Judgment :- 1. By an order dated 19.3.2001, passed in the above C.P.No.514 of 2000, the company Elnet Limited was ordered to be wound up and the Official Liquidator attached to this Court was appointed as its Liquidator. The Official Liquidator scrutinised the records available with the office of the Registrar of Companies and found out the following position : (i) that as on date of the winding up order, three persons, namely, K.S. Lakshminarayanan, K.Kannan and R.Elango were the Directors; (ii) that Bank of India, Indian Bank, IDBI and ICICI were the secured creditors; and (iii) that the company was incorporated in 1988 with its registered office at plot No.B8, Madras Export Processing Zone (MEPZ), Kadaperi, Tambaram, Chennai-45. 2. The Official Liquidator also took possession of the available assets in the office premises at MEPZ on 23.8.2001 and the assets available at the factory premises at plot No.6, SIPCOT Industrial Complex, Hosur on 28.8.2001. The movable and immovable properties were sold and an amount of Rs.2.15 Crores was realised. 3. As per Section 454 of the Companies Act, 1956, one of the former Directors, K.S.Lakshminarayanan filed the statement of affairs with the Official Liquidator on 18.6.2001. The statement of affairs revealed the following : (i) that an aggregate amount of Rs.5,47,107/- was available in various banks; (ii) that a sum of Rs.31,98,575/- was due from various parties under the category of trade debtors; (iii) that an aggregate amount of Rs.2,06,58,043/- is realisable under the category of loans and advances; (iv) that a sum of Rs.1,70,09,713/- is due from one of the Ex-Directors by name Mr.Thiagaraj S.Chettiar, on account of various irregularities committed by him and against whom criminal proceedings were also pending; (v) that under the category of preferential creditors, an aggregate of Rs.1,42,16,311/- is payable to various parties, which includes salaries to employees and dividend; and (vi) that under the category of unsecured creditors, a sum of Rs.7,37,22,034/- is due to various parties. 4. Though the Official Liquidator did not invite any claims from the creditors, the Official Liquidator received 146 claims voluntarily for an aggregate amount of Rs.41,76,31,599.76 p. But, the funds position of the company as on 10.3.2006 was (i) cash of Rs.812/-; (ii) amount in the bank Rs.1,74,075.83 p; and (iii) investment of Rs.2.10 Crores. 5. 4. Though the Official Liquidator did not invite any claims from the creditors, the Official Liquidator received 146 claims voluntarily for an aggregate amount of Rs.41,76,31,599.76 p. But, the funds position of the company as on 10.3.2006 was (i) cash of Rs.812/-; (ii) amount in the bank Rs.1,74,075.83 p; and (iii) investment of Rs.2.10 Crores. 5. In the light of the information culled out, the Official Liquidator has concluded that the statement of affairs filed on 18.6.2001 does not contain any material or documents to show that the Ex-Directors of the company conducted the affairs with an intent to defraud the creditors. The Official Liquidator has further stated that he does not have required documents/ materials to establish that the Directors acted with a fraudulent intention. Therefore, the above application C.A.No.1906 of 2006 is taken out by the Official Liquidator seeking necessary further directions. 6. In the above application, notice was ordered on 1.11.2006. When the application came up for hearing on 22.1.2009, this Court directed the Official Liquidator to conduct a spot enquiry to find out the whereabouts of the Ex-Directors of the company, since there was no representation for the company. Therefore, the Official Liquidator conducted a spot enquiry and filed a report on 20.2.2009. The spot enquiry revealed that all the three Directors, namely, K.S.Lakshminarayanan, K.Kannan and R.Elango were nominated as Directors to the company in liquidation, by the Electronic Corporation of Tamilnadu Limited in view of the fact that ELCOT owned 26% of the share holding. The Managing Director of ELCOT also sent a letter dated 13.2.2009 confirming the fact that the above three Directors were only nominees of ELCOT. However, it was also pointed out that the company was managed earlier by one Mr.Thiagaraj S.Chettiar, who was its Managing Director. On allegations of misappropriation of funds, he was arrested on 9.1.1998 by the CBCID, Tamilnadu and prosecution proceedings were pending against him. 7. In the light of the above facts indicated in the additional report filed by the Official Liquidator, after conducting a spot enquiry, this Court passed an order on 11.3.2009 directing the Official Liquidator to trace the whereabouts of the said Thiagaraj S.Chettiar. Accordingly, he was traced and notice was served on him. Thereafter, he also entered appearance and filed an affidavit. Accordingly, he was traced and notice was served on him. Thereafter, he also entered appearance and filed an affidavit. After taking the affidavit on record, the above application was taken up for hearing and I have heard Mr.M.Jayakumar, learned Deputy Official Liquidator and Mr.S.R.Rajagopal, learned counsel appearing for Mr.Thiagaraj S.Chettiar. 8. It is contended by Mr.S.R.Rajagopal, learned counsel appearing for Mr.Thiagaraj S.Chettiar as follows: (i) The company in liquidation was promoted as a joint venture between ELCOT and New Era Technologies. It was named as Elnet Limited. The Board of Directors was to comprise of two persons nominated by the promoters and four nominated by ELCOT. Mr.Chettiar was the Managing Director during the period 1989-95. He was removed from the Board of Directors in September 1995 and the balance sheet for the year 1994-95 was signed by him. (ii) 26% on the share holding of the company in liquidation was held by ELCOT, 25% was held by New Era Technologies and the balance 49% was held by the public. Due to a financial crisis, the Board for Industrial and Financial Reconstruction initiated an enquiry and ultimately recommended the winding up of the company. (iii) A prosecution was launched against Mr.Thiagaraj S.Chettiar and six others, for offences under Sections 120B, 409, 420, 465 read with 477A, IPC in C.C.No.5525 of 1997 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Chennai-8. By a judgment dated 24.4.2006, all the accused were acquitted. (iv) Though the Official Liquidator has stated in his report that under the category of "Loans and Advances", a sum of Rs.1,70,09,713/- was stated to be due from Mr.Thiagaraj S.Chettiar, as per the 11th annual report for 1998-2000, Mr.Chettiar was removed from directorship in September 1995. In the last balance sheet signed by him, there is no entry to the effect that such an amount was due from him. On the contrary, the 7th annual report for the financial year 1994-95, shows that the company made a profit of Rs.83,15,611/-, as per the profit and loss account for the year ending 31.3.1995. There is no indication in the said report about any amount being sanctioned as loan to any director. The composition of the Board was 2 : 4, in the sense that two were nominated by the promoters and four nominated by ELCOT. There is no indication in the said report about any amount being sanctioned as loan to any director. The composition of the Board was 2 : 4, in the sense that two were nominated by the promoters and four nominated by ELCOT. Therefore, the claim as though an amount was due from Mr.Thiagaraj S.Chettiar, is not borne out by records. (v) Even as per the report of the Official Liquidator, the onus is on him under Section 542 of the Companies Act, to show that the Ex-Directors carried on business with intent to defraud the creditors. But in his report, the Official Liquidator has admitted that he has no substantial evidence. Therefore, no liability can be fastened on Mr.Thiagaraj S.Chettiar. (vi) Under Section 542(1), the Court is empowered to hold a person personally responsible without any limitation of liability, for all the debts or other liabilities of the company, if there is prima facie evidence to show that the business of the company had been carried on with intent to defraud the creditors of the company or any other persons or for any fraudulent purpose. There is no prima facie evidence, even as per the report of the Official Liquidator, to show that the business of the company had been carried on with an intent to defraud the creditors. Therefore, no liability can be fastened on Mr.Thiagaraj S.Chettiar; and (vii) Even to fasten liability upon a person under Section 543(1), a period of limitation of five years is prescribed by sub-section (2) of section 543. Since the said period of limitation has already expired, no order can be passed even under Section 543(1). 9. In support of the above contentions, learned counsel also relied upon the decision in Official Liquidator, High Court, Madras Vs. V.Selvaraj {2009 (152 Comp.Cases 177 (Mad.)}. In the said decision, it was held by P.Jothimani, J that under Section 543(1), the liability can be fastened on the Ex-Directors, only if it is found that the moneys of the company had been misapplied or if there had been misfeasance or breach of trust. It was also held therein that the term 'misfeasance' or 'breach of trust' is relatable not only to the intentional act of the Directors, but also to the deliberate conduct of the Ex-Directors, which resulted in the loss to the company. 10. It was also held therein that the term 'misfeasance' or 'breach of trust' is relatable not only to the intentional act of the Directors, but also to the deliberate conduct of the Ex-Directors, which resulted in the loss to the company. 10. I have carefully considered the above submissions of the learned counsel appearing for Mr.Thiagaraj S.Chettiar. 11. But at the outset, I should point out that there is a fundamental distinction between the scope and purpose of Section 542 and Section 543. The liability under Section 542 arises only when a person charged therewith, was knowingly a party to the carrying on of the business of the company, with intent to defraud the creditors or any other persons or to the carrying on of the business of the company for any fraudulent purpose. But, the liability under Section 543 would arise under any of the following circumstances, namely, (i) when any money or property of the company was misapplied; (ii) when any money or property of the company was retained; (iii) when the person became liable or accountable for any money or property of the company; (iv) when the person was guilty of any misfeasance or breach of trust in relation to the company. 12. The thrust and focus of Section 542 are on "intention to defraud" or on "fraudulent purpose". But, under Section 543, the expressions "misapplied", "retained", "liable or accountable for", "guilty of any misfeasance" and "guilty of breach of trust", are all used disjunctively. The word "or" is used after each one of those expressions, in Clauses (a) and (b) of Sub-Section (1) of Section 543. Therefore, the liability under Section 543 may arise even if a person had (i) misapplied any money or property of the company or (ii) retained any money or property of the company or (iii) become liable or accountable for any money or property of the company or (iv) been guilty of misfeasance in relation to the company or (v) been guilty of breach of trust in relation to the company. Misfeasance or breach of trust is only one of the several contingencies under which Section 543(1) can be invoked. A simple act of retention of the money or property of the company, which need not be coupled with a fraudulent intention or which may not amount to misfeasance or breach of trust, is also sufficient to invoke Section 543(1). 13. Misfeasance or breach of trust is only one of the several contingencies under which Section 543(1) can be invoked. A simple act of retention of the money or property of the company, which need not be coupled with a fraudulent intention or which may not amount to misfeasance or breach of trust, is also sufficient to invoke Section 543(1). 13. There is one more distinction between Sections 542 and 543. Since the principle underlying Section 542 is fraudulent intention or fraudulent purpose, the liability thereunder is on all persons who were knowingly parties to the carrying on of the business of the company, with fraudulent intention or for fraudulent purpose. But the liability under Section 543 is not on all persons, but only on (i) persons who had taken part in the promotion or formation of the company; (ii) any past or present director; (iii) any past or present manager; (iv) any past or present liquidator or officer of the company. Since it is a fundamental principle of law that fraud vitiates all solemn acts, Section 542 makes all persons who were knowingly parties to the fraudulent intention or purpose, liable for the debts of the company. But Section 543 operates in a field other than fraud. Therefore, the liability under Section 543 is confined only to the set of four persons indicated hereinabove. 14. Keeping the above fundamental distinctions between Sections 542 and 543 in mind, if we now get back to the facts of the case, it is seen from the report of the Official Liquidator accompanying the above application that he could not find any material for the invocation of Section 542. In paragraph 11 of his report, the Official Liquidator had admitted that he had not come across any material to show that the business of the company was carried on with intent to defraud the creditors or for any fraudulent purpose. Therefore, there is no occasion, in the case on hand, for the invocation of Section 542. 15. But, in the statement of affairs as on 19.3.2001, filed by Mr.K.S. Lakshminarayanan, one of the Directors as on the date of winding up, it is indicated at S.No.35 of Schedule III of List A, relating to "Loans and Advances" that an amount of Rs.1,70,09,713/- was due and payable by Mr.Thiagaraj S. Chettiar. The date of advance is indicated to be 1995-96 under Column No.2. 16. The date of advance is indicated to be 1995-96 under Column No.2. 16. In the Explanatory Note on the statement of affairs, which is enclosed to the report of the Official Liquidator, it is stated under para X as follows : "Advances shown in the balance sheet is not fully realisable : The advances receivable, amongst other things include Rs.170.09 lakhs which is the amount due from the then Managing Director as per the books of accounts of the company. A detailed explanatory note on the background of this outstanding amount is given in the notes on accounts forming part of the accounts for the year ended 31.3.2000 (in page No. 38 clause No.24 of Annexure 2) which may kindly be noted." 17. The entry at S.No.35 in Schedule III to List A of the statement of affairs filed by Mr.K.S.Lakshminarayanan, does not appear to be something made through the hat. In the last column of Schedule III, the particulars of the folio of ledger from which such an entry had been culled out, is indicated to be "G.L.Page No.9". Therefore, without the Official Liquidator examining the general ledger relating to the year 1995-96, it cannot be concluded that the said entry is false or incorrect. Though it is true that Thiagaraj S.Chettiar went out of the Board in September 1995, we do not know what transpired after 31.3.1995 but before September. Therefore, this is a matter which requires a detailed enquiry by the Official Liquidator, since the claim may fall under the category of "money of the company retained" or under the category of "person liable or accountable for the money of the company", in terms of Section 543(1)(a). 18. However, before issuing appropriate directions to that effect, I must consider the issue of limitation raised under Section 543(2). While no period of limitation is prescribed for invoking Section 542(1), a period of limitation of five years is prescribed under Sub-Section (2) of Section 543 for invoking the same. The starting point for this limitation is prescribed by Sub-Section (2) of Section 543 to be (i) either the date of the order of winding up; (ii) or the date of first appointment of the Liquidator in winding up; (iii) or the date of retention of the money or property, whichever is longer. 19. The starting point for this limitation is prescribed by Sub-Section (2) of Section 543 to be (i) either the date of the order of winding up; (ii) or the date of first appointment of the Liquidator in winding up; (iii) or the date of retention of the money or property, whichever is longer. 19. There is no dispute about the fact that the above company was ordered to be wound up and the Official Liquidator appointed as Liquidator to take charge of the assets and effects of the company by an order dated 19.3.2001. The above application seeking appropriate directions, was filed by the Official Liquidator on 16.3.2006, as seen from the seal affixed by the Registry. Therefore, it is clear that the claim, if found to be true and correct, would be within the period of limitation prescribed under Section 543(2) of the Act. 20. In view of the above, the above application C.A.No.1906 of 2006 is ordered, directing the Official Liquidator to hold an enquiry and find out if Mr.Thiagaraj S.Chettiar had retained or had become liable or accountable for an amount of Rs.1,70,09,713/- to the company. Mr.Thiagaraj S.Chettiar is directed to cooperate with the Official Liquidator and participate in the enquiry and render all assistance to him. The other persons, who were the directors of the company at the time of winding up, namely, Mr.K.S.Lakshmi Narayanan, K.Kannan and R.Elango are also directed to cooperate with the Official Liquidator and render all assistance to him. After completion of enquiry, the Official Liquidator shall file a report along with necessary applications for further directions. The application is disposed of on the above terms.