K. J. SHETTY, J. ( 1 ) THIS company application is filed by the official liquidator under section 543 of the companies act alleging against 9 of the former directors of M/s. Chamundi chemicals and fertilisers ltd. (in liquidation) for acts of misfeasance and breach of trust. The respondents 1 to 8 were the directors of the company during the period noted below: respondent no. 1: from the date of incorporation till the date of winding up ordc respondent no. 2: from 12-8-1961 to 11-2-1969. Respondent no. 3: from 12-8-1961 to 22-6-1972. Respondent no. 4: from 14-3-1962 to 11-10-1968 (as a nominee of industrial finance corporation, delhi) respondent no. 5: from 1-9-1968 till the date of winding up order. Respondent no. 6: from 30-3-1970 till the date of winding up order. Respondent no. 7: from 21-4-1975 till the dale of winding up order. Respondent no. 8: from 13-7-1976 to the date of winding up order. Respondent no. 9 was the managing agent of the company and they ceased to be the managing agents consequent on the abolition of the managing agency system. The first respondent, who was the former director, died on 23-3-1987. Respondents 5 and 7 are his sons, but no l. r. application was filed to bring them on record as l. rs. Of deceased respondent 1. But they were the directors of the company during the period mentioned in the note above. ( 2 ) THE allegations of the official liquidator against the respondents during therelevant time in which the respondent-company was functioning are: the company advanced Rs. 1,60,900/- in september, 1966 long before the contract was awarded to mysore machinery manufacturers limited on 1-9-1967 in which respondent 1 was interested. The competence of the said company to execute such a contract was doubtful. Although M/s. Mysore machinery manufacturers ltd. , was awarded the contract on 1-9-1967, the company had been making advances to it from september, 1966 itself. This was first ratified by the board of directors on 1-9-1967 wherein the advance of Rs. 1,60,900/- outstanding as on that date was considered as advance made towards fabrication and installation of the plant. The granting of the advance of Rs. 1,60,900/- to the above company long before the contract was awarded appears to have been done intentionally by the management of the company and appears to be a loan advanced to the said company without interest. The granting of the advance of Rs. 1,60,900/- to the above company long before the contract was awarded appears to have been done intentionally by the management of the company and appears to be a loan advanced to the said company without interest. Though no plant was erected in pursuance of the aforesaid contract and the company continued to make advances from september 1966 onwards, it was first decided by the company to charge interest @ 10% only in the year 1970 vide resolution dated 29-9-1970, on amount outstanding from 1-1-1970. As a result of this, the company lost a sum of Rs. 1,99,847. 50 ps. Being interest on outstanding advance from september, 1966 to 31-12-1969. It is alleged a sum of Rs. 97,500/- was advanced to a. j. george, an employee of the company for purchase of a motor car in 1965. He gave account only for Rs. 57,321/ -. Next year, a further sum of Rs. 9,354/- was advanced, to him without clearing the previous balance of Rs. 41,918. 85. That year, he gave account for Rs. 3,010/-and in 1967 he gave account for Rs. 22,499. 85, which included a car valued for Rs. 17,0007 -. He made a claim for Rs. 1,257. 63 in 1968 which was settled by the company and a further sum of Rs. 500/- was advanced to him. The balance outstanding viz. , Rs. 27,520. 66 was written off in 1974 as bad debt. The company did not make any efforts to recover the amounts originally advanced while granting fresh advance. Respondent nos. 1 to 6 being the directors and respondent no. 9 being the managing agent of the company during the relevant period arc jointly and severally liable to account for the loss of Rs. 27,520. 56 suffered by the company on this count. It is alleged that in the year 1967, a sum of Rs. 10,000/- was transferred from the account of c. Appu rao, an employee of the company to the account of respondent no. 9. But, as on 31-12-1968, the debit balance of Rs. 8,588. 33 in the employee's account was written off as bad debt. This has apparently been done with the intention of wiping off his balance in the books of the company. Respondent nos. 1 to 5 being the directors and respondent no. 9. But, as on 31-12-1968, the debit balance of Rs. 8,588. 33 in the employee's account was written off as bad debt. This has apparently been done with the intention of wiping off his balance in the books of the company. Respondent nos. 1 to 5 being the directors and respondent no. 9 being the managing agent of the company during the relevant period are liable to make good the loss. It is alleged that d. Kamesh, a staff member of the company at bangalore, was entrusted with the work of purchasing raw materials. Huge sums were accordingly transferred to him. A sum of Rs. 25,380. 49 was outstanding in his account which was written off as bad debt in 1970, which is not the actual amount due from him, but from the management. Respondent nos. 1 to 6 being the directors and respondent no. 9 being the managing agent of the company during the relevant period are liable to make good the loss of Rs. 25,380. 49 suffered by the company by writing off the said sum. It is further stated that a sum of Rs. 19,000/- was advanced to c. p. dhawan on 28-3-1966 by letter dated 24-3-1966 by a direction of m. c. cherian, managing director of the company. This amount continued to remain outstanding till 1974 when it was finally written off as bad debts. No efforts were made by the company to recover the amount before it was written off. Respondent nos. 1 to 6 being the directors and respondent no. 9 being the managing agent of the company during the relevant period are liable to make good the loss of Rs. 19,000/- suffered by the company on this account. It is further alleged that the company advanced to v. c. khanna, a sum of Rs. 8,000/- on 28-5-1978 for purchase of a house constructed by him. Subsequently, the government cancelled the rights of the vendor over the property and the company decided to write off the said advance as bad debt vide resolution dated 30-5-1972. Respondent nos. 1 to 6 being the directors and respondent no. 9 being the managing agent of the company during the relevant period are liable to make good the said loss. Subsequently, the government cancelled the rights of the vendor over the property and the company decided to write off the said advance as bad debt vide resolution dated 30-5-1972. Respondent nos. 1 to 6 being the directors and respondent no. 9 being the managing agent of the company during the relevant period are liable to make good the said loss. It is alleged that one h. s. sharma, ex-employee of the company is stated to have addressed a letter, dated 28-8-1978 to the secured creditors (punjab national bank) that the piece of the land acquired on 28-8-1965 stood registered in the name of one k. t. cherian, though the cost of land including registration charges were debited to the company's account. No efforts were taken to recover the amount before it was considered to be bad and written off. The company suffered a loss of Rs. 16,033-99 on this account. The respondent nos. 1 to 4 being the directors and respondent no. 9 being the managing agent of the company at the relevant time are liable to make good the said sum of Rs. 16,039. 99. It is alleged that a sum of Rs. 8,500/- outstanding in the books of M/s. Chamundi curing works in 1968 against s. v. rajaratnam, an ex-employee of the company, was transferred to the company. After setting of Rs. 1,140/- due to him as bonus for 1966-67, the remaining sum of Rs. 7,360/- was written off as ex gratia and travelling expenses. This was done to satisfy queries raised by auditors and lacks bona fides. Respondent nos. 1 to 5 who were the directors and respondent no. 9 being the managing agent of the company at the relevant time when the amount of Rs. 7,360/- due from the aforesaid person was written off, are liable to account for the said amount. It is further alleged that the company purchased 15,763. 156 m. tons of sulphur during the period from 1964 to 1968. But the actual quantity of sulphur received in the factory of the company was only 15,057. 124 m. Tons. It is found that the quantity of 706. 32 m. ts. Of sulphur was short received by the factory causing financial loss to the company. 156 m. tons of sulphur during the period from 1964 to 1968. But the actual quantity of sulphur received in the factory of the company was only 15,057. 124 m. Tons. It is found that the quantity of 706. 32 m. ts. Of sulphur was short received by the factory causing financial loss to the company. Further, it is submitted by the official liquidator that the respondents are jointly and severally liable to pay the several amounts referred to in paragraphs 8 (i) to 8 (ix) above, in All aggregating to Rs. 11,58,936. 97. In the application, the official liquidator has stated that it appears, the chartered accountant has finalised his report without taking into consideration the clarifications given by the ex-director. It is further stated in the application by the official liquidator that in short, the ex-directors stated that the transactions reflected in the respective balance sheet had been duly approved by the board as well as by the general body, and the statutory auditors had given unqualified reports for All the years and that the management had always acted for the betterment and improvement of the company. ( 3 ) THE respondents 1, 5, 7, 8 and 9 have filed their reply statement/objectionstatement. It is stated that the respondent no. 1 was a director from the time of inception of the company till he resigned on 15-2-1977. Respondent no. 5 was a director of the company from 1-9-1968 till he resigned on 17-2-1977. Respondent no. 7 was a director of the company from 21-4-1975 till he resigned on 24-1-1977. Respondent no. 8 was a director of the company from 13-7-1976 till he resigned on 28-1-1977, respondent no. 9 was the managing agent of the company till it was abolished by the central government. The averments in para 5 contrary to the above are not admitted. It is stated that in response to the notice received by the court in winding up petition, Mr. M. c. chandy filed an affidavit opposing the winding up order. The respondent nos. 1,5, 7 and 8 received a notice dated 22-4-1977 from the official liquidator requiring them to submit the statement of affairs of the company. In reply to the notice, the respondent no. 5 has filed the statement of affairs. Mr. M. c. cherian, respondent no. 1 was in-charge of the company (in liquidation ). The respondent nos. 1,5, 7 and 8 received a notice dated 22-4-1977 from the official liquidator requiring them to submit the statement of affairs of the company. In reply to the notice, the respondent no. 5 has filed the statement of affairs. Mr. M. c. cherian, respondent no. 1 was in-charge of the company (in liquidation ). He had a paralytic stroke in july 1977. As such, he could not file the statement of affairs. For and on behalf of Mr. M. c. cherian and under his instructions Mr. M. c. chandy, the respondent no. 5 has filed the statement of affairs, though he had ceased to be a director of the company prior to the winding up of the company. In reply to the various allegations in the company application, it is stated by respondent nos. 1, 5, 7, 8 and 9 that the company decided to install a mixing and granulated plant in august 1966. Certain advances, therefore, were given to mysore machinery manufacturers limited (m. m. m. ltd.) Towards initial expenses for fabrication of the proposed plant. M. c. cherian became the director of the m. m. m. limited only on 12-10-1966. Respondent no. 1 being one of the directors of m. m. m. limited did not participate in the discussions held on 1-9-1967. The order for fabrication of the plant. was given by the board of directors of the company. Decision was taken by the managing agents to give advance in august 1966, itself and the first advance was made on 21-9-1966 even before m. c. cherian became a director of m. m. m. limited. As such, it is stated that it is incorrect to suggest that advances were made by the company to m. m. m. limited as a loan, free of interest. It is stated that since production in the company was stopped in july 1968, due to heavy accumulation of stocks and slump in the market and for want of funds, the idea of installing the proposed plant was dropped and a decision was taken to give up the idea of installing the plant and to recover the advances and to charge 10% interest on the advances from 1-1-1970 to avoid the risk of forfeiture of the advances by m. m. m. limited for cancellation of the orders. It is further stated that the advances to m. m. m. limited have been treated as an asset of the company in the balance sheet for the years ending 31-12-1968 to 1973. The accounts of the company have been unanimously approved and passed by the shareholders of the company in general meetings. The entire allegations of the official liquidator in this behalf is baseless. The issue cannot, therefore, be reopened and questioned under section 543 of the Companies Act, 1956. Insofar as the advances to a. j. george is concerned, it is stated that the company had engaged a. j. george for liaison work at Delhi at a nominal remuneration of Rs. 100/- per month (in addition to actual expenses incurred by him ). He was buying motor vehicles for the company also in addition to the liaison work. He was drawing advances from the company periodically for purchase of motor cars as well as towards expenses incurred for the work of the company. The respondents are not in possession of the account books of the company and therefore, unable to deal with the matter itemwise. A. j. george has been submitting accounts for the expenses incurred on behalf of the company, in order to meet the exigencies, the company used to give advances to a. j. george in the usual course of business in anticipation of accounts for advances made earlier. Monthly remuneration was paid to george only for 8 years, though he worked for the company for 12 years. As such, the directors were right and justified in writing off the sum of Rs. 27,520. 66 keeping in view the services performed by george. In fact, in the usual course of management the board wrote off the above amount. The accounts were also duly audited. The fact of the difference being written off for the year ended 31-12-1974, was disclosed in the balance sheet by including the same in the total of bad debts written off in that year. The official liquidator is not justified in objecting to the amount of Rs. 27,520. 66 due from Mr. A. j. george having been written off in the aforesaid circumstances explained. In controverting the allegations made in para 8 (iii) it is stated that respondent no. The official liquidator is not justified in objecting to the amount of Rs. 27,520. 66 due from Mr. A. j. george having been written off in the aforesaid circumstances explained. In controverting the allegations made in para 8 (iii) it is stated that respondent no. 5 became the director of the company on 1-9-1968 and as such, he is not responsible for any transactions of the company prior to that date. Respondent nos. 1 and 9 had stated that c. Appu rao, being sales officer of the company had to travel a lot to promote sales of the products of the company. He was in service of the company for about 8 years. The personal account of c. Appu rao was credited for a sum of Rs. 10,000/- debiting the account of respondent no. 9, who was the managing agent. The corresponding entry exists in the accounts of respondent no. 9. Official liquidator, therefore, cannot question the credit given to an employee for which there is a debit entry in the books of the company. The personal account of c. Appu rao was credited by a sum of Rs. 10,000/- towards the ex gratia payment and a sum of Rs. 6,988. 33 towards travelling allowance incurred by him for the work of the company, amounting to Rs. 8,588. 33. It is incorrect that a sum of Rs. 8,588. 33 due from c. Appu rao, was written off. It is false to contend that there is any diversion of funds of the company through the account of Mr. C. Appu rao. The apprehension of the official liquidator in this behalf is baseless. Hence, respondent nos. 1,5 and 9 are not liable to pay this amount. It is further stated that respondent no. 5 Mr. Chandy, became the director of the company on 1-9-1968. As such, he is not responsible for the transaction of the company earlier to that date. D. Kamesh was in-charge of the office at Bangalore and was making purchases in addition to doing liaison work for the company at bangalore. A sum of Rs. 61,000/- was given by the company to d. Kamesh for making payment to mysore machinery manufacturers limited, towards fabrication of a plant for the company. There were 5 directors in the company in 1967 whereas there were six directors in m. m. m. limited. A sum of Rs. 61,000/- was given by the company to d. Kamesh for making payment to mysore machinery manufacturers limited, towards fabrication of a plant for the company. There were 5 directors in the company in 1967 whereas there were six directors in m. m. m. limited. Out of the above, only one respondent i. e. , m. c. cherian was a common director in both the company and m. m. m. limited. D. Kamesh died on 30-5-1968 without leaving any assets. There being no chances of recovery of the outstanding sum of Rs. 25,318/-, the directors were justified in writing off the same. Though respondent no. 5 by his letter, dated 20-9-1980 had clarified this point to official liquidator, the official liquidator entirely ignored the clarification. The account has been duly audited and the explanation called for by the auditors were given and the sum was included in the amounts to be written off. The general body passed the accounts unanimously. Respondent nos. 1,5 and 9 are not liable to pay the amount. Insofar as the advance given to Mr. Dhawan is concerned, it is stated that respondent no. 5 is not responsible for any transactions of the company prior to the date 1-9-1968 on which date he became the director of the company. A sum of Rs. 19,000/- was paid to c. p. dhawanas advance for supply of a pulveriser in 1966. He is not related to any of the directors. The company stopped production in july 1968, and as such did not require the machine. In 1974, the directors decided to write off the said amount advanced to c. p. dhawan, as taking delivery of the machine required further investments which the company, could not afford till the factory of the company re-started. Therefore, the board of directors were justified in writing off this amount. This amount included in the accounts written off for the year ended 1974, duly audited and the auditors obtaining the explanations included the same in the audited report to be written off and that was placed before the general body which passed the accounts as audited by chartered accountant of the company. Respondent nos. 1,5 and 9 are not liable to pay that amount. Insofar as the advance of Rs. 8. 000/- to v. c. khanna is concerned, it is stated that a sum of Rs. Respondent nos. 1,5 and 9 are not liable to pay that amount. Insofar as the advance of Rs. 8. 000/- to v. c. khanna is concerned, it is stated that a sum of Rs. 8,000/-was advanced to v. c. khanna for the house built by him at the site belonging to thungabadra dam, as it was found ideal to use it as a guest house of the company. But, unfortunately, the government rejected the company's application for transfer of the site. V. c. khanna did not agree to return the amount advanced to him, which was consequently written off by the directors. The written off sum was included in the amount to be written off as bad debts for the year ending 1972 and the accounts were duly passed at the anual general board meeting. Respondent nos. 1,5 and 9 are not liable to make good the alleged loss and they arc in noway personally interested in the transaction. Respondent nos. 1 and 9 submit that the land bearing s. No. 93 is adjacent to the factory at munirabad, which has a residential building over it, and has All along been used as residence by the staff and officers of the company from the date of purchase i. e. , 1965. It belonged to k. t. cherian, assistant manager, who was paid Rs. 16,030/- for purchasing the premises. The company has acquired title to the property in question by adverse possession. The advance for the purchase of the property is shown in the books of the company under the heading 'land account'. The property was not shown in the statement of affairs of the company, but the advance made to k. t. cherian for the purchase of land is included in the 'land account' in the statement of affairs. This position was clarified by respondent no. 5 by his letter dated 20-9-1980 to the official liquidator. The land in question has been included in the value of total land held by the company at the time of filing the statement of affairs. The value of the property in question has very much appreciated. It is false to contend that respondent nos. 1 and 9 misappropriated the funds of the company. The allegations contained in para 8 (viii) is untenable and false. The value of the property in question has very much appreciated. It is false to contend that respondent nos. 1 and 9 misappropriated the funds of the company. The allegations contained in para 8 (viii) is untenable and false. It is stated that s. v. rajaratnam was working as a fertiliser sales officer in coorg and mysore coffee company limited, for about 10 years, before he was employed by the company. There was a debit balance of Rs. 7,360/- in the books of the company consequent to transfer from coorg mysore coffee company limited on 31-1-1968. The services of rajaratnam were terminated prematurely when the depot was closed. At the time of closing the depot Rs. 2,360/- was adjusted against travelling allowance and Rs. 5,000/- was adjusted towards ex gratia payment by the company to rajaratnam due to premature termination. It is not correct that the sum of Rs. 8,500/- was transferred from coorg mysore coffee company limited to this company, and that respondent nos. 1, 5 and 9 are liable to account for the said amount. The shortage referred to in para 8 (ix) pertains to the period 1964 to 1968. Respondent no. 5 became the director of the company only on 1-9-1968 and as such he is not responsible for any transaction that took place prior to that date. The respondent nos. 1 ad 9 submit that in response to the clarification sought by the official liquidator, respondent no, 5 submitted the clarifications. There is no shortage of sulphur. The special auditor, appointed by the court has not taken into account the purchase and receipts of sulphur during 1963, sale of sulphur of 1104 of tonnes at Bombay in 1965 by the company and sale of 451 tonnes of sulphur in 1974 by Punjabnational bank at bombay. Taking this into account, the respondent submits that there is an excess of 606. 088 tonnes of sulphur. It is further stated that All the transactions of the company including those referred in the application have been approved by the board of directors of the company and have been adopted by the shareholders of the company. Due to change in import policy of the central government, permitting import of large quantities of complex fertilisers viz. It is further stated that All the transactions of the company including those referred in the application have been approved by the board of directors of the company and have been adopted by the shareholders of the company. Due to change in import policy of the central government, permitting import of large quantities of complex fertilisers viz. , di-ammonium phosphate, and due to its production by large public and private undertakings in the country, the demand for superphosphate declined steeply All of a sudden. Hence, the company could not sell its products profitably and consequently the production had to be stopped in 1968. It is pertinent to mention that most of the factories manufacturing superphosphate stopped production at the relevant time. Directors of the company viz. , m. c. cherian, m. c. chandy and m. c. george were mainly responsible for bringing in, monies to an extent of about Rs. 4 lakhs from their personal sources and relatives for maintaining the staff and machinery of the company, in the hope of re-starting the factory. The details which is given in the account, if properly checked, the official liquidator would not have come to the conclusion that there was a shortage of 706. 032 matric tonnes of sulphur. It is further denied that these respondents have committed acts of misfeasance, breach of trust; diverted the funds of the company (under liquidation), no efforts were made to recover the amounts due to the company, misappropriated the funds of the company (under liquidation), amounts were written off to satisfy the queries raised by auditors, and the action taken by the directors lacks bona fides and that they are liable to account for the loss suffered by the company (under liquidation) etc. , as contended by the official liquidator in the application. It is emphatically denied that the company has suffered any loss much less Rs. 11,58,936. 97 claimed in the petition due to any acts of the directors. It is further stated that the present application is doubtless mala fide, because the then official liquidator had illegally and without justification brought to sale many essential parts and spare parts for scrap value, and had filed the present application, without even caring to take into consideration the clarifications given by the respondent no. 5. ( 4 ) MR. It is further stated that the present application is doubtless mala fide, because the then official liquidator had illegally and without justification brought to sale many essential parts and spare parts for scrap value, and had filed the present application, without even caring to take into consideration the clarifications given by the respondent no. 5. ( 4 ) MR. Rangarajan, the senior counsel appearing for respondents, has contendedthat the application is liable to be rejected in limine for more than one reasons. Firstly, that the application under section 543 is misconceived one for, the pleading as to misfeasance and breach of trust by the respondents-former directors of the company, are vague and imprecise. That there are no specific charge of misfeasance or misfeasance amounting to breach of trust by the individual directors. That the respondent no. 1 died on 23-3-1987 and there was no declaration as to the misfeasance committed by him, as such his l. rs. Respondents 5 and 7 who are already on record cannot be held to be liable for any act of misfeasance, if any, by the respondent no. 1. He further argued that none of the allegations do go to establish, or even prima facie establish that the respondents-former directors were liable for misfeasance or breach of trust, and thirdly to account for the alleged loss by way of compensation. ( 5 ) THE learned counsel appearing for the official liquidator, has submitted thatthe company has no jurisdiction to reject the application without holding full dressed enquiry by taking evidence, and the enquiry should be conducted in accordance with the section 543 of the act. The proceedings under section 543 against the delinquent director will not abate after his death. He has further argued that there is sufficient material to prove the charge made against the delinquent directors as per the report of the chartered accountant. ( 6 ) IN view of the pleadings and contention of the parties the following questionsarise to be answered by this court: (1) whether the proceedings initiated against a director under section 543 of the companies act would come to an automatic termination on the death of the director, in any event whether court has jurisdiction to continue the proceedings against the legal representatives of deceased director? (2) whether the court has inherent power to reject the application under section 543 of the act in limine or it is bound to hold regular enquiry of the application filed under section 543 of the act? (3) whether the official liquidator has made out a case to foist liability on respondents 1 to 9 for the alleged loss that may have been caused by the company in liquidation? ( 7 ) POINT no. 1: it is not disputed that respondent 1, the former director of thecompany (in liquidation) died on 23-3-1987. The company was wound up by the order of this court on 18-2-1987. The company application under section 543 was filed on 31-7-1981, till 9-10-1987, the steps were being taken to serve notice to respondents. Though respondent 1 died during the intcrgnum period of taking steps to service notice to other respondents and subsequently the case was fixed for hearing on 20-11-1987, no step was taken to bring the l. rs. Of deceased respondent 1, but it was stated that respondents 5 and 7 are the sons of deceased respondent 1 and they are already on record being former directors of the company. It is relevant to note there is no order to treat respondents 5 to 7 as the l. rs. Of respondent 1 since no steps were taken to treat them as l. rs. Of deceased respondent 1. These respondents 5 and 7 are therefore are not representing the deceased respondent but they arc parties, respondents being the former director of the company during relevant period. ( 8 ) THE learned counsel Mr. Rangarajan, contended that on the death of thedirector, the misfeasance proceeding against him automatically get terminated. Further he argued, that the misfeasance proceedings cannot be confined against the legal representatives of deceased director, for, the personal conduct can be defended only by the person against whom the charge of misfeasance or breach of trust are levelled. In support of his submissions, the learned counsel relied on the decision of this court reported in company cases 1980 Karnataka page 763, official liquidator, High Court of Karnataka v maganlal hirachand shah and others, and 1979 (49) company cases 170, mrs. Joselin and others v official liquidator, alwaye chit funds (p) ltd. In support of his submissions, the learned counsel relied on the decision of this court reported in company cases 1980 Karnataka page 763, official liquidator, High Court of Karnataka v maganlal hirachand shah and others, and 1979 (49) company cases 170, mrs. Joselin and others v official liquidator, alwaye chit funds (p) ltd. ( 9 ) THIS court in the above-referred first case observed that:"it is unnecessary to go into the reasons why misfeasance proceedings cannot be continued against the legal representatives of a deceased director particularly in cases where no declaration against the director has been made by the court in which the proceedings have been initiated, for the obvious reasons that the language of section 543 of the act or section 542 of the act clearly indicates that what is impeachablc under those sections is the personal conduct of the director or other person who had been responsible for causing loss to the company in the course of participating in the business and management of the company. This personal conduct can only be defended by such person with the facts and knowledge that he possesses and it cannot be defended by others who are ignorant of anything that the deceased director might or might hot have done in the course of such management and business of the company. Therefore, legal representatives can never be stated to be in a position to defend, no matter how detailed or elaborate the pleadings of misfeasance on the part of a director or other person may be, in proceedings under section 542 or 543 of the act. They will be placed in a very difficult position if they are exposed to defend the action of somebody about which they might not have knowledge at all. " the division bench of Kerala High Court in the second case held that:"the three directors had died at an early stage of the proceedings before the company court. They had not been examined in the misfeasance proceedings nor had they an opportunity to place before the company court any evidence in support of their contentions prior to their death. Therefore, it would not be just, fair or equitable to continue the misfeasance proceedings against the appellants, who were the legal representatives of the three directors. They had not been examined in the misfeasance proceedings nor had they an opportunity to place before the company court any evidence in support of their contentions prior to their death. Therefore, it would not be just, fair or equitable to continue the misfeasance proceedings against the appellants, who were the legal representatives of the three directors. " ( 10 ) THE misfeasance charged against a director is a seripus charge in aproceeding contemplated under section 543 of the act; and it involves an inquiry into the personal conduct of persons acting in capacities mentioned therein. It was contended by the respondents' counsel that the maxim 'actio personalis moritur cum persona' is applicable in respect of the proceedings initiated against a delinquent director under section 543 of the act and the proceedings initiated against the director under section 543 of the act would cease on the death of director, by reasons of the operation of the maxim that personal action will not survive the death of a wrong doers. ( 11 ) KEEPING in view, the decision of this court referred to above, I am of the viewthat a misfeasance proceeding against directors contemplated under section 543 of the act involving inquiry into personal conduct, misfeasance or breach of conduct, would certainly attract the application of the maxim 'actio personal is moritur cum persona' (the personal action will not survive the death of wrong doer ). The contention of the counsel of official liquidator that the proceedings under section 543 against the delinquent director will not abate'afterhis death, is unacceptable and the same is rejected. The other contention of the official liquidator, that the court has jurisdiction to continue the proceedings against the legal representatives of deceased director is equally not acceptable. In the instant case, the respondents 5 and 7, though are the sons of respondent 1, they have not been brought on record as l. rs. Even otherwise in view of the decision of the high court, that misfeasance proceedings cannot be continued against the legal representatives of a deceased director for the obvious reason, that language of section 543 or section 542 indicates that what is impeachable is the personal conduct of the director or other person who had been responsible for causing loss to the company. The personal conduct can be defended by a person against whom the allegations are made, for he is the person who possesses the facts and knowledge about his action in the course of such management and business of the company. That apart, it is relevant to note that no declaration has been made as to the liability of respondent 1 when he was alive. It is to be noted that the proceedings initiated against the director was not culminated in a judgment of this court which proceeded against the legal representatives of the deceased director. In the instant case respondent 1 died at the early stage of proceedings. He had not been examined in misfeasance proceedings nor any material is placed before this court in evidence in support of his contention prior lo his dcath. Therefore, it would not be just, fair and equitable to continue the misfeasance proceedings against the legal representatives of the deceased director. Further, it is to be noted that the legal representatives of respondent 1 have not been brought on record representing the deceased respondent 1. ( 12 ) POINT no. 2: the misfeasance proceeding is no doubt a proceeding of civilnature but it give raise to the liability of director for his misconduct which is of a quasi-criminal nature and serious one. Section 534 provides relief by a summary procedure to assess the delinquent directors liability. Thus misfeasance proceedings in the course of winding up of a company are independent. Whether or not the person proceeded against may be criminally liable for any offence disclosed by the facts of the case and for assessing the civil liability under section 543 of the act. The counsel for the official liquidator has referred to Rules 260 to 262 and contended, that the court should conduct an enquiry by taking evidence, and it cannot reject the judges summons on prima facie finding, that there was no case made out lo proceed with the enquiry. The learned counsel for respondents submitted that the court has inherent power to reject the application under section 534 of the Act, if it finds that the allegations made against the delinquent even if taken on face value did not constitute the misconduct of misfeasance or malfunction. The learned counsel for respondents submitted that the court has inherent power to reject the application under section 534 of the Act, if it finds that the allegations made against the delinquent even if taken on face value did not constitute the misconduct of misfeasance or malfunction. ( 13 ) IT is apparent that under rule 260 when an application is made under section542 or 543, it shall be in the form of summons returnable in the first instance in the chamber. The summons so issued shall state the nature of the declaration or order for which an application is made and the grant of the application and it shall be served on every person against whom an order is sought under rule 261; it provides that on return of the summons, the court may give such direction as it shall think fit, as to whether points of claims or defence to be delivered, as to it taking evidence wholly or partly by affidavit or orally. It further provides that the procedure is of summary procedure and for the hearing thereof. The preliminary hearing after return of summons docs not mean that the court has not to apply its mind to prima facie satisfy about the merit of the application. The language of section 534 read with rule 261, it is manifestly clear about the discretion resting with the court in granting application. The word 'as it thinks fit' occurring in rule 261 makes it clear and points out that direction on preliminary hearing could be given by the court if it thinks fit to do so, not otherwise. Thus, on the basis of the act and rules, it is not compulsory for the court to give direction as to whether points of claims or defence to be delivered as to taking evidence. The court has in its inherent power under rule 9 of the companies (court) rules, which reads as follows:-"9. Inherent powers of court. nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent the abuse of the process of the court. Inherent powers of court. nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent the abuse of the process of the court. "ample power to reject the application without resorting to the direction as to the points of claims under section 543 of the Act, in order to secure ends of justice. ( 14 ) IT is well-laid principles of law that any proceeding against delinquentdirector in the initial stage can be quashed if on the face of the complaint (application) no misconduct viz. , misfeasance or breach of trust is constituted. In other words, the test is that taking the allegation in the complaint/application as they arc, if no misconduct is made out, then the company court will be justified in quashing the proceedings in exercise of its inherent power. ( 15 ) POINT no. 3: it is relevant to analyse section 543 of the act. It enumerates thepower of the court to assess damages against the delinquent directors mulcting them with the damages for not acting reasonably and thus committing company to unnecessary loss. The proceedings however docs not extend to any and every kind of claims which the company may have against the delinquent directors. It is confined to claims relating to misfeasance or breach of trust in respect of their duties in relation to the company. Thus, it is only misfcasance which includes breach of duty, breach of trust resulting in loss to the company will come within the purview of section 534 of the act. Mere negligence or neglect of duty will not by itself create liability, unless there was gross negligence amounting to misfeasance or breach of duty resulting in loss to the company. ( 16 ) IN the decision of Madras High Court reported in official liquidator v g. shanmugham, 1979 company cases 903, it is observed thus: "section 543 of the companies act which enumerates the power of court to assesses damages against the delinquent directors has set down certain norms for the exercise of such power resulting in mulcting the ex-officers, may be directors, with damages for not acting reasonably and thus committing the company to unnecessary loss. The vein that runs through the independent of section 543 of the companies act appears to be that there should be prima facie proof of such negligence bordering on misfeasance and breach of trust which alone was generally the basis for invocation of the punitive rule contained in section 543 of the companies act. No doubt, section 543 (1) (a) and section 543 (1) (b) create as between themselves a dichotomy in the matter of exercise of the power of the court in such matters. As per clause (a) of sub-section (1) of section 543 of the Act, such a power to assess the damages could be invoked in case of misapplication and retention of monies or property of the company and on a fair and reasonable conclusion by the court that the officers of the company are liable or accountable for the same. The court can then exercise its jurisdiction and assess the damages against the delinquent director or officer. Clause (b) of sub-section (1) of section 543 of the Act, however, lays down a specific hypothesis for the invocation of the power and for the exercise of it. It contemplates that the delinquent director should be found to be guilty of misfeasance or breach of trust in relation to the company. Therefore, clause (b) deals with a particular situation, wherein it should appear to the court, whether on the application of the liquidator or any creditor or contributory, that the company whilst it was functioning acted through a body known as the directors or the officers who are guilty of appropriation without authority of funds of the company. It may ultimately be a case wherein there was misappropriation also resulting in the breach of that faith which the shareholders and the creditors outside the domestic chamber of activity of a company place in the body of directors or officers-in-charge of the affairs of the company. " thus, it enables the court on an application by the official liquidator or any other creditor or contributory to examine the conduct of the delinquent directors or officers of the company. The court examines the conduct to see if they were guilty of any misfeasance or other breach of duty to company. If the court finds, it can order the delinquent directors or officers to repay or restore to the assets of the company of such sum as the court thinks just. The court examines the conduct to see if they were guilty of any misfeasance or other breach of duty to company. If the court finds, it can order the delinquent directors or officers to repay or restore to the assets of the company of such sum as the court thinks just. ( 17 ) IT is contended by the respondents counsel that as per the statement containedin the application by the official liquidator that All the transactions reflected in the respective balance sheet had been duly approved by the board as well as the general body, and the auditors had given unqualified reports. That being so, the shareholders in the company had no objection to or even authorised, the conduct which the liquidator is now complaining of as a breach of duty. As such, when the shareholders have unanimously approved of acts of directors, it cannot be complained of by the liquidator that their acts constituted negligence and are liable to make good the loss. In the decision reported in multinational v multinational services, 1983 (1) ch. 258, it has held thus:-"if the company is bound by what was done, when it was going concern, then the liquidator is in no better position. He cannot sue the members because they owed no duty to the company as a separate entity and he cannot sue the directors because the decisions which he seeks to impugn were made by, and with full consent of the members. "in the above case, the shareholders unanimously approved of acts of the directors which the liquidator later complained constituted negligence. In such a situation, it has been held that the company could not complain of acts to which it had itself agreed. And since the company could not complain neither could the liquidator on behalf of the creditor. This approach will have to be accepted, for that creditor originally has no action in part against a debtor for negligent misuse by the debtor of his assets. This is true, in my opinion, so far as individual debtor is concerned, if the debtor is a company, the director owes a duty to the company which has no counterpart in the case of individual debtor. In the above multinational gas's case, it is manifest that the shareholders consent can deprive the creditors of a remedy in respect of a breach of duty by the directors. In the above multinational gas's case, it is manifest that the shareholders consent can deprive the creditors of a remedy in respect of a breach of duty by the directors. The learned counsel for the official liquidator brought to my notice the subsequent decision of court of appeal viz. , west marcia safety wear ltd v dodd, 1987 times 24 november ca, which has explained that multinational gas Rules applies only where the company was solvent at the time of breach of duty. I am in full agreement with this view, that is to say, if the company is solvent, the shareholders' consent can deprive the creditors of a remedy in respect of breach of duty of the directors. If the company was not solvent at that time, then the duty of the directors to the company is principally to consider the creditors interest, since it is their money which is now at risk, rather than the shareholders. ( 18 ) IN the instant case, the acts of the directors, which have the consent ofshareholders, were All at the time of the company was not insolvent. The acts of the directors complained by the liquidator were All of the periods between the year 1961 up-to-date of winding up. The transactions which have been made and the decision taken by the board and the general body approving the various acts and deeds of directors were All at the relevant periods prior to the winding up of the company. The chartered accountants' report annexure-a relied upon by the liquidator alleging the misfeasance against the directors, does not indicate that the company was not solvent at the time of alleged breach of the duty by directors. I am of the view that since the shareholders have no objection to, and even authorised the conduct of directors during the relevant periods, when the company was not insolvent, the liquidator cannot now complain that the conduct of the directors constituted negligence amounting to misfeasance including breach of trust. ( 19 ) HOWEVER, the official liquidator relying on the report of the charteredaccountant, anncxrurc-a, has strenuously argued, that directors are liable to account to the loss causes to the company. ( 19 ) HOWEVER, the official liquidator relying on the report of the charteredaccountant, anncxrurc-a, has strenuously argued, that directors are liable to account to the loss causes to the company. In the application he has enumerated the various acts of ex-directors of the company, respondents 1 to 9 at para 8 (i) to 8 (viii) and 8 (ix) claiming that the directors arc liable to repay the sum of Rs. 11,58,936. 97. The respondents have delivered their defence and submitted that no case much less a prima facie case is made out by the liquidator. I have perused the records and the material placed by the parties and heard them on each point of allegation of misfeasance, breach of trust made against the ex-directors, respondents 1 to 9. The liquidator can no doubt succeed in making issuance of the prayer in the summons only if he establishes, that respondents 1 to 9 as ex-directors (quondam directors) of the company have become liable or accountable for the money which was due to the company. This is not a case where monies have been misappropriated or monies have been retained by the respondents/directors. It is well-laid principles of law, that in order to make the directors personally liable under section 534 for misfeasance, it is necessary to show that the directors have dishonestly acted or abstained from acting, in conflict with their plain duty, and that by reason of the act of directors the company has incurred loss. ( 20 ) NOW, I will take up each allegations contained in the application filed by theliquidator. The liquidator on the basis of the report of the chartered accountant at para 8 (i) has stated that the mysore machinery was awarded the contract on 1-9-1967 and advances have been made and that was ratific'd by the board. An advance of Rs. 1,60,900. 00 was made for fabrication of machinery on 1-9-1967. Later, when the plant was not erected, the company decided to charge interest at 10% on the amount outstanding from 1-1-1970 by a resolution of the company. As a result, company has lost a sum of Rs. 1,99,847. 50. The respondents have stated in their defence that it was wrong on the part of the liquidator to suggest that advances were made by the company to m. m. ltd. Company as a loan. As a result, company has lost a sum of Rs. 1,99,847. 50. The respondents have stated in their defence that it was wrong on the part of the liquidator to suggest that advances were made by the company to m. m. ltd. Company as a loan. Since the idea of installation the proposed plant was dropped due to stoppage of production and the board took decision to charge at 10% interest on the advances from 1-1-1970 to avoid the risk of forfeiture of the advances by m. m. ltd. , for cancellation of the orders. The accounts of the company have been unanimously approved and passed by the shareholders of the company in general meeting. Jn the accounts of the company the advances was shown as the assets of the company. The official liquidator's case is that they ought to have charged interest from the date of advance, failure to do so amounts to negligence on the part of the director. The peculiar facts of the case, that since the company did not want the machinery to be installed by the m. m. ltd. , and there is likelihood of forfeiture of the advance money for breach of contract, a decision was taken to treat it as a loan and charged interest at 10% which is a commercial decision by the board of directors which later came to be approved by the shareholders in the general body meeting. As already pointed out that when once the conduct of the director authorised and approved by the shareholders, it cannot be complained to by the official liquidator or any contributory under section 543 of the act. That apart, there is no nexus between the accountability which is claimed by the official and any personal act on the part of the respondents-directors. ( 21 ) IN para 8 (ii) of the application, the claim is made to the effect that anemployee a. j. george was advanced a sum of Rs. 97. 500/- for the purchase of motor car during the year 1965. He gave an account only for Rs. 57,321/ -. Subsequently, there was some more advances to him and later, he gave account for Rs. 22,499. 85 which included the value of the car at Rs. 17,000/ -. In the year, it seems the said george claimed a sum of Rs. 1,257. 63 which was settled by the company. He gave an account only for Rs. 57,321/ -. Subsequently, there was some more advances to him and later, he gave account for Rs. 22,499. 85 which included the value of the car at Rs. 17,000/ -. In the year, it seems the said george claimed a sum of Rs. 1,257. 63 which was settled by the company. It is further stated that a sum of Rs. 27,520. 66 was outstanding from him, which was written off in the year 1974, by the company. It is alleged that the company did not make any efforts to recover the amounts, and thereby the respondents 1 to 6 and respondent 9 who were the directors at the relevant lime are liable to account. The respondents in their defence have stated that Mr. A. j. george was employed to do liaison work to the company and his remuneration was paid only for 8 years, though he worked for the company for more than 12 years. The directors were therefore writing off the sum of Rs. 27,520. 66 keeping in view of the services rendered by Mr. George. Further, it is maintained by the respondents that the board, as well as the general body approved the writing off the said amount. It is to be noted that there is no specific charge against individual director, but allegations of negligence have been made en-mass against All the directors, respondents 1 to 6 and 9. Unless there is specific allegation against the individual directors of negligence or misfeasance and he is actually responsible. I do not think that official liquidator could proceed against the directors for misfeasance or breach of trust resulting in the alleged loss caused to the company. As noticed above, the action/conduct of the directors was authorised and approved by the board and the general body. ( 22 ) I now turn on to consider the statement made in para 8 (iii) of the claimapplication by the official liquidator. I do not think that the official liquidator has made out any case of misfeasance or breach of trust, must less any prima facie case to prove against the directors under section 534 of the act. It is alleged that in 1967 a sum of Rs. 10,000/- was transferred from the account of c. Appu rao, the sales officer of the company to the account of respondent no. 9 (associated planters ). It is alleged that in 1967 a sum of Rs. 10,000/- was transferred from the account of c. Appu rao, the sales officer of the company to the account of respondent no. 9 (associated planters ). As on 31-12-1968, the debit balance of Rs. 8,588. 83 in the employees' account was written off, which is stated to have been done at the instance of directors. It is stated that this has apparently been done as per the decision of the directors, and the directors respondents I to 5 and 9 arc liable to make good the loss. This has been controverted by the respondents in their defence, to the effect, that a bald allegation has been made "that it is apprehended that the management was diverting the funds of the company": and there is no specific allegation against any of the directors as to diverting the fund for his own benefit or there is misappropriation of the fund. It is stated that the personal account of c. Appu rao, the sales officer was credited for a sum of Rs. 10,000/- by debiting the account of respondent no. 9. (the associated planters private ltd.) Who were the managing agents. The corresponding entry exists in the accounts of respondent no. 9, as such, the official liquidator cannot question the credit given to an employee for which there is entry in the books of company. It is further pointed out that personal account of c. Appu rao was credited by a sum of Rs. 10. 000/- towards ex gratia payment and a sum of Rs. 8,588. 33 towards travelling allowance incurred by him for the work of the company. It is therefore, submitted that it was incorrect to state that a sum of Rs. 8,588. 33 due from c. Appu rao was written off. It is argued by the respondents counsel that the official liquidator has not alleged that there was any fraudulent transfer of the amount from the account of the employee for the personal gain of the directors, I do find that in the statement of claims referred to in para 8 (iii) the allegations made do not constitute the misfeasance, much less the breach of trust by the respondents- directors of the company. The liquidator has, in fact, stated in his statement of allegations which is based on the chartered accountant report-annexure a that the chartered accountant'has finalised the report without taking into consideration of the clarifications given by the ex-directors. ( 23 ) IN para 8 (iv) it is alleged that a sum of Rs. 25,380. 49 from the account of Sri d. Kamesh, a staff member of the company to the mysore machineries ltd. , was outstanding in his name and the same was written off in year 1970. No efforts were made by the management to recover it from the said staff member. It is apprehended that the sum shown as due is not actually the amount from the staff member; but from the management. In the defence, it is stated that respondent 5, m. c. chandy became the director of the company on 1-9-1968. He has nothing to do with the transaction. The said d. Kamesh was in-charge of the office at Bangalore entrusted with the file making purchases in addition to liaison work. The company gave advance of rs. 61,000/- to d. Kamesh for making payment to m. m. m. ltd. , for fabrication of a plant. He died on 30-5-1968 leaving no assets. As such, thcrebeing no chance of recovery of the outstanding sum of Rs. 25,318/-, the directors were justified in writing off the same. The gist of charge against the directors is that they did not make any attempt to recover the amount due from d. Kamesh. The fact remains that d. Kamesh leaving behind no assets, and in that situation, the management was left with no other course, except to write off. The management's decision to write off the amount in the circumstances is in the interest of the company and it cannot be construed as breach of duty. Moreover, these allegations do not amount to that the directors have committed any breach of duty or omitted to do anything which it would be wrongful. ( 24 ) LIKEWISE in para 8 (v) it is alleged that to one Sri c. p. dhawan certain sum was advanced for supply of machinery. No details are available on the dealings of that person with the company, but the said amount was written off by the management as bad debt. ( 24 ) LIKEWISE in para 8 (v) it is alleged that to one Sri c. p. dhawan certain sum was advanced for supply of machinery. No details are available on the dealings of that person with the company, but the said amount was written off by the management as bad debt. No efforts were made to recover the amounts, as such, the directors respondents 1 to 6 are liable. In the defence, it is stated that the amountwas paid to dhawan as advance for supply of pulveriser. The company stopped production, as such it did not require the machinery and the director decided in the year 1974 to write off the said amount advanced to dhawan as taking delivery of machinery required further investments. It is further submitted by the respondents' counsel that the decision to write off was taken by the board and the same was approved by the shareholders. Here, the charge is that a wrong decision is taken in writing off the advance amount given to the supplier of machine. But there is no charge that the directors misapplied the fund for their personal benefit. It is a sound commercial judgment taken by the director in the interest of the company. It is relevant to note, that there is no specific charge against individual director, moreover the allegations are vague and lack of particulars of the alleged wrongful acts and omissions. ( 25 ) IN para 8 (vi) it is alleged that a sum of Rs. 8,000/- was paid to v. c. khanna on 28-5-1966 as advance to purchase a house, lateron the contract was cancelled and the amount advanced was not recovered but written off as bad debts, whereby the respondents 1 to 6 and 9 are liable for the loss. In reply to this claim, the respondents in defence statement has stated that the amountwas advanced to v. c. khanna for the house built by him which was found to be ideal to use as a guest house of the company. Since the government refused to transfer the site to the company, v. c. khanna refused to return the amount despite the best efforts put by the management. Ultimately, it was treated as bad debt and written off. It is submitted by the counsel for the respondents, that it may be bad decision, but that does amount misfeasance or malfeasance by the director. Ultimately, it was treated as bad debt and written off. It is submitted by the counsel for the respondents, that it may be bad decision, but that does amount misfeasance or malfeasance by the director. In this, liquidator's charge is that the amount due was not recovered by the management, as such, the directors are liable to refund the said sum to the company. As noted, even in this allegation there is no specific charge against the individual directors. I am of the view that the charge is not sustainable either on law or on facts. ( 26 ) IN para 8 (vii) it is alleged that the ex-employee h. s. sharma had alleged in his letter that the land acquired by the company was registered in the name of Sri k. t. chcrian, the cost of the land and registration was debited to the company account, but the said land did not find mention in the statement of affairs filed by respondent 5 with the official liquidator. The respondents in their defence have stated that the land on which the residential building is situated close to the factory and has All along been used as residence by the staff of the company from the date of purchase. It belonged to k. t. cheriyan and the advance paid to him by the company has been shown in the books of the company. This position was clarified by respondent no. 5 by his letter dated 20-9-1980 to the official liquidator, pointing out that the land in question had been included in the value of land held by the company at the lime of filing the statement showing as 'land account'. The allegation is that respondent no. 5 has not included that the cost of the land in the statement of affairs filed before the official liquidator. Had the official liquidator looked into the clarification issued by the respondents to that of certain question, which in fact even the chartered accountant did not, there would not have those allegations referred in para 8 (viii ). It is obvious, and to my mind it appears that the allegations arc devoid of any charge of misfeasance or breach of trust against the directors. ( 27 ) IN para 8 (viii) it is alleged that a sum of Rs. It is obvious, and to my mind it appears that the allegations arc devoid of any charge of misfeasance or breach of trust against the directors. ( 27 ) IN para 8 (viii) it is alleged that a sum of Rs. 8,500/- outstanding in the books of M/s. Chamundi curing works in 1968 against rajaratnam, an ex-employee of the company was transferred to the company. After setting of amount due to him as bonus for the year 1966-67 thebalance amount of Rs. 7,360/- was written off as ex gratia and travelling expenses. It is slated that it was done to satisfy the queries raised by the auditors and there is lack of bona fides on the part of the directors. In reply, it is controverted by the respondents staling that rajaratnam was working as fertiliser sales officer in coorg and mysore coffee. Company ltd. , for about 10 years before he was employed by the company. There was a debit balance of Rs. 7,360/- in the books of the company consequent to the transfer from coorg mysore coffee company lid. , on 31-1-1968. The services of rajaratnam were terminated prematurely when the depot was closed. At the time of closing the depot Rs. 2,360/- was adjusted against travelling allowances and Rs. 5,000/- was adjusted towards er gratia payment by the company to rajaratnam due to premature termination. It is denied that a sum of Rs. 8,500/- was transferred from coorg mysore coffee company ltd. , to this company. The case put forward by the official liquidator is that the written off balance amount as ex gratia and travelling allowance of the ex-employee was done to satisfy the queries raised by auditors and lacks bona fides. It is argued by the respondents' counsel that there is no allegation or charge that the directors have misapplied or wrongly returned the amount. Except alleging that writing off the balance amount as ex gratia payment to the employee for his travelling expenses, and to satisfy the auditory qucrry, no material particulars given to show how the action of the directors was not bona fide. This is not a case of retention of the money in the hands of the director causing loss to the company. I am, therefore, unable to hold that this allegation even taken as true, it does not establish that directors have committed any breach of trust or misfeasance. This is not a case of retention of the money in the hands of the director causing loss to the company. I am, therefore, unable to hold that this allegation even taken as true, it does not establish that directors have committed any breach of trust or misfeasance. I am also of the view that in writing off the balance as ex gratia payment of travelling expenses of employee which since being approved by the board and the general body, under no stretch imagination, the action of the directors could be construed either as dishonest or acted in conflict with their plain duty, and that by reason of such acts of the directors the company has incurred the alleged loss. ( 28 ) LASTLY,i turn to the allegation contained in para 8 (ix) of the claim statement of the liquidator. It is alleged that the company purchased 15,763. 156 m. Tons of sulphur during the period from 1964 to 1968. But the actual quantity of sulphur received in the factory of the company was only 15,057. 124 m. Tons. As such, it is stated there was a deficit of 706. 32 m. Tons of sulphur in the factory causing financial loss to the company to the tune of Rs. 8,47,200/ -. In defence, the respondents have staled lhal during the relevant period respondent no. 5 was not the director of the company. He became the director of the company only on 1-9-1968. As such, he is in noway responsible for the transaction that looks place prior to that dale. It is further stated that to the liquidators queries that the clarification has been issued by respondent no. 5 through letter, dated 20-9-1983 stating that there is no shortage of sulphur. It is also stated that the special auditor appointed by the court has not taken into account the purchases and receipts of sulphur during 1963. Sale of sulphur of 1,104 tonnes at Bombay in 1965 by the company and sale of 451 tonnes of sulphur in 1974 by Punjabnational bank at bombay. If this was taken into account, the special auditor as well as the liquidator would not have made the allegation. In fact, there was an excess of 606. 088 tonnes of sulphur. The allegation in the claim statement is that a quantity of 706. If this was taken into account, the special auditor as well as the liquidator would not have made the allegation. In fact, there was an excess of 606. 088 tonnes of sulphur. The allegation in the claim statement is that a quantity of 706. 32 m. Tons, of sulphur was short received by the company in the year 1964 to 1968 causing financial loss to the company. It is pointed out by the respondent that in response to clarification sought for by the liquidator in this regard, it was clarified by respondent no. 5, director, that there was no shortage of sulphur. It was pointed out that the sale of sulphur effected during 1963 and in 1965, had it been taken, it would reveal that there is excess of 606. 088 tonnes of sulphur. It is relevant to refer here that the liquidator has in fact stated in his claim statement at para 7 that the allegation is based on the chartered accounlants report, annexure-a, who has not taken into consideration the clarification given by the directors. It is further poiivtcd out by the respondents that All the transactions have been approved by the board of directors of the company which have been approved by the shareholders of the company. Respondents' counsel has further pointed out that when the company stopped production in the year 1968, the directors of the company viz. , m. c. chcrian, m. c. chandy and m. c. george were mainly responsible for bringing money to an extent of about Rs. 4 lakhs from their personal sources for maintaining staff and machinery of the company, in the hope of re-starting the company. I am in agreement with the submission made by the respondents' counsel that the allegation is vague and speculative. Had the liquidator taken into consideration the clarification issued by the directors and referred the books of accounts, which would reveal the truth of sale of sulphur effected by the company, in the year 1963 and 1965; he would not have levelled the charge against the directors of causing loss to the company. ( 29 ) LASTLY, the counsel for the official liquidator contended that the series of acts and omissions alleged in the claim statement go to show that the directors were negligent of their duty of caring to the company. ( 29 ) LASTLY, the counsel for the official liquidator contended that the series of acts and omissions alleged in the claim statement go to show that the directors were negligent of their duty of caring to the company. A claim based on common law negligence or an ordinary claim of damages for mere negligence, is not a claim for misfeasance. It is only 'gross negligence' which amounts to misfeasance. The phrase that gross negligence amounting to misfeasance was what is often called a 'recklcssncss'. in the case of lagunas nitrate co. V lagunas syndicate, 1899 (2) ch. 392, lindley, mr said:"the amount of care to be taken is difficult to define, but it is plain that directors arc not liable for All the mistakes they may make, although if they had taken more care they might have avoided them. . . . Their negligence must not be the omission to take All possible care, it must be such more blameable than that; it must be in a business sense culpable or gross. "in this case, however, the 'recklessness' which is conduct nearly 'approaching fraud, is not alleged against the respondent-directors. ( 30 ) I am, therefore, unable to hold that the respondents 1 to 9, the directors of the company in this case have misapplied the applicants amount and that therefore they are liable to account. There is no case as to any breach of trust committed by any of the directors in relation to the company and it is not suggested that any money of the company have been misappropriated by the directors or that any duty was imposed on the directors by the company in respect of which the directors have committed a breach. In any event, the loss alleged to have sustained by the company appears to be rather speculative than real and too remote, that it cannot be said that the company has sustained loss as a direct consequence. ( 31 ) I, therefore, hold that the respondents 1 to 9, the directors arc not liable for any misfeasance or misapplication or breach of trust under section 543 of the companies act. The judge's summons, therefore fails and is dismissed. ( 32 ) IN the result, the prayers (a), (b), (c), (d), (e) and (f) are rejected. No order as to costs. Order accordingly. --- *** --- .