JUDGMENT Sanjeev Prakash Sharma J. - The instant company application has been filed by the official liquidator of M/s. Ashoka Oil Products P. Ltd. (company in liquidation) under sections 542 and 543 of the Companies Act, 1956, alleging that the respondents exdirectors of the company in liquidation, which was ordered to be wound up vide order dated March 23, 1991 are guilty of having committed breach of trust in discharge of functions and duties in managing the affairs of the company in liquidation. Their acts for alleged transfer of property in preference to the other creditors reflects their fraudulent nature of acts and prove their act of mismanagement and it is claimed by the official liquidator that the respondents are jointly and severally liable for compensating the company in liquidation for Rs. 14,99,111.81, i. e., the pecuniary loss suffered by it along with interest at 18 per cent, per annum. 2 Issues were framed for adjudication of this company application vide order dated March 18, 2016 : "(1) Whether the respondents disposed of the properties of the company even without getting valuation to the detriment of the creditors of the company ? . . . applicant. (2) Whether the respondent have handed over the possession of the current stock, record and books of account to the official liquidator on the passing of the winding up order ? . . . non-applicant. (3) Whether the respondents have caused breach of trust and loss to the company to the extent of Rs. 14,99,111.81 by retaining properties and assets belonging to the company ? . . . applicant. (4) Whether there is any specific event on part of respondents Nos. 3 and 4 relating to misapplication, retention or act of misfeasance of breach of trust in relation to the company ? . . . applicant." 3. The official liquidator got himself examined on oath after having filed his affidavit wherein he stated that M/s. Ashoka Oil Products P. Ltd. (company) was incorporated as a private limited company on August 12, 1987 in the State of Rajasthan under the provisions of the Act of 1956 with authorised share capital of Rs. 5,00,000 divided into 5,000 equity shares of Rs. 100 each. The issued, subscribed and paid-up share capital of the company was Rs. 3,71,200 divided into 3,712 equity shares of Rs. 100 each fully paid-up. 5,00,000 divided into 5,000 equity shares of Rs. 100 each. The issued, subscribed and paid-up share capital of the company was Rs. 3,71,200 divided into 3,712 equity shares of Rs. 100 each fully paid-up. It was further stated that the company was promoted by Shri Kaushal Kishore Dalmia, Kailash Prasad Dalmia, Ashok Dalmia, Satyendra Prasad and Raj Kamal Banka and were also named as first directors of the company. This fact is also confirmed from the record of the Registrar of Companies. These ex-directors were handling the day-today affairs of the company. It was further stated in the affidavit that the company was engaged in the business of manufacturing and trading in edible and nonedible oils, oil cakes, etc., and commenced its business activity in the first year from their "Tel Mill" situated at Hindaun Road, Kherli, District Alwar (Rajasthan) and the registered office of the company was situated at "D' Villa, 3, Chankyapuri, Behind Teej Tourist Bungalow, Banipark, Jaipur. It was further stated that N. C. Jain, chartered accountant submitted his report. From the record more particularly being the copy of the winding up petition and misc. application filed by M/s. Bhagwan Das Gopal Das and the report of the chartered accountant, it transpires that the ex-directors had transferred the plant and machinery of "Tel Mill" being the asset of the company to Kherli Vyapar Mandal for a total consideration of Rs. 15.40 lakhs vide sale deed dated December 3,1990. The said Kherli Vyapar Mandal was an organization formed by 32 creditors of the company and was indebted in total by a sum of Rs. 22.23 lakhs. Similarly, the factory land and building of the "Tel Mill" had been also sold to 42 other creditors for total consideration of Rs. 4.30 lakhs under various sale deeds dated December 5, 1990, December 11,1990 and December 12,1990. It was further stated that the petitioner/creditor to whom the company was indebted by a sum of Rs. 5.75 lakhs was not at all informed or favoured for payment. The exdirectors favoured few creditors in preference to the petitioner-creditor for settlement of their dues and further all the sales of properties had been effected within a period of six months from the date of presentation of the winding up petition, i. e March 13,1991. 5.75 lakhs was not at all informed or favoured for payment. The exdirectors favoured few creditors in preference to the petitioner-creditor for settlement of their dues and further all the sales of properties had been effected within a period of six months from the date of presentation of the winding up petition, i. e March 13,1991. Therefore, the alleged transfer of properties under various sale deeds had not been made in the ordinary course of business of the company and were in the nature of fraudulent transaction within the meaning of section 531 of the Act of 1956 and voidable against the liquidator as provided under section 531A of the Act of 1956. It was further stated that from the record it also transpires that the ex-directors deliberately did not get the properties of the company valued from an approved valuer and also avoided to put the sale through an advertisement for their personal gains which was not in the interest of the company. The High Court vide order dated August 2, 1996 set aside the sales and the sale deeds dated December 5, 1990, December 11, 1990 and December 12, 1990 were declared null and void. Thus, it is clear that the ex-directors who were engaged in managing affairs of the company were guilty and have committed breach of trust in discharge of their function and duties. Their acts for transfer of property in preference to the other creditors reflects their fraudulent intent and prove their acts of mismanagement. It was further stated that the ex-directors who were controlling the affairs of the company have also not filed the statement of affairs as prescribed under section 454 of the Act of 1956. Tire said statement of affairs usually contains the particulars about the assets and liabilities including the name and address about the debtors and creditors, etc., which has to be filed within 21 days from the date of winding up order or provisional winding up order whichever is earlier. Further, the ex-directors also did not hand over the books of account and other records including statutory records maintained by the company and also the properties and assets belonging to the company to the official liquidator to enable him to conduct liquidation proceedings in accordance with the provisions of the Act of 1956. Further, the ex-directors also did not hand over the books of account and other records including statutory records maintained by the company and also the properties and assets belonging to the company to the official liquidator to enable him to conduct liquidation proceedings in accordance with the provisions of the Act of 1956. The ex-directors were grossly negligent in discharging their duties towards the company since after statutory notice and reminders they have neither filed the statement of affairs nor handed over the books of records and properties of the company to the liquidator for conducting the liquidation proceedings. It is further stated that the respondents-directors did not maintain books of account and thus committed offence under section 209(1) of the Act of 1956 and were additionally liable for prosecution under section 541 of the Act of 1956. 4. In all, nine documents were exhibited as exhibits 1 to 9 which included report of the chartered accountant. The chartered accountant Mr. N. C. Jain also examined himself and in his affidavit. He has virtually reiterated the same submissions as that of the official liquidator. 5. In defence, the respondent-Mr. Ashok Dalmiya and respondent-Mr. Raj Kamal Banka were examined. 6. The respondent-Mr. Ashok Dalmiya in his affidavit stated that Ashoka Oil Mills P. Ltd., was incorporated on August 12, 1987 and he as well as the other directors and their family members had contributed to the share capital of the company being Rs. 3.71 lakhs and also certain unsecured loans were given by the directors. His brother-in-law Mr. Raj Kamal Banka was staying in Gaya, Bihar and was in look out for some business opportunity and in view of his parental business for the last two generations has been crushing of oil seeds and selling of the same has advised Shri Raj Kamal Banka, his brother-in-law (wife's brother) for venture in Rajasthan with his association. Since mustard seeds were sown/grown/produced in abundance in Kherli and nearby areas, he along with others floated the company and in 1988 had purchased the land, plant and machinery in the name of the company by utilization of the share capital as well as the unsecured loans. He further stated that for the purpose of setting up of the mill, acquisition of land, building, plant and machinery, no financial assistance from any bank/financial institution was obtained by the company. He further stated that for the purpose of setting up of the mill, acquisition of land, building, plant and machinery, no financial assistance from any bank/financial institution was obtained by the company. He further stated that for the financial year ended March 31, 1988 till which the account were prepared and thereafter till August, 1989, the business operations were smooth but gradually the receivables in respect of finished goods, i. e., mustard oil sold in State of Uttar Pradesh, Bihar where it had bulk consumption, started blocking and resultantly, the payment of raw material, i. e., mustard seeds started delayed. In the month of October-November 1989 all the suppliers of the raw material at Kherli became united under the umbrella of "Kherli Vyapar Mandal" and created such a tryannical and inescapable position for the directors of the company including him and under tyrannical situation unleased by the suppliers of the mustard seed, he and other director without free will and under coercion were compelled to execute the conveyance deeds in respect of the land, building plant and machinery of the company in their favour. It was further stated by him that M/s. Bhagwan Das Gopal Prasad, the petitioner in winding up petition being S. B. Company Petition No. 4 of 1991 had preferred and application under section 450 of the Act of 1956 for appointment of the provisional liquidator and the same was registered as S. B. Civil Misc. Company Application No. 23 of 1991. He, as a director of the company, did file reply to the said company application which, inter alia, contained the tight liquidity position and the inability to meet which the demands of the traders who had sold the raw material and the situation that these traders held ex-directors of the company, i. e., himself Rajkamal Banka, Kausal Kishore Dalmia and Satyendra Prasad as hostages at Kherli at gun point and asked them to execute and have the sale deeds registered in their favour and at the gun point they were compiled to execute the agreement for sale of machinery and other movable assets of the company. The said deeds were not executed by free will but under coercion at the threat of gun point and hence all these sale deeds be treated as nullity. It was further stated that the official liquidator had filed S. B. Civil Misc. The said deeds were not executed by free will but under coercion at the threat of gun point and hence all these sale deeds be treated as nullity. It was further stated that the official liquidator had filed S. B. Civil Misc. Company Application under section 446 of the Act of 1956 for declaring the sale deeds as nullity and hand over possession of the assets of the company to the official liquidator. The said application dated July 3,1991 came out to be registered S. B. Civil Company Application No. 36 of 1991 and by order dated August 2, 1996 the court, allowing the application, annulled the sale of immovable/movable property made to respondents Nos. 4 to 7 on December 3, 1990 and December 5, 1990 and further directed the official liquidator to take possession of immovable/movable property and to deal with the same in accordance with law. It was further stated that after December 1990, he never visited the place of factory premises of the company and he came to know thereafter that the possession of the assets of the company was taken by the official liquidator and also learnt that on or around June 8,1992 the records related to which are on the files of the official liquidator and about 12 articles lying at Jaipur office premises of the company situated at 3D, Villa, Chankya Puri, Jaipur were also taken into possession by the official liquidator and there did not remain any books of account, vouchers, other records relating to the company. He does not recall about having received any communication from the office of the official liquidator in the matter of books of account, which in view of the problems at work place of the factory at Kherli which were not in existence and whatever was available at Jaipur office were possessed by the official liquidator and hence, he being ex-director of the company did not remain in possession of the assets, books of account, vouchers, etc., of the company under liquidation. 7. The respondent-Mr. Raj Kamal Banka has reiterated what has been submitted by the respondent-Mr. Ashok Dalmiya. 7. The respondent-Mr. Raj Kamal Banka has reiterated what has been submitted by the respondent-Mr. Ashok Dalmiya. He has further stated that he does not recall having received any communication from the office of official liquidator in the matter of books of account, which in view of the problems at the work place of the factory at Kherli which were not in existence and whatever was available at Jaipur office were possessed by the official liquidator and hence, he being ex-director of the company did not remain in possession of the assets, books of account, vouchers, etc., of the company under liquidation. 8. Both the respondents were cross examined by counsel for the official liquidator and they are inconsistent of their stand that they were forced by gun point and to get the sale deed executed by the 32 creditors and they had to run away and did not have possession of the documents relating to the company nor they have the same in possession. On a query relating to their duty as directors, both have feigned ignorance that they were new directors. They have admitted that they had executed the sale deed but the said sale deed was cancelled and annulled by the court. They have also admitted that no valuation was conducted by the excuse which has been consistently taken is that sale was executed on account of force and coercion. 9. Learned counsel for the respondents, in defence, stated that the official 9 liquidator has carried on the report submitted by the chartered accountant and he did not independently conduct any enquiry. He has also relied on the cross examination where the official liquidator states that the chartered accountant had conducted examination of the bank statement/entries relating to the transactions conducted by the company and submitted that Mr. N. C. Jain, chartered accountant, in his cross-examination, refuses to having examined the transactions and bank statement of the company. Learned counsel further submits that there is no allegation by the official liquidator in his entire statement which is asserted by him independent of the report of Mr. N. C. Jain, chartered accountant. N. C. Jain, chartered accountant, in his cross-examination, refuses to having examined the transactions and bank statement of the company. Learned counsel further submits that there is no allegation by the official liquidator in his entire statement which is asserted by him independent of the report of Mr. N. C. Jain, chartered accountant. Learned counsel further submits that the provisional liquidator was appointed on March 23, 1991 which is marked as exhibit 4 and also relies on the order dated August 2, 1996 passed by this court whereby all the sale deeds, which were executed in force, were cancelled and annulled. The Superintendent of Police, was directed to provide sufficient police force and the assistant to enable him to execute order of the court. Learned counsel submits that a look at exhibit 9 shows that there have been lot of transactions in the bank account but the official liquidator failed to examine the same and general allegations have been levelled as against the respondents. It is stated that the official liquidator did not have any order passed under section 454 of the Act of 1956 against the respondents. The issues as raised by the official liquidator against the respondents have not been proved by the official liquidator. 10. Heard learned counsel for the parties. 11. It is noted that the Supreme Court in the case of Official Liquidator v. Raghawa Desikachar, AIR 1974 SC 2069 ; [1975] 45 Comp Cas 136 (SC), held as under (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's 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. The application made by the official liquidator did not give sufficient particulars which, in our view, it should have. Once a show-cause notice was given to respondents Nos. 1 to 4 the official liquidator did not lead any evidence nor rely upon any other documents, nor did respondent No. 5, who was instrumental in initiating the misfeasance case against respondents Nos. 1 to 4, lead any evidence." 12. In the instant case, the circumstances beyond the control and power of the respondents is made out. However, it is noted that the sale deeds, which were sought to have been executed on the basis of duress and force have already been annulled by this court. Sufficient mitigating grounds, as noted above, are made out. Merely on the basis of report of N. C. Jain, chartered accountant, who has admittedly not examined the books of account, which makes it obvious that the case for initiating proceedings and punishing the respondents under section 543 of the Act of 1956 is not made out. It is also stated that the official liquidator had already sold the said properties. 13. Taking into consideration that the company application fails to detail narration of the specific acts of commission or omission on the part of each director and further the official liquidator has not been able to prove the case of misfeasance or committing any breach of trust in discharge of functions and duties and the respondents have been able to justify their action in not making available the records and selling their properties in duress, issues Nos. 1, 2, 3 and 4 as framed by this court are not found to be proved and are answered in favour of the respondent. 1, 2, 3 and 4 as framed by this court are not found to be proved and are answered in favour of the respondent. It is noted that non-handing over the possession of current stock, books of account is on the basis of reasonable excuse and this court is satisfied that keeping in view the law laid down by the apex court in the case of Official Liquidator v. Raghawa Desikachar, AIR 1974 SC 2069 ; [1975] 45 Comp Cas 136 (SC), no case for holding the respondents guilty of section 543 of the Act of 1956 of misfeasance or breach of trust within the meaning of section 543 of the Act of 1956 is made out. 14. Consequently, the instant company application is accordingly dismissed.