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2012 DIGILAW 2122 (RAJ)

Official Liquidator v. G. C. Bhandari

2012-10-11

AJAY RASTOGI

body2012
JUDGMENT 1. - Instant company application No. 548 dated 06/01/2012 has been filed by the Official Liquidator u/R.9 of the Companies Court Rules,1959 read with Section 151 CPC for recalling the order dated 05/12/2008 deleting the name of Sh.GC Bhandari, who was one of the promoter director of M/s B.T. Conductors Pvt. Ltd (Company in liquidation), died during pendency of the proceedings on 07/02/2007. 2. The brief facts that culled out from the averments made in the application indicates that the original Company Application No.29/1993 was filed u/Sec. 542 and 543(1) of the Companies Act, 1956 for repayment and restoration to the Company in liquidation impleading the directors of the Company as respondents and late GC Bhandari, being one of the promoter director of the Company, was impleaded as respondent No.1 in the original Company Application No.29/1993. 3. Notices of the company application No. 29/1993 were served upon late GC Bhandari, counsel appeared on his behalf and reply was filed and issues were framed and during pendency G.C. Bhandari died on 07/02/2007. This Court would like to note that Sh.TC Bhandari, who is real younger brother of late GC Bhandari, informed the Court by filing application on 17/04/2007 that GC Bhandari, promoter director of the Company died during pendency of the proceedings on 07/02/2007 and proceedings stood abated qua him. However, further application came to be filed by the counsel appearing for late GC Bhandari and categorical statement was made that wife of late GC Bhandari died and he has no son as legal representative as per his knowledge; and counsel confined to communicate regarding son, it appears that there was knowledge about daughter of the deceased but this fact was not disclosed to the Court and even from the order-sheets of the present proceedings of Company Application No.29/1993, time was granted by the Court to the counsel appearing for late GC Bhandari to inform the Court regarding legal representatives of the deceased but he too has shown his inability to trace out the names of the legal representatives. However, the ultimate fact remains that since the name of the legal representative of the deceased promoter director late GC Bhandari could not be traced out, an application came to be filed from the office of the Official Liquidator seeking permission of this Court to delete the name of respondent No.1-late GC Bhandari. 4. However, the ultimate fact remains that since the name of the legal representative of the deceased promoter director late GC Bhandari could not be traced out, an application came to be filed from the office of the Official Liquidator seeking permission of this Court to delete the name of respondent No.1-late GC Bhandari. 4. This Court also took endeavor to find out the legal representative of late GC Bhandari but since either of the party could not provide any assistance to find out name of his legal representative, finally the name of the respondent NO.1 late GC Bhandari was deleted from the array of respondents vide order dated 05/12/2008. However, at a later stage, another application came to be file from the office of the Official Liquidator under Order 22, Rule 4 CPC for taking legal representatives of late GC Bhandari on record and since the counsel appearing for other respondents had no objection about the same, that application was allowed on 29/07/2010 and the legal representative of late GC Bhandati was taken on record. However, the matter was not put to rest and immediately after the legal representative was served, written objections came to be filed that once the respondent-director late GC Bhandari stood deleted from the array of respondents vide order dated 05/12/2008 and this fact was not brought to the notice of the Court while application under Order 22, Rule 44 CPC was considered and his legal representative was taken on record and this Court also finds substance in the submission made by legal representative who was taken on record pursuant to order dated 29/07/2010 and after hearing the parties, the order passed by the Court on the application under Order 22, Rule 4 CPC dated 29/07/2010 came to be recalled vide later order dated 04/08/2011 and the matter has now come up on the application filed by the Official Liquidator u/R.9 of the Companies Court Rules,1959 read with Section 151 CPC for recalling the order dated 05/12/2008 deleting the name of late GC Bhandari. 5. Mr. 5. Mr. Amod Kasliwal, appearing for the Official Liquidator submits that the original company application No.29/1993 was filed u/Sec. 542 and 543(1) of the Companies Act, 1956 and these being summary proceedings for determining the amount payable by a person who has caused loss to the company, by an act amounting to breach of trust and of civil in nature, the proceedings will not stand abated and the liability being coextensive, placed reliance on the judgment of Hon'ble Supreme Court, reported in 1983(1) SCC 538 and submits that in case of death of a director of the company, such of the proceedings initiated u/Sec.543 of the Act, will not stand abated and the liability of legal representative will be co-extensive to the value of deceases estate devolved and further submits that it was the duty of the counsel for the respondents to trace out that there was any legal representative and when the second application came to be filed by the counsel himself on his personal knowledge, he too misled the Court by making a mention that late GC Bhandari has no son as legal representative but still the fact remains that admittedly late GC Bhandari has a daughter who could be his legal representative but since this fact was not brought to the notice of the Court at any point of time either by Sh. TC Bhandari, brother of late GC Bhandari or the counsel appearing for him and both misled the Court for one reason or the other and that has constrained the Official Liquidator to file application seeking permission of the Court to delete name of the respondent No.1-promoter director late GC Bhandari. Sh. Amod Kasliwal, counsel for OL submits that in these facts and circumstances, the order passed by the Court on 05/12/2008 deleting name of respondent No.1 late GC Bhandari may be recalled. 6. The application has been opposed by Mrs. Sh. Amod Kasliwal, counsel for OL submits that in these facts and circumstances, the order passed by the Court on 05/12/2008 deleting name of respondent No.1 late GC Bhandari may be recalled. 6. The application has been opposed by Mrs. Saroj Jain, who happens to be the daughter and legal representative of late GC Bhandari and it has been submitted that there was an application filed by the Official Liquidator for deletion of the name of late GC Bhandari on 16/04/2007 and once the Official Liquidator made a request seeking deletion of the name, no error was committed in granting permission for deleting name of respondent late GC Bhandari vide order dated 05/12/2008 and in these facts and circumstances, the order does not require interference and the application filed by the Official Liquidator for recalling at such a belated stage deserves outright rejection. 7. Counsel further submits that even if this Court comes to the conclusion that legal representative could at the best be held liable confining to the estate of the deceased devolved upon her, the fact is that Mrs.Saroj Jain, as a legal representative, has not inherited the property of late GC Bhandari and even if she is allowed to be impleaded and prosecuted in the present proceedings, it will remain an empty formality and is not going to serve any purpose. 8. In counter, Mr. Amod Kasliwal submits that what will be the effect of the proceedings in the original company application initiated at the behest of the Official Liquidator, cannot be presupposed at this stage and the only question which has to be considered is as to whether in the capacity of legal representative, she can be impleaded as a respondent in the original Company Application No.29/1993. 9. I have considered the rival submissions made by counsel for the parties and have also considered the material available on record. 10. 9. I have considered the rival submissions made by counsel for the parties and have also considered the material available on record. 10. As regards the proceedings initiated against the directors of the company/Sec. 542 and 543 of the Companies Act, 1956, the question as to whether such proceedings can be allowed to be continued after death of the any of the director against his legal representative and liability determined will be co-extensive to the value of the estate of the deceased devolved in the hands of legal representatives, came to be examined by Hon'ble Supreme Court in the case reported in 1983(1) SCC Page 538 and finally observed that proceedings against the legal representatives can be allowed to continue, however, it could be confined to the estate of the deceased devolved in the hands of the legal representatives and it will be appropriate to quota Para 17 and 18 of the aforesaid judgment ad-infra:- "17. Having given our anxious consideration to the question before us, we are of the view that the Kerala and Punjab and Haryana High Courts have applied the decision in Tendolkar case' correctly and that the two learned Judges of the Calcutta High Court who delivered the judgment under appeal erred in its application. If this Court had really come to the conclusion that on the death of a person against whom proceedings under Section 543 had been initiated such proceedings could not be proceeded against his legal representative, the final order would not have been what was actually made therein. "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. 18. The liability arising under the misfeasance proceedings is founded on the principle that a person who has caused loss to the company by an act amounting to breach of trust should make good the loss. Section 543 of the Act does not really create any new liability. 18. The liability arising under the misfeasance proceedings is founded on the principle that a person who has caused loss to the company by an act amounting to breach of trust should make good the loss. Section 543 of the Act does not really create any new liability. It only provides for a summary remedy for determining the amount payable by such person on proof of the necessary ingredients. The section authorises the court to direct such persons chargeable under it to pay a sum of money to the company by way of compensation. This is not a provision intended to punish a man who has been found guilty of misfeasance but for compensating the company in respect of the loss occasioned by his misfeasance. Whenever there is a relationship based on contract, quashi-contract, some fiduciary relation or a failure to perform a duty, there is no abatement of the liability on the death of the wrong-doer. When once the liability is declared it is open to the Official Liquidator to realise the amount due by resorting to Section 634 of the Act and Section 50 of the Code of Civil Procedure. In Tendolkar case this Court did not consider the effect of Section 634 of the Act which made the relevant provisions of the Code of Civil Procedure relating to execution of decrees applicable to orders passed by the Court under the Act." 11. The question regarding the rights of the legal representative in such proceedings being summary of civil nature, can be continued against the legal representatives as well confined to the estate of the deceased devolved in the hands of legal representative. 12. In the facts of the instant case, this fact was not brought to the notice of the Court either by the real younger brother TC Bhandari that the promoter director late GC Bhandari who died on 07/02/2007 has any legal representative and only prayed that the proceedings stands abated on account of his death in his application dated 17/04/2007. 12. In the facts of the instant case, this fact was not brought to the notice of the Court either by the real younger brother TC Bhandari that the promoter director late GC Bhandari who died on 07/02/2007 has any legal representative and only prayed that the proceedings stands abated on account of his death in his application dated 17/04/2007. However, the second application came to be filed by the counsel appearing for late GC Bhandari and he too was very candid in making a statement that as per his knowledge, late GC Bhandari has no son as his legal representative but the fact has now come on record that late GC Bhandari has a daughter who could be his legal representative but this fact for the reason best known was misled and concealed from this Court. 13. As already noticed, even after application came to be filed seeking deletion of the name of late GC Bhandari from the array of respondents, time was granted to the counsel to inform regarding legal representative of the deceased, if any but the counsel also shown his inability regarding the legal representative and even after best efforts made from the office of OL, it could not be traced out and by introducing Order 22, Rule 10A CPC, the legislative intention behind was that it is the duty of the pleader to communicate to the Court regarding death of a party and to subsist the contract between pleader and the deceased party for the purpose and in these circumstances, the decision taken by the Court on the application filed by the Official Liquidator deleting name of the deceased respondent late GC Bhandari on 05/12/2008, requires re-consideration. 14. Taking note thereof, this Court is of the considered opinion that despite it was in the knowledge of the respondents particularly Sh. 14. Taking note thereof, this Court is of the considered opinion that despite it was in the knowledge of the respondents particularly Sh. TC Bhandari who moved application despite the fact that he was not respondent in the original company application, which was his voluntary act, may be under the guidance of deceased pleader not to disclose his legal representative and so far as the application filed by his counsel without disclosing the fact regarding legal representative of late GC Bhandari, if any but once this fact has been brought to the notice of the Court and the so-called legal representative is being represented by Shri JK Singhi, Senior Advocate, opposing the present application in these facts and circumstances, this Court is of the opinion that the order passed way back on 05/12/2008 deleting name of respondent No.1 late GC Bhandari, in these facts and circumstances, deserves to be recalled. 15. Consequently, the present misc. application No. 548 dated 06/01/2012 stands allowed and the order dated 05/12/2008 deleting name of respondent No.1-late GC Bhandari stands recalled.Petition allowed. *******