JUDGMENT : 1. Instant Company Application filed by the Official Liquidator under Section 543 of the Companies Act, 1956 is based on following facts: 1.1 The BIFR vide its order dated 01/08/1994 had declared Rajasthan Telephone Industries Limited (for short, the Company in liquidation) as a sick industrial Company as it was not likely to make its net worth exceed its accumulated losses within a reasonable time while matching all its financial obligations. It appointed IFCI as an operating agency to prepare a viability report. The promoters failed to honor their commitments to refuse any fresh funds in accordance with the sanctioned rehabilitation scheme. Hence, the BIFR has under Section 20(1) of the SICA Act, 1985 vide its order dated 16/06/1999 recommended that the sick company be wound up and had forwarded its opinion to the High Court for passing appropriate orders in accordance with the provisions of the Companies Act. 1.2 The Company in liquidation was ordered to be wound up by this Court vide order dated 12/08/1999 in Company Petition No.24/1999. 1.3 The Chartered Accountant filed his report on 13/07/2004. As per the records of the Registrar of Companies, Rajasthan, Jaipur, the following persons were Directors of the Company in liquidation as on 12/08/1999 i.e. on the date the winding up order was passed (i) Ranjan Kumar Poddar, 7, Amrita Shergil Marg, New Delhi- 110003 (ii) Rajendra Jain, Railway Station, Post Office Complex, Jaipur, Rajasthan. (iii) Chiranji Lal Biyani, r/o House No.203, Greater Kailash-1, New Delhi. 1.4 The Ex-Directors of the Company in liquidation had filed the statement of affairs under Section 454 of the Act of 1956 on 27/06/2001. The audited annual accounts and the un-audited accounts for the year 1998-99 and 1999-2000 (01/04/1999- 12/08/1999) and other records and papers of the Company in liquidation were examined. 2. Vide order dated 14/09/2007, this Court framed following issues:- (1) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of Rs.4,29,591.56 along with interest towards the value of the assets of the Applicant Company namely Furniture and Fixtures, Office Equipment, Air Conditioners, Refrigerators and Electric Installations ? ...Applicant (2) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of Rs.19,275.00 along with interest in respect of the Electrical Equipment belonging to the Applicant company sold by them on 1.4.2000 ? ...Applicant (2) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of Rs.19,275.00 along with interest in respect of the Electrical Equipment belonging to the Applicant company sold by them on 1.4.2000 ? ...Applicant (3) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of Rs.74,400/- along with interest towards the cost of 93 Push Button Telephones and 62 PMB/EMPB dialers belonging to the Applicant Company ? ...Applicant (4) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of Rs.2,69,955.00 along with interest for allowing the said sum recoverable from the sundry debtors of the Applicant Company to become time barred under the Limitation Act, 1908 ? ...Applicant (5) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company, the sum of Rs.2,03,823.00 with interest which was due to the Applicant Company towards Security deposits, Earnest money, accrued interest on Bank FDRs, TDS, Loans and Advances etc. which the respondents had failed to recover from the concerned parties. ...Applicant (6) Whether the respondents are jointly and severally liable to compensate or contribute to the Applicant Company the sum of Rs.72,90,043.00 with interest toward the value of goods Plant and Machinery belonging to the Applicant Company which had been lost due to the negligence of the respondents ? ...Applicant (7) Whether the respondents are jointly and severally liable to restore the possession of the moulds for Plastic Parts or the equivalent value thereof to the applicant Company ? ...Applicant (8) Whether the acts as mentioned in the report of the Chartered Accountant dated 13.7.2004 (Annexure R/1/1) constitute acts of misfeasance or breach of trust in relation to the Applicant company on the part of the respondents and the respondents are thus liable to what extent ? ...Applicant (9) Whether assets of the Company were sold in much lower price amounting to misfeasance ? ...Applicant (10) Whether the action of the directors was unjustified in arriving at settlement to wipe out liability of rent and mesne profits ? ...Respondents” (11) Whether the directors can be held liable for the goods found missing on 28.11.2001 when the physical possession was already taken by the Official Liquidator 28.8.99 ? ...Applicant (12) Relief ? 3. Mr. ...Applicant (10) Whether the action of the directors was unjustified in arriving at settlement to wipe out liability of rent and mesne profits ? ...Respondents” (11) Whether the directors can be held liable for the goods found missing on 28.11.2001 when the physical possession was already taken by the Official Liquidator 28.8.99 ? ...Applicant (12) Relief ? 3. Mr. KJ Mehta, learned counsel for the applicant-OL submitted following points on various issues:- (A) Issue No.1:- On 7th July, 1999, the Company had sold certain items of fixed assets i.e. furniture, fixtures, office equipment, air-conditioners, refrigerators and electric installation items for Rs.4,26,092.88 and incurred a loss thereon for Rs.3,498.68. The W.D.V. of the items sold viz. Furniture and fixtures was Rs.3,03,935.92. Office equipment was Rs.48,229.82, air-conditions and refrigerators was Rs.17,974.95 and of electric installations was Rs.59,450.87 respectively aggregating to Rs.4,29,591.56. The said sale transaction had been made through a journal voucher no.40 dated 7th July, 1999 and had been entered in the account books. In recording this sale transaction, the Company had however not received any payment in cash and the Company had simply debited sundry creditors account and credited the sale account. The minute book of the Board meetings maintained by the Company did not have any resolution of the Board empowering the ex-management to sell the assets of the Company. Besides, the sale transaction had been effected while the winding up petition was pending with the High Court. As per Section 531 of the Companies Act, the said sale transaction was therefore void. Therefore, in this case also the sale of assets made by the ex-directors on 7th July 1999 to its creditors is covered u/s 531 of the Companies Act. No valuation report is on record to show the correct value of the gods either. (B) Issue No. 2 : Voucher No. 39 of the inventory list of records of the Company showed that the Company had sold electrical equipment for Rs. 19,275.00 in cash on 1st April 2000, i.e., after the winding up order had been passed. No details of the equipment has been given in the voucher. (C) Issue No. 3 : As per the statement of affairs, the Company had 93 push Button Telephones with a value of Rs. 37200.00 on 12th August 1999 when the winding up order was passed. These were not found when possession of the factory was taken by the OL. No details of the equipment has been given in the voucher. (C) Issue No. 3 : As per the statement of affairs, the Company had 93 push Button Telephones with a value of Rs. 37200.00 on 12th August 1999 when the winding up order was passed. These were not found when possession of the factory was taken by the OL. (D) Issue No. 4 : The scrutiny of Annexure II of the Statement of Affairs which had contained the list of sundry debtors, had revealed that the sundry debtors balance of Rs. 2,69,955.87 was outstanding from 10 debtor’s parties and the same had been shown as doubtful of recovery. The list of debtors had revealed that the balance due from all the sundry debtor’s parties had been outstanding between the period from 1989 to October 1995 and therefore, the entire out standings had become time barred under the Limitation Act 1908 even prior the the date of the order of winding up of the Company. The audited balance sheet also had revealed that the Company had not obtained any balance confirmations from the parties nor had filed any recovery suits in the Courts to keep the debt alive which gave rise to an inference that the ex-directors had deliberately allowed the debt to become time barred under the Limitation Act. (E) Issue No. 5 : The Scrutiny of Annexure II of the Statement of Affairs containing the list of loans and advances and revealed that the Company was to recover a sum of Rs. 247191.61 from various Govt. Departments and parties. The summary of recoverable amount as given in the list was as under :- (a) Security Deposit 89574.50 (b) Earnest Money 130851.80 (c) Accrued Intt. On Bank FDR 5508.00 (d) Balance with Excise Deptt. 421.51 (e) T.D.S. 588.00 (f) Advance to Golden Paper Udyog 20247.80 These were from the various Govt. Departments between 1986-87 to 1994-95. The said list included the deposits amounting to Rs. 5861.00, Rs. 1000.00 and Rs. 10,000.00 given to M/s Industrial Refrigeration for cylinder security and M/s Motorcades for monthly Petrol bill respectively. These were not recovered. The Statement of Affairs had disclosed about Rs. 2,03,823.00 as being doubtful of recovery against total dues of Rs. Departments between 1986-87 to 1994-95. The said list included the deposits amounting to Rs. 5861.00, Rs. 1000.00 and Rs. 10,000.00 given to M/s Industrial Refrigeration for cylinder security and M/s Motorcades for monthly Petrol bill respectively. These were not recovered. The Statement of Affairs had disclosed about Rs. 2,03,823.00 as being doubtful of recovery against total dues of Rs. 2,47,191.61 (F) Issue No. 6 and 7 : The scrutiny of the list plant and machinery items enclosed as Annexure VI to the Statement of Affairs at page No. 47, had revealed that certain Plant items belonging to the Company had been shown as lying with third parties They had not handed over the possession of the same to the Official Liquidator till the date of filing of the Statement of Affairs with the Official Liquidator. The details of the items was as under : (a) Moulds for Plastic parts lying with M/s Industrial Plastic Moulders, A-5-16, Jhilmil Tahirpur Industrial Area, Shahdara. (b) Moulds for Plastic parts lying with M/s Precision Plastics, Tigaon Road, Ballabhgarh, Haryana. (c) D.G. Set 250 K.V.A. (1 No) lying with M/s SRS Engineering Services UG-3, Gyan Deep Complex, 66-A/11, New Delhi. (Since delivered on 28th December 2001). (d) Refrigeration (1 No) Book value Rs. 7600/- lying with exdirectors (since delivered on 28th December 2001). Though, in pursuance of the notices issued by the Official Liquidator to the ex-directors for handing over of the above assets, the ex-directors had delivered the DG set, Fax Machine (2 Nos), VHF trans receiver RT 41 Type (1 No) and Refrigerator 165 Liters (1 No) of the Official Liquidator on 28th December 2001 but the Plastic Moulds had not been returned either by the exdirectors nor by the above mentioned parties. Further, there was no proof or evidence on record about the delivery of the items to the above stated parties and the ex-directors had given incomplete details and information about the items in the Statement of Affairs submitted with the Official Liquidator. PNB vide letter No. ARMB/DDHAM/4061 dated 1st January 2002 had intimated to the Official Liquidator about missing of finished goods in the factory premises when they had visited the factory on 28th December 2001. (G) Annexure V shows that the material in transit having a value of Rs. 38,11,549.00 had been shown to the lying with the Custom authorities and Airport authority’s in the bonded warehouses. (G) Annexure V shows that the material in transit having a value of Rs. 38,11,549.00 had been shown to the lying with the Custom authorities and Airport authority’s in the bonded warehouses. These materials had been imported by the Company sometime in the year about 1990 and since then were lying with the Custom authorities. Plant and Machinery too with a value of Rs. 3478494.00 were imported by the Company some time in the year 1990 and were lying with Custom authorities. 4. He has taken this Court to the cross-examination conducted of Mr. Ranjan Kumar Poddar to submit that the Director Mr. Ranjan Kumar Poddar has shown gross negligence in taking care of the management of the Company in liquidation and had left everything for being looked after by his executives. Large amount of dues were payable to the suppliers and a poor financial condition of the Company in liquidation was brought about on account of his negligence. There were amounts which were required to be recovered from the Government Departments to the tune of Rs.2,47,191/- but he has not shown any effort made to recover the said amount. No details were given out of making any effort. The goods were lying with Custom Department about Rs.72 lac but the same remained unrecovered. The decision to leave the goods with the Custom Department was taken by the Board of Directors without resolution. He was not even present at the time when possession of the factory was taken over by the Official Liquidator. The office furniture and electrical instruments were sold to the landlord for adjustment of Rs.10 lac without there being any such resolution after the Company in liquidation had gone into liquidation and thus, it is stated that the respondents are jointly and severally liable to compensate with interest the loss caused by them to the Company in liquidation. 5. It is submitted that the sale was conducted at the level of the Directors without tender or valuation. The sale of goods lying in the Company premises was done to benefit particular section of creditors which is in violation of the provisions of Section 531 of the Companies Act. 5. It is submitted that the sale was conducted at the level of the Directors without tender or valuation. The sale of goods lying in the Company premises was done to benefit particular section of creditors which is in violation of the provisions of Section 531 of the Companies Act. It is pointed out that there were missing items when possession was taken over by the Official Liquidator for which the Directors will have to be held liable and thus they are guilty of act of misfeasance and breach of trust. 6. During pendency of the proceedings of the Company Application, Mr. SR Joshi, Adv. has put in appearance on behalf of the respondents no.1 to 3 and submitted that the Company was wound up vide order dated 12/08/1999 and the allegations levelled by the applicant have been denied. Individual replies have been filed on behalf of Mr. Ranjan Kumar Poddar and Mr. Chiranji Lal Biyani. However, counsel has argued for both and has made written submissions as under:- “(a) The furniture and fixtures, office equipments, Air Conditioners and Refrigerators were sold to landlord of rented premises at Delhi of which the Company was the tenant and these furniture & fixtures were installed in that rented premises. In order to arrive at an amicable settlement (agreement dated 7.7.1999) with the landlord for his withdrawal of Suit No. 11/1997 for recovery of arrears of rent and eviction pending before Shri S.K. Tandon, Additional District Judge, Delhi, the furniture & fixtures etc., were sold. Copy of the Agreement dated 7.7.1999 was submitted and marked as Annexure R-1/1 with Reply to the Application. The arrears of rent up to July, 1999 amounted to Rs. 9,95,784/- plus common maintenance & water charges. Thus the liability of the company was more than Rs. 10 lacs which was wiped out by arriving at settlement between the company and the landlord by handing over the aforesaid furniture and fixtures having book value of Rs. 4,29, 591/- but the same were adjusted at Rs. 4,26,092/- with a meagre difference of Rs. 3,498/-. It is pertinent to note that re-sale value of furniture and fixtures, electric items are drastically reduced due to wear & tear; change in design and advancement of technology. 4,29, 591/- but the same were adjusted at Rs. 4,26,092/- with a meagre difference of Rs. 3,498/-. It is pertinent to note that re-sale value of furniture and fixtures, electric items are drastically reduced due to wear & tear; change in design and advancement of technology. Thus the realization of the same could be 5% to 10% and for this reason, there is provision of depreciation @ 20% per annum in the books of accounts. In the present matter, there is meager loss of 1% of the written down value. While the liability of more than Rs. 10 lacs was wiped out. (b) The sale of electric equipments on 1.4.2000 for Rs. 19,275/- was wrong and emphatically denied, because possession of the factory was taken by the Official Liquidator on 20.8.1999. After 8 months of taking possession, the alleged sale took place, for which the Answering Respondents (former Directors) were not liable and entire record of the Company including books of accounts and vouchers were in power and possession of the Official Liquidator, therefore, the Answering Respondents were not in position to give detailed reply. (c) That so far lying of Moulds for Plastic Parts with M/s Industrial Plastic Moulders are concerned, the Company was indebted to this firm and several cheques issued by the Company were bounced from time to time. The firm initiated proceedings against the Directors of the Company, which were ultimately settled between the parties. The company is no longer indebted to the firm and the moulds for plastic parts may be taken over by the Official Liquidator, who made no efforts in this regard. So far moulds for plastic parts with another firm M/s Precision Plastic is concerned, the Company was indebted Rs. 1,52,413/- as on 12.8.1999, the date of passing of winding up order. (d) That allegation of missing of some finished goods is prima facie false, since the possession of the factory was taken by the Official Liquidator on 20.8.1999 and the above stated finished goods were found missing on 28.12.2001, i.e., after a lapse of more than 2 years for which the Answering Respondents were not liable. (e) That it was not practical to recover form each sundry debtors, the amount payable to the company, although due to efforts were made by the company and certain amounts were also recovered and remaining parties were reminded for payment of their dues. (e) That it was not practical to recover form each sundry debtors, the amount payable to the company, although due to efforts were made by the company and certain amounts were also recovered and remaining parties were reminded for payment of their dues. Apart from this, legal action was also taken in some cases. But other parties closed their business, therefore, there was no possibility of recovery from them. Since the entire records of the Company are with the Official Liquidator, therefore only the general reply could be given. (f) That the Company had made all reasonable efforts form time to time to recover the outstanding amounts from various parties including the government departments but practically it is not possible to achieve 100% target in recovering the outstanding amounts. The entire record of the company is with the Official Liquidator, therefore only general reply could be given. (g) That the goods lying with the Custom and Airport authorities could not be released due to several factors, inter-alia, by the time the goods arrived in the country, the indigenous items were cheaper than that of imported items due to change of government policy. The Company had paucity of funds for payment of custom & other duties and there was reluctance of financial institutions for releasing further funds in the regard. Due to delay, arrears of rent of Custom Department’s Ware House, where the goods were lying accumulated. It is pertinent to note that the company always secured delivery of imported goods in time from the custom authorities when the company was economically sound. It was only during the hard days of the company when it had no financial capability to take the delivery of goods, the same could not be taken.“ 7. Having noticed aforesaid pleadings, this Court finds that the provisions of Section 543 of the Companies Act, 1956 provide as under:- “543. It was only during the hard days of the company when it had no financial capability to take the delivery of goods, the same could not be taken.“ 7. Having noticed aforesaid pleadings, this Court finds that the provisions of Section 543 of the Companies Act, 1956 provide as under:- “543. Power of Tribunal to assess damages against delinquent directors, etc.:- (1) If in the course of winding up of a company, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, manager, liquidator or officer of the company - (a) has misapplied, or retained, or become liable or accountable for, any money or property of the company ; or (b) has been guilty of any misfeasance or breach of trust in relation to the company, the Tribunal may, on the application of the Official Liquidator, or the liquidator, or of any creditor or contributory, made within the time specified in that behalf in sub-section (2), examine into the conduct of the person, director, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the Tribunal thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Tribunal thinks just. (2) An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplication, retainer, misfeasance or breach of trust as the case may be, whichever is longer. (3) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.” 8. In the case of Official Liquidator, Supreme Bank Ltd. Vs. P.A. Tendolkar (Dead) by Lrs. and ors., AIR 1973 (SC) 1104 , the Apex Court has laid down following principles:- “It is certainly a question of fact, to be determined upon the evidence in each case, whether a Director, alleged to be liable for misfeasance, had acted reasonably as well as honestly and with due diligence, so that he could not be held liable for conniving at fraud and misappropriation which takes place. A Director may be shown to be so placed and to have been so closely and so long associated personally with the management of the Company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of the business of a Company even though no specific act of dishonesty is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the Company even superficially. If he does so he could be held liable for dereliction of duties undertaken by him and compelled to make good the losses incurred by the Company due to his neglect even if he is not shown to be guilty of participating in the commission of fraud. It is enough if his negligence is of such a character as to enable frauds to be committed and losses thereby incurred by the Company.” 9. Similarly, in the case of The Official Liquidator Vs. Raghawa Deshikachar an ors. : AIR 1974 (SC) 2069 , the Apex Court has held as under:- “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 but of such acts or omissions. The burden of proving misfeasance or nonfeasance 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.” 10. In a similar matter under Section 543 of the Act of 1956, this Court in the case of The Official Liquidator Vs. Shri Kaushal Kishore Dalmiya & ors. (SB Company Application No.82/1996), decided on 17/05/2018, a similar case under Section 543 of the Act of 1956 has observed as under:- “12. In a similar matter under Section 543 of the Act of 1956, this Court in the case of The Official Liquidator Vs. Shri Kaushal Kishore Dalmiya & ors. (SB Company Application No.82/1996), decided on 17/05/2018, a similar case under Section 543 of the Act of 1956 has observed as under:- “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 Mr. N.C. Jain, Chartered Accountant, who has admittedly not examined the books of accountants, 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 OL 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 OL 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, the issues no.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 accounts 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 The Official Liquidator Vs. Raghava Desikachar & ors (supra), 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.” 11. Raghava Desikachar & ors (supra), 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.” 11. Considering the matter in light of the law as discussed above, this Court finds that the BIFR had declared the Company in liquidation as a sick unit on 01/08/1994 and had referred the matter to this Court for winding up and an order was passed for winding up of the Company in liquidation on 12/08/1999. 12. The instant company application moved by the Official Liquidator is solely based on the report prepared by the Chartered Accountant dt. 13/07/2004. The Chartered Accountant was examined. Neither in his affidavit nor during the course of crossexamination, he has pinpointed of any particular misfeasance or fraud committed by a particular Director of the Company in liquidation. As noticed, the power under Section 543 of the Act of 1956 is to be exercised by the Court wherein the Court is vested with the jurisdiction to examine conduct of the past or present Director, Manager or any other officer of the Company who is found to be guilty of any misfeasance or breach of trust. Thus, such proceedings have to be treated in the nature of quasi criminal proceedings. 13. Misfeasance is not to be imputed to a Director unless he has dishonestly acted or abstained from acting any conflict with his plain duty. Such allegation must be pointedly put up by the Official Liquidator in the application moved under Section 543 of the Act of 1956. There has to be a positive and specific evidence and pleadings in support of the individual Director of a nature contemplated by the Section. 14. From the documents which have come on record, pleadings of the parties as well as the submissions which have been recorded, this Court has been unable to find a specific allegation as against a particular Director apart from the general allegations of the loss caused to the Company which is difficult to be pinpointed on a particular individual as has been held by the Delhi High Court in the case of Ashoka Auto and General Industries (P.) Ltd. Vs. Inder Mohan Puri and others: (2005) 124 Company Cases 422 as under:- “In the absence of such specific allegations and positive evidence, it is not possible or proper for the court to indulge in a fishing or roving enquiry so as to compel the individual director to reimburse and/or compensate the Company. The principles with regard to the pleadings and proof are well-settled. There cannot be a general and roving enquiry into the conduct of a person sought to be made liable.” 15. Since there is no detailed narration of a specific act or act of commission or omission on the part of each Director quantifying the loss to the Company nor the Official Liquidator has been able to show any intentional act on the part of a particular Director in causing loss to the Company, merely because of inaction on the part of the Directors as a general allegation, this Court does not find any ground to hold the respondents guilty of misfeasance or fraud in terms of Section 543 of the Act of 1956. 16. Consequently, the instant company application is dismissed.