JUDGMENT : Sanjeev Prakash Sharma, J. This company application under section 543(1) of the Companies Act, 1956 has been presented by the Official Liquidator (OL) appointed for the Jaipur Spinning and Weaving Mills Limited (company in liquidation). 2. The company in liquidation was ordered to be wound up by this order vide order dated 02/12/1983. The OL was accordingly appointed in terms of Section 449 of the Act, 1956. The non-applicants No.1 to 5 are the Directors of the Company in liquidation and the non-applicant no.6 is Secretary-cum-Financial Controller. The non-applicant no.1 expired and his legal representatives were taken on record apart from non-applicant no.2 who was also a Director. 3. Initially, the respondents raised preliminary objection relating to limitation. The same was, however, rejected by this Court vide order dated 19/04/1991. The said order was upheld by the Supreme Court. The case of the OL is that the company has suffered losses on account of the respondents. It had taken services of M/s. N.C. Jain and Associates, Chartered Accountants, Jaipur for the purpose of conducting investigation of books of accounts and to find out instances which may fall within the purview of Section 543 of the Act, 1956 and the OL submits that the respondents were guilty of misfeasance and breach of trust in relation to the company in liquidation. As on 31/12/1980 the total sundry debtors amount is Rs. 114.27 lac. A sum of Rs. 34,63,880/- was recoverable from 75 sundry creditors. However, the debt had become time barred long back as it related to period from 1973 to 1978. The non-applicant no.1-Director, for the first time, informed the Board of Directors in its meeting held on 09/05/1981 about the lapses of the company in not filing suits for recovery of the aforesaid amount. Thus, the non-applicants allowed the debts of the huge amount of Rs. 34 lac to become time barred. No steps were taken to recover such huge amount of the company although it was their prime duty and therefore, they are jointly and severally liable for the said amount. It was on account of shortage of goods supplied by the company to the said debtors from Jaipur Factory as well as Panipat Office. The shortage is revealed from the register maintained as as Central Excise Register known as R.G.1 Register. It was on account of shortage of goods supplied by the company to the said debtors from Jaipur Factory as well as Panipat Office. The shortage is revealed from the register maintained as as Central Excise Register known as R.G.1 Register. The goods from Panipat Office were found to have re-booked by Praveen Road Lines to Jaipur Factory but no received, hence the shortage and thus guilty of misfeasance. 4. The Court, vide order dated 31/03/2011 framed following issues:- "1. Whether the respondents were negligent in not taking steps to recover from the debtors sum of Rs. 3462880/- and allowing them to become time barred ? 2. Whether the respondents are liable for the claim of Rs. 49.21 lacs made by the then Rajasthan State Electricity Board by not making efforts for cutting of the electricity connection of the company in liquidation ? 3. Whether the respondents have committed breach of trust by diverting the companies assets of Rs. 463050/-, by accounting fictitious purchases of goods which were actually never received by the company in liquidation ? 4. Whether the respondents have willfully and deliberately caused loss of Rs. 102000/-, which was paid to M/s. Modala Woolen Mills Limited Bombay, as premium for obtaining import licence, as neither any raw material was imported under the said import licence nor any effort was made to transfer the said licence nor to recover the amount from the said company ? 5. Whether the respondents are liable for sum of Rs. 8.71 lacs claimed by State Bank of India on account of misappropriation of the same done by the respondents ? 6. Whether the respondents have failed to discharge their duties by selling goods worth Rs. 2141224/- to parties from whom even the earlier outstanding amount was not recovered and the company in liquidation had already taken a decision to not to transact with companies to any defaulting party ? 7. Whether the respondents were liable for loss of about Rs. 2.40 lacs approx. which was caused on account of failure to take any action for recovery of goods lying with the transport company ? 8. Whether the respondents were negligent in allowing the stock of the company worth Rs. 202290/- to become obsolete and consequently writing it off from the books of the company ? 9. Whether the respondents were liable for loss of Rs. 8. Whether the respondents were negligent in allowing the stock of the company worth Rs. 202290/- to become obsolete and consequently writing it off from the books of the company ? 9. Whether the respondents were liable for loss of Rs. 32.9 lacs paid by the company in liquidation as commission to its sole selling agents, who failed to render any service and never endeavor to promote or procure orders for the company ? 10. Whether non-applicant in proceedings of the present nature can be impleaded as legal heir of late Ganesh Narain Poddar the then Chairman of the company for the alleged liability of misfeasance if any committed and at all inheritable by his legal representatives ? 11. Whether legal representatives if inherited any property from late Ganesh Narain Poddar and if so how far they are liable to make payment ? " 5. After death of Ganesh Narain R. Poddar (respondent no.1), Mr. Pawan Kumar was taken on record as legal representative of late Ganesh Narain R. Poddar while Mr. Ajay Kumar Poddar, the another legal representative of late Ganesh Narain R. Poddar, was already there as a party as respondent No.2 in the case. Mr. Ajay Kumar Poddar filed reply placing on record certified copy of the order dated 17/08/1989 passed by the Bombay High Court in Case No. 51/1989 adjudging Ganesh Narain R. Poddar as insolvent and certified copy of the judgment dated 05/07/1991 passed by the Company Judge in SB Company Criminal Complaint No.242/1984 . The similar reply has been filed by Pawan Poddar and in this manner have stated that they have not received any single penny from late Ganesh Narain R. Poddar. 6. The affidavits of the OL and the Chartered Accountant of M/s. N.C. Jain and Associates were filed and both were put to cross-examination. The OL, who put in evidence, has stated that the business affairs of the Company in liquidation were looked after by Shri Govind Narain R. Poddar, Chairman of the Company. 7. The OL, in his affidavit has stated on the basis of the report prepared by the Chartered Accountant dated 14/03/1989 (Exhibit- 1) that the Company was not initially promoted by Poddars but in the year 1945, Shri R.K. Poddar joined the Board of Directors and thereafter was appointed as Chairman of the company. 7. The OL, in his affidavit has stated on the basis of the report prepared by the Chartered Accountant dated 14/03/1989 (Exhibit- 1) that the Company was not initially promoted by Poddars but in the year 1945, Shri R.K. Poddar joined the Board of Directors and thereafter was appointed as Chairman of the company. For the year ending 31/12/1981, no audited accounts were maintained and even the books of accounts for 1981, 1982 and 1983 were incomplete and therefore, it could not be audited. He has further stated that all the respondents are jointly and severally liable to compensate the applicant company, as stated above and the company was put to loss to the tune of Rs. 34,62,880/-. It was also urged that the respondents were jointly and severally guilty of misfeasance and were liable to compensate the company in liquidation a sum of Rs. 6,36,308.50 or contribute assets of equivalent value. It is stated that 19 cases of synthetic yarn, which were lying in godown of Shakti Mills Limited, Bombay since 1980, were not taken up by the company in liquidation although the non-applicant no.1 was also Director of Shakti Mills Limited, Bombay. A compensation of Rs. 1,15,000/- has also been demanded. That apart, the respondents have failed to discharge their duties in the interest of the company with regard to Rs. 476.62 lac to the Commercial Tax Department, Rajasthan; Rs. 30.10 lac and Rs. 8.67 lac to the Commercial Tax Department of Bombay and Delhi respectively as well as Rs. 49.21 lac to the then Rajasthan State Electricity Board. 8. Similarly, a sum of Rs. 9,26,100/- was to be paid as on account of misappropriation of the funds by making payment to one Dharmendra & Company while the goods were never received. A sum of Rs. 1,02.000/- was liable to be paid which was paid to one M/s. Modela Woolen Mills Ltd. on account of premium of import license although no goods were imported nor the amount was recovered. A sum of Rs. 8,71,000/- was required to be reimbursed towards misappropriation of amount given by State Bank of India which they were demanding back. A misappropriation of fund of Rs. 21,41,224/- and likewise for other amounts was also claimed. 9. The Chartered Accountant also submitted his affidavit pointing out a total amount due and outstanding against the Directors to the tune of Rs. 8,71,000/- was required to be reimbursed towards misappropriation of amount given by State Bank of India which they were demanding back. A misappropriation of fund of Rs. 21,41,224/- and likewise for other amounts was also claimed. 9. The Chartered Accountant also submitted his affidavit pointing out a total amount due and outstanding against the Directors to the tune of Rs. 72,08,579/- from the sundry debtors apart from Rs. 34,62,880/- which was considered as bad debt on account of having been barred by limitation. 10. The cross examination of both the witnesses, as above, was conducted. 11. The case was finally heard and written submissions have been filed by counsel for the respondents who submitted that the liability of the other Directors was not existing at all as none of them was handling the business affairs of the company. It is submitted that the OL had admitted in cross examination that two directors Mr. Laxmi Lal Pitti and Chhuni Lal Jaipuria were directors only upto 02/12/1983. It is stated that Mr. Ajay Poddar had never been given any work nor any statement has come on record that Mr. Ajay Poddar was in any manner involved in the day-to-day affairs of the company in liquidation. The learned counsel further submitted that even the Chartered Accountant Mr. N.C. Jain admits that the overall day-to-day affairs of the comply were looked after by Mr. Ganesh Narain R. Poddar and none-else and there does not appear even a single act of misfeasance on record which can be said to have been committed by Mr. Ajay Poddar or a particular Director within the meaning and provisions of Section 543(1) of the Act, 1956. It is submitted that on the basis of such a vague and bald allegation, the proceedings could not have been continued against the Directors. It is submitted that the report filed by the Chartered Accountant is vague and therefore, the employees working as Section Incharge,Clerks, Manager etc. cannot be held liable for the negligence and as Mr. Ganesh Narain R. Poddar had already been declared insolvent, no decree, order or declaration can be passed against the legal heirs of Mr. Ganesh Narain R. Poddar. It is further submitted that the audit report is a secondary evidence while the audit report basis i.e. the record is to be treated as primary evidence which was not produced before this Court. Ganesh Narain R. Poddar. It is further submitted that the audit report is a secondary evidence while the audit report basis i.e. the record is to be treated as primary evidence which was not produced before this Court. Learned counsel relies on the law laid down by this Court in the case of Official Liquidator of M/s. Shield Shoe Company Private Ltd. (In Liquidation) v. Shri Fateh Chand Pahwa & others : 2007(5) WLC (Raj.)522 wherein it has been held by coordinate Bench of this Court as under:- "6. In order to establish the charge of misfeasance against the ex-directors it 6 is required that specific acts of commission or omission and/or negligence on the part of each director are pointed out; the loss arising to the company as a result of such specific act of commission or omission or negligence shall also have to be quantified-as the order of recovery from such a director would be based on the said qualification. The liability under the provision though in the nature of tortious liability, yet it is quasi-criminal in nature and it is a particular director who has caused loss to the company by his act which would amount to misappropriation, breach of trust, misapplication or retention of monies/properties of the company who would be called upon to make good such loss. Thus, the onus is on the person who alleges such acts of misfeasance. The onus has to be discharged by cogent, reliable and specific evidence which should prove that the alleged misconduct was wilful and amounted to misfeasance with culpable negligence. 7. In Official Liquidator v. Raghawa Desikachar their Lordships of the Supreme Court indicated thus (page 142): It may be mentioned that misfeasance action against the directors is a serious charge. It is a charge of misconduct or misappropriation or breach of trust. For this reason the application should contain a detailed narration of the specific acts of commission and omission on the part of each director quantifying the loss to the company arising out of such acts or omissions. The burden of proving misfeasance or non-feasance rests on the official liquidator. The official liquidator, it may be mentioned, merely relied upon the evidence recorded in public examination of the directors and on a few documents tendered in evidence. The burden of proving misfeasance or non-feasance rests on the official liquidator. The official liquidator, it may be mentioned, merely relied upon the evidence recorded in public examination of the directors and on a few documents tendered in evidence. At the stage of public examination there was no charge of misfeasance against the directors and they were not in a position to know what would be the grounds that would be alleged against them for recovering any amounts for the loss said to have been caused to the company by reason of such misfeasance." 12. Counsel further submits that the proceedings were initiated under Section 454(5) of the Act, 1956 but the same were dropped vide order dated 05/07/1991 against other respondents except Mr. Ganesh Narain R. Poddar. Learned counsel also relies on the judgment passed in the case of The Official Liquidator v. Parthasarathi Sinha and others: AIR 1983 SC 188 wherein the Apex Court has held as under:- "15. 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's case (supra) 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 representatives, 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." 13. On the basis of above, the counsel asserts that the proceedings for misfeasance could only be continued against the legal representatives provided they have, in their hand, estate of the deceased from which alone it can be recoverable. In the circumstances, it is stated that the proceedings initiated under Section 543 of the Act, 1956 against the respondents be dropped. 14. In the circumstances, it is stated that the proceedings initiated under Section 543 of the Act, 1956 against the respondents be dropped. 14. Further, it is stated that Mr. Ganesh Narain R. Poddar was not examined on account of having expired, the applicants cannot be held responsible for any act of misfeasance which was done by him which can only be proved in his presence. 15. Learned counsel for the petitioner, however, submits that the amount as per report of the Chartered Accountant is huge and the said loss has been caused at the hands of the Directors. 16. Apart from taking note of the submission of the counsel for the respondents, this Court finds that the last audited balance-sheet, which has been taken into consideration by the concerned Chartered Accountant, to submit his report was available only upto the year ending 31st December, 1980. Later on, M.C Bhandari & Company Chartered Accountants were appointed as auditors for audit of the accounts ending upto 31/12/1981 but the same were not made available to the OA appointed by the OL. However, he has submitted a report of dues as per the balance-sheet of 31/12/1980 alone and thereafter, any amount, which has been paid or reimbursed to the company, has not been noticed. Thus, there is a complete lack of report for the period from 1980 upto the time when the Company was wound up i.e. 1983. Therefore, for the year ending December, 1981; 1982 and 1983, the accounts were lying incomplete and on the basis of such incomplete statement or accounts, the liabilities under Section 543 of the Act, 1956 of misfeasance cannot be put jointly and severally on all the Directors. That apart, individually, this Court has taken a view following the law, as noted above in the case of Official Liquidator of M/s. Shield Shoe Company Private Ltd. (In Liquidation) v. Shri Fateh Chand Pahwa & others (supra). 17. In view thereof, no case for proceedings, as claimed by the OL of misfeasance action, is made out. 18. Consequently, the instant company application is accordingly dismissed. Notices are discharged. No costs.