any part thereof to the company. This section, thus, calls for the examination of the conduct of an individual director or officer and passing of an order against him, only if he is personally found to be liable for misapplication etc. of the money or property of the company or guilty of any misfeasance or breach of trust in relation to the company. This section, thus, calls for the examination of the conduct of an individual director or officer and passing of an order against him, only if he is personally found to be liable for misapplication etc. of the money or property of the company or guilty of any misfeasance or breach of trust in relation to the company. Obviously, therefore, there has to be positive evidence in respect of an individual director or officer of an act of the nature contemplated by section 543(1). In absence of such positive evidence, it may not be possible to compel him to reimburse or compensate the company. To borrow the words of the Supreme Court in the Official Liquidator v. Raghara Desikachar and Others, ( AIR 1974 SC 2069 ) : "......It may be mentioned that misfeasance action against the directors is a serious charge. It is a charge of misconduct or misappropriation or breach of trust. For this reason, the application should contain a detailed narration of the specific acts of commission and omission on the part of each director quantifying the loss to the company arising out of such acts or omission. The burden of proving misfeasance or nonfeasance rests on the official liquidator...... The application made by the official liquidator did not give sufficient particulars which, in our view, it should have." 29. These observations clearly upheld the view taken by this Court in Official Liquidator v. Mathura Prasad and Others, ( AIR 1963 All 55 ) in which the principles about the pleadings and proof in proceedings under section 235 of the Act of 1935 were laid down succinctly by Sri A D Srivastava. And the principles are that the investigation contemplated by section 235 could not be a general and roving enquiry into the conduct of the person sought to be made liable nor could it be started without any definite allegation being made which the respondent could be called upon to meet. Specific allegation must be made before the Court could start investigation into the conduct of the respondent. Enough particulars must be furnished so that the respondent may meet the charges levelled against him. Specific allegation must be made before the Court could start investigation into the conduct of the respondent. Enough particulars must be furnished so that the respondent may meet the charges levelled against him. The fact that the proceedings under this section do pot amount to a suit or that a plaint is not required to be filed could not justify dispensing with the requirement of making definite allegations about the acts complained of in respect to which the respondent had to explain his conduct. 30. Liability could be fixed under this section only for acts amounting to (i) misapplication; (ii) retention; (iii) becoming liable or accountable for any money or property of the company ; (iv) misfeasance, or (v) breach of trust. Before the application can succeed, it is necessary for the liquidator to establish one or more of these facts by proper evidence. The distinction (in the matter of misfeasance) is to be made between the directors on the one hand and the director-in-charge. The directors cannot be held responsible for the acts or omission of the director-in-charge in the absence of any proof that they knew about all these acts and omissions and could take any steps to mend matters. 31. A look at the application shows that after narrating antecedent facts, the official liquidator has described in paragraph 20, the various facts of omission and commission attributable to the directors and officers of the company (in liquidation) on ' the basis whereof relief has been sought under sections 542 and 543. In the subsequent paragraphs of the petition general statements are contained regarding the conduct and liability of these directors and officers. 32. Paragraph 20 is divided into (xvii) sub-paragraphs. Except for sub-paragraphs (xii) and (xiii) in which a specific allegation has been made against Sri A.V. Srinivasan, opposite party No. 4, about collusively getting a decree held by the company in favour of one of the depositors of the company. Dr. 32. Paragraph 20 is divided into (xvii) sub-paragraphs. Except for sub-paragraphs (xii) and (xiii) in which a specific allegation has been made against Sri A.V. Srinivasan, opposite party No. 4, about collusively getting a decree held by the company in favour of one of the depositors of the company. Dr. Sada Shiv Saran Srivastava after the company had gone into liquidation, by signing a power of attorney in back date and collusively getting criminal case No. 902 (renumbered as 279 of 1972) pending in the Court of Special Judicial Magistrate, Lucknow dismissed on August 12, 1976 against one Chattu Prasad, a debtor of the company, for reasons best known to him, there is no specific act attributed to any other officer or director of the company. The allegations in the various sub-paragraphs of paragraph 20 do not specify the role of an individual director or officer. There is no mention in these paragraphs as to which of the opposite party was liable for misapplication etc. of the money or property of the company or guilty of misfeasance or breach of trust in relation to the company. The pleadings do not amount to adequate or proper pleadings, in respect of the opposite parties, to furnish the basis for investigation into the conduct of the opposite parties. In the absence of any definite allegation about the act complained of in respect of each of the opposite parties, it is difficult to expect these opposite parties to explain their conduct. The investigation which the official liquidator expects this Court to make about the opposite parties under section 543 is virtually of the nature of a roving enquiry in which something may be found against one or the other opposite party. An investigation of this nature is not contemplated by section 543. By way of illustration, the nature of the allegation in the various sub-paragraphs may be seen. 33. In sub-para (i), it is said that complete and correct details of all the assets and amounts realisable from all the debtors have not been included in the statement of affairs. By way of example are mentioned the names of 14 persons whose names had not been shown and included in the list of trade debtors although it was said that cases against these trade debtors were pending execution. 34. By way of example are mentioned the names of 14 persons whose names had not been shown and included in the list of trade debtors although it was said that cases against these trade debtors were pending execution. 34. In sub-para (ii), are contained the names of 23 persons with their serial numbers in the list of trade debtors disclosed in the statement of affairs about which it has been said that it was not clear and made known to the official liquidator whether any decree had been obtained or vehicles seized by the company prior to winding-up. 35. In sub-para (iii), the complaint made is that in respect of 10 trade debtors, mentioned therein, no information had been given whether any suit had been filed by the company prior to the winding-up. 36. In sub-para (iv), the allegation is that the names of heirs of one Ram Lakhan Rai, who was shown at serial No. 51 in the list of trade debtors, had not been given to the official liquidator. 37. Sub-para (v), contains complaint that detailed particulars of the assets owned by 8 persons named in it, who were the principal debtors and their guarantors, had not been given to the official liquidator. 38. A general statement has been made in sub-paragraph (vii) that during the course of winding-up proceedings, it had come to the notice of the official liquidator that though the names of certain persons were mentioned in the list of "decrees in favour of the company handed over by the management to the Income-tax Officer, Allahabad, "the names of certain persons (mentioned in Annexure `E' filed with the application of the official liquidator) had not been shown in the list of trade debtors nor the fact of handing over of the decrees to the Income Tax Officer for recovery mentioned in the statement of affairs. 39. In sub-para (vii), the official liquidator has disclosed the names of 23 persons against whom legal proceedings had been instituted by the company; yet their names and amount due from them, had not been included in the list of trade debtors, furnished to him. 40. 39. In sub-para (vii), the official liquidator has disclosed the names of 23 persons against whom legal proceedings had been instituted by the company; yet their names and amount due from them, had not been included in the list of trade debtors, furnished to him. 40. In sub-para (viii), four names are mentioned by the official liquidator against whom "cases which had been filed by the company had been compromised by and under instruction and with the consent and knowledge of the ex-directors of the company working under the influence of the then managing director of M/s Premier Motor Private Limited and India Motors Corporation Pvt. Limited prior to the winding-up order" which were not shown in the statement of affairs. 41. In sub-para (ix), it has been said that prior to the winding-up of the company, embezzlement had taken place in respect of 44 vehicles financed by the company by an ex. employee of the company, Sri B M Lamba. During investigation, it was discovered that the company had obtained the decree against certain persons but could not execute the same as the parties were fictitious. No civil suit for proceedings had been instituted against B M Lamba for recovery of the embezzled amount as far as known to the official liquidator. 42. Sub-para (xi) shows that certain preferential payments were made to the sister units by transfer of certain decrees held by the company (in liquidation) for realisation against the amount of debts payable by it to those units. This appeared to have been done on selective basis with a view to give fraudulent preference before passing of the winding-up order. Details of such decrees and payments had not been made known to the official liquidator. 43. In sub-para (xiv), (xv) and (xvi) are mentioned the instances of Smt. Parbati Kapoor, Baij Nath Gupta and Bhuneshwar Prasad Tripathi against whom the amount due was shown to be of doubtful recovery or bad debt. Though the suits filed against them had either been compromised or decreed and the amount paid to the company (in liquidation), yet necessary information was withheld from the official liquidator. 44. Though the suits filed against them had either been compromised or decreed and the amount paid to the company (in liquidation), yet necessary information was withheld from the official liquidator. 44. In sub-para (xvii), the grievance is that A.V. Srinivasan, opposite party No. 4, filed a criminal case on behalf of the company against one Bishwanath Singh and Laxmi Narain whose names had neither been mentioned in the statement of affairs nor the mode and date of disposal of the case intimated to the official liquidator. 45. As far as the allegation against A.V. Srinivasan, opposite party No. 4, in sub-paras (xii) and (xiii) is concerned, it is noticeable that even after specifying the name of the Ex-Secretary and disclosing the act and omission attributed to him, the official liquidator does not make a grievance about any misapplication or retention or liability of Srinivasan so as to bring the case within the four corners of section 543. 46. Sri A K Banerji is right when he says that no definite allegation having been made against any of the opposite parties, it is difficult for them to meet any specific case. He is a?so right when he says that what the official liquidator was trying to do was to fish out something against these opposite parties and that such an investigation is not contemplated under section 543. In the oral evidence as well, no specific act or omission on the part of the,e opposite parties which could saddle them with liability under section 543 has not been brought out on behalf of the official liquidator. 47. Assuming that the entire case of official liquidator, as disclosed in the paragraph 20 of the application, is accepted, is it possible to fasten any of these opposite parties with specific act or omission or misapplication, retention or liability or accountability for any money or property of the company or to hold them guilty for misfeasance or breach of trust in relation to the company. The answer, to my mind, is in the negative. Therefore, it is not possible to issue a direction compelling any of the opposite parties to repay or restore the money or property or to contribute any sum to the assets of the company by way of compensation in respect of misapplication, retention or misfeasance or breach of trust. 48. The answer, to my mind, is in the negative. Therefore, it is not possible to issue a direction compelling any of the opposite parties to repay or restore the money or property or to contribute any sum to the assets of the company by way of compensation in respect of misapplication, retention or misfeasance or breach of trust. 48. In his submission before me, Sri Prakash Gupta, who placed the case of the official liquidator with ability, laid special emphasis upon issue No. 4 relating to the allegations made in paragraph 20 of the application. The submission about it has been split into six heads : 49. The first of these was that there were decrees against certain persons in favour of the company which were in the process of execution. The details of these decrees were not given to the official liquidator. The names of these persons were not shown in the statement of affairs and, therefore, it appeared that the amount of these decrees were realised and misappropriated. But the question is by whom? The answer is not easy to get, either on the basis of the allegations contained in paragraph 20 or from the evidence adduced on behalf of the official liquidator in the case. 50. The second head of Sri Gupta's submission was that in the list of trade debtors (Ext. P-32), the debts shown against certain named persons had been shown to be bad debts or of the nature of doubtful recovery. Decrees had been obtained against them but not handed over to the official liquidator. According to the submission, the conclusion was that the amount had been realised and misappropriated. However, the answer to the question by whom, would not be found in respect of such decrees as well. 51. Under the third head, were mentioned the cases of debtors against whom cases were filed but compromised, and the amount realised prior to the wining up. The names of these trade debtors were not disclosed in the statement of affairs. The suggestion was that the amounts were misappropriated. However, in his submission before me on December 13, 1985, Sri Prakash Gupta gave up the plea in respect of these trade debtors. 52. The 4th head of submission was that there were certain instances in which suits were filed against trade debtors, compromised and the amount realised but in the list (Ext. However, in his submission before me on December 13, 1985, Sri Prakash Gupta gave up the plea in respect of these trade debtors. 52. The 4th head of submission was that there were certain instances in which suits were filed against trade debtors, compromised and the amount realised but in the list (Ext. P 32) they were shown either as bad debt or debts of doubtful recovery. The inference which Sri Gupta wanted me to draw was that these amounts had been misappropriated. Out of the five instances, Sri Gupta gave up the plea relating to Ram Kola Sugar Mills and Shyam Behari Pandey. In regard to the remaining three, namely, Smt. Parbati Kapoor, Baijnath Gupta and Bhuneshwar Prasad Tripathi, Sri Gupta could not satisfy me as to which of the opposite parties will be said to have misappropriated the amount. 53. The 5th and 6th heads of Sri Gupta's submission, were the cases of 34 persons against whom decrees had been obtained and handed over to the Income-tax Officer, Allahabad for realisation; but the names of 14 trade debtors, out of them, were not shown in the list of trade debtors, nor was information given to the official liquidator and the cases of 38 trade debtors, who were not mentioned in Ext. P. 32 about whom no action was taken by the ex-directors to recover the amount due from them. Which amongst the directors failed to take necessary action could not be pointed out. 54. The above discussion leads to the inevitable conclusion that as far as the allegations in paragraph 20 of the application are concerned, which may be assumed to be established fully by the evidence, both oral and documentary, brought on the record on behalf of the official liquidator, their acceptance, even in entirety, cannot lead to the inference that anyone of the opposite parties can be held to be accountable for a liability of the nature contemplated by section 543. Issue No. 4, insofar as it relates to the accountability of the opposite parties, has to be answered against the official liquidator. 55. I now take up the other issues : 56. In regard to issue No. 1, Sri Gupta, for the official liquidator and Sri Banerji, for the opposite parties stated before me during the hearing of the case on April 28, 1987 that there was no dispute between the parties about it. 55. I now take up the other issues : 56. In regard to issue No. 1, Sri Gupta, for the official liquidator and Sri Banerji, for the opposite parties stated before me during the hearing of the case on April 28, 1987 that there was no dispute between the parties about it. In other words, this deserves to be and is answered in the affirmative in favour of the official liquidator. Likewise, in respect of issue No. 2 also there was no dispute, according to these learned counsel, about the fact that the company (in liquidation) had suffered losses to the tune of Rs. 37,08,575.49 upto the date of winding-up order; and that it had a paid-up capital of Rs. 6,00,000. To this extent, the issue is answered in favour of the official liquidator. The answer to the remaining part of the issue, namely, whether the sum aforesaid is recoverable from the opposite parties, depends upon the answer to other issues and need not be recorded under this issue. 57. Issue Nos. 3 and 5 have substantially been dealt with earlier. They are over-lapping in nature. Insofar as the question of liability of the opposite parties under sections 542 and 543 of the Companies Act is concerned, section 477 only recites the power of the Court to summon persons suspected of having the property etc. of the company. Issue No. 7 stands substantially answered against the official liquidator, insofar as it relates to the accountability of the respondents, on the facts pleaded in the petition. 58. Before closing the discussion, I may revert to the question whether the heirs of late Sri P.N. Tandon, namely, his widow Smt. Swarn Lata Tandon and son Sri Piyush Tandon, can be held liable under section 543 as such heirs. There seems to be little doubt about the legal position, after the decision of the Supreme Court in the case of Tendolkar ( AIR 1973 SC 1104 ) and the later case of Parthasarathi Sinha ( AIR 1983 SC 188 ) that the extent of the value of the estate of a deceased director, the legal representative can be held liable for the acts of misfeasance etc. of the deceased director. But the basic requirement that there should be precise and clear pleadings about the alleged misfeasance etc. of the deceased director. But the basic requirement that there should be precise and clear pleadings about the alleged misfeasance etc. of the deceased director has, nevertheless, to be fulfilled before the heirs can be called up to answer allegations of the nature contemplated by section 543. In the present case, the official liquidator has not made any specific allegation of that character against late Sri P.N. Tandon. One could hardly expect the heirs of late Sri P.N. Tandon to meet any allegation of misfesance etc. on the part of Sri P.N. Tandon with a view to justify the actions of Sri Tandon. There is no evidence of any specific act or omission of the nature envisaged by section 543, which may be attributed to late Sri P.N. Tandon personally. It is not possible. Therefore, to record any satisfaction, even in a prima facie manner, that Sri Tandon had misapplied or retained or was liable or accountable for any money or property of the company (in liquidation) or of being guilty of any misfeasance or breach of trust in relation to the company. Consequently, it is not possible to compel his heirs to repay or restore the same or contribute any sum to the assets of the company by way of compensation. 59. Against Smt. Swarn Lata Tandon (opposite party No. 9), who was the director of the company (in liquidation) since its inception till April, 1971, also there is no specific allegation of any act or omission of the nature contemplated by section 543 personally in her capacity as a director. There is no evidence on the record in respect of any such act or omission on her part either. It is not possible therefore, to fasten any liability upon her even in her capacity as a director. 60. The circumstance that no specific allegation, capable of being effectively met by his heirs, has been made against late Sri P.N. Tandon in respect of his dealing till he was alive, to suggest that the business of the company had been carried on by him with intent to defraud the creditors of the company or for any fraudulent purpose, it would not be a sound exercise of discretion to saddle his heirs with any liability by making a declaration under section 542 against late Sri P.N. Tandon. 61. 61. Issue No. 8 is, therefore, to be answered against the official liquidator by holding that he is not entitled to any relief in the present petition. 62. The petition is dismissed; but I leave the parties to bear their own costs.