JUDGMENT 1. The Official Liquidator (for short, OL) by way of this company application prays for initiating proceedings under Section 543 of the Companies Act, 1956 (for short, the Act of 1956) against the respondents who were Directors of M/s. Lok Vikas Finance Corporation Limited (for short, the Company in liquidation). 2. Counsel for the OL submits that on 13/04/2001, this Court had passed orders to wound up the Company in liquidation in Company Petition No. 31/2000 and the OL attached to this Court was appointed as Liquidator of the Company in liquidation with directions to take charge of the properties and assets of the Company in liquidation. The respondents were Directors of the Company in liquidation as on the date of the winding up order and Mr. Lokesh Kumar Singh, respondent No. 1 was the Managing Director. 3. During pendency of the instant company application, the respondent No. 6 was deleted from the array of respondents as notices on him remained unserved on account of the address not available with the OL and the amended cause title was accordingly taken on record. 4. The OL submits that vide letter dated 08/06/2004 he directed the Chartered Accountant Mr. NC Jain to examine records of the Company in liquidation to find out whether there is any act of misfeasance made out against the Ex-Directors of the Company in liquidation and the Chartered Accountant submitted his report dated 05/04/2006 concluding that the respondents were guilty of misfeasance and accordingly, the present company application has been preferred as against the respondents alleging of having committed misfeasance in terms of provisions of Section 543 of the Act of 1956 with a prayer direct the respondents to make good the losses caused by them to the Company in liquidation and restore the money and properties of the Company in liquidation alongwith interest at the rate of 18% per annum. 5. Reply to the company application has been filed on behalf of respondents Nos. 1, 2, 3 & 5 and they have denied the charges levelled. It is stated that the Chartered Accountant has acted as a mouth piece of the OL and by no stretch of imagination it can be said to be an investigation into the accounts books of the Company in liquidation. 1, 2, 3 & 5 and they have denied the charges levelled. It is stated that the Chartered Accountant has acted as a mouth piece of the OL and by no stretch of imagination it can be said to be an investigation into the accounts books of the Company in liquidation. The allegations levelled are based on unverified and unconfirmed story and there was no outstanding dues and no loss or injury has been caused to the Company in liquidation. With regard to the report further explanation has been given by the respondents. 6. Rejoinder to reply has been filed by the OL reasserting the allegations whereafter this Court vide order dated 26/07/2012 framed following issues for consideration:- "(i) Whether respondents Nos. 1 to 6 had been Directors of the Company in liquidation on or before the date of its winding up? (ii) Whether respondents Nos. 2, 3 and 5 had resigned from the office of Director of company in liquidation. If yes, when and what is the effect? (iii) Whether respondents are liable for having committed acts of misfeasance with respect to the amount of 2,85,02,345/- and Rs. 3,89,95,081/-and the other amounts mentioned in paras 17 and 18 of the report dated 05.04.2006 (Anx.1) of the chartered accountant and are as such guilty under Section 543 of the Companies Act, 1956? (iv) Whether the respondents are guilty of having acted in violation of Section 295 of the Companies Act, 1956 in obtaining loans from the Company (in liquidation) without obtaining permission of Central Government? (v) Relief?" 7. Learned counsel for the OL submits that the statements of affairs were filed on 04/05/2004 and an application under Section 454 of the Act of 1956 was also filed by the OL, however, the same has been dismissed by this Court. 8. The statement of the OL and the Chartered Accountant were filed by way of affidavits and the respondents were allowed to cross-examine the OL as well as Chartered Accountant. Thereafter, the affidavits of Lokesh Kumar Singh, respondent No. 1 was filed and he was examined as DW-1. 9. So far as the issue No. 1 is concerned, learned counsel for the OL has asserted that as per Exhibit-2 and Exhibit-3, it is apparent that the respondents were Directors of the Company in liquidation before the date of winding up of the Company in liquidation. 9. So far as the issue No. 1 is concerned, learned counsel for the OL has asserted that as per Exhibit-2 and Exhibit-3, it is apparent that the respondents were Directors of the Company in liquidation before the date of winding up of the Company in liquidation. Exhibit-2 is the memorandum of association wherein names of the Directors Lokesh Kumar Singh, Krishan Kumar Batra, Mrs. Mradul Singh and Sudhir Kumar Bansal are mentioned, however, name of respondents No. 5 is not mentioned in the said memorandum. 10. In Exhibit-3 Articles of Association of Lok Vikas Finance Corporation Limited, names of the respondents have been mentioned. 11. Learned counsel for the OL has taken this Court to Exhibit-4 i.e. the statement of Lokesh Kumar Singh recorded under Section 180 of the Company Court Rules, 1959 on 28/05/2001 where in answer to the question, he metnions names of other Directors including names of Hari Shankar Sharma and T.R. Yadav i.e. respondents Nos. 5 & 4 while in the affidavit filed by Lokesh Kumar Singh, it is stated that the respondents namely; K.K. Batra, Mridul Singh and Hari Shankar Sharma have already resigned from directorship of the Company and in this regard information was furnished to the Registrar of the Companies that they were not Directors at the relevant time. 12. In cross-examination Mr. Lokesh Kumar Singh states that without looking into the records he cannot say as to when respondents Nos. 2, 3 and 5 have submitted their resignation. Form No. 32 has been submitted to the Registrar of Companies. 13. The OL on the other hand, has stated that on an enquiry conducted by the Chartered Accountant which is placed on record of the annual return of the Company filed in terms of Section 159 of the Act of 1956 on 20/01/1999, names of the Directors have been mentioned who are shown as respondents and therefore, it cannot be said that they were not Directors of the Company. 14. Taking into consideration the documents which have come on record, as noticed above, this Court answers the issue No. 1 in favour of the petitioner and holds that the respondents No. 1 to 5 were Directors of the Company in liquidation on or before the date of its winding up. 15. 14. Taking into consideration the documents which have come on record, as noticed above, this Court answers the issue No. 1 in favour of the petitioner and holds that the respondents No. 1 to 5 were Directors of the Company in liquidation on or before the date of its winding up. 15. Issue No. 2 is also answered in favour of the OL and this Court holds that there is no document to show that respondent Nos. 2, 3 and 5 had resigned from the office of the Directors of the Company in liquidation on the day when the Company was wound up. 16. As regards issue No. 3, counsel for the OL submits that as per the report of the Chartered Accountant, specially Para 17 an 18, the misfeasance is clearly made out. 17. Per-contra, learned counsel for the respondents Nos. 1, 2, 3 & 5 submits that report prepared by the Chartered Accountant Mr. NC Jain cannot be relied upon. The same has been prepared without availability of the record and to show predetermined intention of the of applicant-OL. The Chartered Accountant has stated that the record was not handed over to the OL is a baseless allegation and if the Chartered Accountant has not looked into the records, the non-applicants cannot be blamed. It is stated that the OL in order to prove issue No. 3 ought to have pinpointedly made specific allegations against the non-applicants. There is no specific pleadings that an individual non-applicant, as Director of the Company, was liable for a particular misfeasance or breach of trust. There is no narration of any specific act or omission or commission on the part of any of the Directors nor any loss has been quantified as against the concerned Director and hence, the charge under Section 543of the Act of 1956 cannot be made out against them. It is further submitted that the charge of misfeasance has not been proved by the statement of the OL. It is on the OL to satisfy himself independently with regard to the allegations of misfeasance as against the Ex-Directors of the Company in liquidation. There is no concrete positive evidence placed before the Court to bring down charge of Section 543 of the Act of 1956. It is on the OL to satisfy himself independently with regard to the allegations of misfeasance as against the Ex-Directors of the Company in liquidation. There is no concrete positive evidence placed before the Court to bring down charge of Section 543 of the Act of 1956. Learned counsel for the respondents submits that the Chartered Accountant has prepared his report on the basis of the balance-sheet of 1997-1998 and the statement of affairs filed by the Ex-Directors but both the documents were not exhibited. 18. Heard learned counsel for the parties and perused the material available on record. 19. This Court finds that the PW-1 has admitted in his cross- examination that the audited balance-sheet as on 31/03/1998 had not been filed. Similarly, PW-2 has also admitted in his cross- examination that the balance-sheet and the statement of affairs had not been submitted. There is no allegation about specific nature of misfeasance as against any of the particular Director. The Chartered Accountant in his affidavit relies on his report prepared and submitted on 05/04/2006. The Company in liquidation i.e. Lok Vikas Financial Corporation Ltd. was a non-banking financial company which was promoted to carry on business by the Registrar of Companies vide certificate dated 03/01/1989 and the Reserve Bank of India allowed the Company to carry on business vide its letter dated12/03/1989. The Company had 84 branches. The last available balance-sheet as on 31/03/1998 and annual return for the period of 01/08/1998 has been filed. No return thereafter has been filed and thus the Company and its Directors have committed offence under Section 210, 159 and 166 of the Act of 1956. It is also reported that the Company was wound up on an application moved under Section 433 (f) read with Section 434 and 439 of the Act of 1956. The winding up order has been passed on the petition moved by Mr. Lokesh Kumar Singh, Co-Promoter-cum-Ex-managing Director of the Company wherein he mentions of the financial position of the Company having deteriorated after unfair and illegal means adopted by the Income Tax Department for recovery of disputed demands and its sister concerns to levy of penalty of technical breaches. It became overburdened for outstanding liabilities and therefore, committed defaults. The depositors lodged FIRs with Police Stations and cheque bounce cases under Section 138 of the Negotiable Instruments Act. As per examination of Mr. It became overburdened for outstanding liabilities and therefore, committed defaults. The depositors lodged FIRs with Police Stations and cheque bounce cases under Section 138 of the Negotiable Instruments Act. As per examination of Mr. Lokesh Kumar Singh and Hari Shankar Sharma under Section 130 of the Act of 1956, it was observed that the Registrar of Cooperative Societies had attached the registered office of the Company due to non-payment of bank dues of Rs. 1.75 Crore. A loan was advanced to sister concern Lok Vikas Housing Financial Corporation Limited, Lok Vikas Leasing Limited, Lok Vikas Capital Limited and Lok Vikas Domestic Appliances Limited against the collateral securities of the Companys properties. Out of 23 branches, the OL could take possession of 9 branches which were all vacated prior to winding up and the furniture, other items and records were lying with Branch manager. The accounts books and records of the Company with the OL were not complete and therefore, accuracy of the balance-sheets could not be examined and the irregularities which the Chartered Accountant noted were as under:- "a. The company has accepted deposits from public in excess of ceiling laid down under para 5(2) (B) (I) of RBI directives. b. The company has paid commission to its collection agents in excess of the rates specified in clause 10A of the Directives. c. The application form used by the company for accepting deposits is not in conformity with para-7 of RBI directives of 1977. d. The company has charged higher interest on secured loans and not paid any interest on prematurely payments in Contravention of Para-11 of the RBI Directives. e. The company has not maintained minimum percentage of Liquid assets as required under para 12 of RBI Directives. f. Unsecured Loans include Rs. 360720/- of security deposits received from employees. The company has not maintained a separate account for depositing security money as required by sec. 417 of the Companies Act. g. Interest has not been charged on loans and advances made to employees in some cases. h. The company has not made interest payment on prematurely payments amounting to Rs. 1638397/- i. The company has given following loans without obtaining the permission of central Govt.; hence contravened the provisions of sec. 295 of the companies act. (a) Lok Vikas Housing Finance Corp. Ltd. in which Mr. Lokesh Kumar Singh holds more than 25% of the voting power. 1638397/- i. The company has given following loans without obtaining the permission of central Govt.; hence contravened the provisions of sec. 295 of the companies act. (a) Lok Vikas Housing Finance Corp. Ltd. in which Mr. Lokesh Kumar Singh holds more than 25% of the voting power. - Rs. 13511826/- (b) Loan given to directors Mr. Lokesh Kumar Singh, Mr. K.K. Batra, Mr. Hari Shankar Sharma and Mr. T. R. Yadav Rs. 3070179/-, Rs. 73454/-, Rs. 274560/- and Rs. 31130/- respectively. (c) Balances of sundry debtors, sundry creditors, loans and advances are subject to confirmation. (d) Good will standing in the name of Propriety concern amounting to Rs. 750000/- is not supported by any documentary evidence to the extent of Rs. 300000/- j. The Company had granted loans which in many cases are prejudicial to the interest of the company from the point of proper security and their recovery position. From the above stated irregularities by the company in the Notes on accounts and the auditors report it is inferred that the audited balance sheets do not appears to give a true and correct state of affairs of the company as on 31.03.1997 and 31.03.1998 and its losses shown in the profit & loss account for the respective year ended on that dates. Further the assets and liabilities stated by them in the winding up petition as of the date of filing of winding up petition i.e. year 2000 with out the profit & loss account details and working results for that period is unverifiable in the absence of account books and records." 20. The Company had executed loan agreement for Rs. 1.75 crore with Lok Vikas Cooperative Bank Ltd. by creating equitable mortgage of Malviya Nagar property but the said loan is not verifiable in the absence of the accounts books and records. Unsecured loan of Rs. 3-4 crore was given when on the other hand the borrowings were made by pledging of immovable assets. The Company was thus made liable without actually receiving of the money from them creating a fictitious liability in the name of the sister concerns. The money raised appears to have been diverted by the Directors to themselves or bogus loans were given and thus, it is a case of criminal misconduct and breach of trust in relation to the Company. There is unsecured creditors of amount of Rs. The money raised appears to have been diverted by the Directors to themselves or bogus loans were given and thus, it is a case of criminal misconduct and breach of trust in relation to the Company. There is unsecured creditors of amount of Rs. 2,85,02,345/- and movable assets included furnitures and fixtures amount to Rs. 33,68,240/-. In absence of statement of accounts, books and records, the vehicles with the depreciated value of Rs. 6,60,464 as on 31/03/1998 must have been sold and the amount has been misappropriated for personal benefits and to the disadvantage of the Company. The goods worth Rs. 33,33,240/- towards cost of remaining items in the list have not been handed over to the OL and thus, the Directors would be jointly and severally liable for the same. The loans and advances to individuals which have become non-recoverable to the tune of Rs. 2,31,84,940/- have become non-recoverable as no addresses of the said persons have been mentioned nor made available to the OL. The Directors did not hand over the loan documents nor filed recovery suits against the said persons who were mostly individuals without any security and inference has to be drawn that deposits taken from thousands of poor public persons have been advanced to the parties without any security and guarantee. The amount has become time barred and thus, the Directors did not discharge their duties and there is willful negligence on their part and are liable to compensate the Company in liquidation and the amount of Rs. 1,58,17,141/-, which is aggregate of the loans and advances amount (Item No. 4) was allowed to be released without any security and guarantee and has become time barred. Non-filing of the recovery suits against the debtors and guarantors within limitation period would amount to misfeasance and willful negligence towards the Company. 21. The respondents-Directors have submitted that report of the Chartered Accountant is inferential and is not based on complete record and does not prove the act of misfeasance as against the Directors and rely upon the judgments passed by this Court in the case of The Official Liquidator of M/s Ashoka Oil Products Pvt. Ltd. v. Shri Kaushal Kishore Dalmiya & Ors. , SB Company Application No. 82/1996, decided on 17/05/2018 to submit that merely on the basis of the Chartered Accountant report, the proceedings under Section 543 of the Act of 1956 ought not be initiated. 22. After examining the submissions made by learned counsel for both the parties, this Court finds that the respondents- Directors, who were having complete knowledge relating to the Company, were required to explain the allegations levelled in the report submitted by the Chartered Accountant and disapprove the allegations. The provisions of onus of proof on the prosecution as is understood in the criminal law, in the opinion of this Court, would not be applicable in cases relating to Company Law where the Directors are required to provide information to the OL and satisfy him in relation to the objections and queries put up by the Chartered Accountant. The very purpose of the Act of 1956 in relation to winding up proceedings is that when the OL takes over of the Company, the Ex-Directors would satisfy and peacefully handover the entire record as well as explain each and every objection which may arise during the course of examining the record relating to the Company in liquidation. The purpose of Section 543 of the Act of 1956 is to find out whether the Directors were in any manner instrumental in causing misfeasance which has resulted in the Company suffering loss of finances or reputation. While it is true that specific charges are required to be levelled as has been held by this Court in the case of The Official Liquidator of M/s Ashoka Oil Products Pvt. Ltd. v. Shri Kaushal Kishore Dalmiya & Ors. (supra), at the same time, this Court finds that if the Directors themselves have moved application before this Court for seeking winding up of their Company under Section 433(f) of the Act of 1956, it becomes incumbent upon all of them individually and jointly to explain about functioning of the Company and as to how and why the loans and advances were granted without security and as to how and why the same were not recovered and allowed to become bad debts and time barred. It is a natural corollary and inference that if such omissions have been made by the Directors, they all were together in hand and gloves in getting finances of the Company dwindled and siphoned to other persons or sister companies. 23. Taking into consideration the loans, which have been advanced to individuals, were given without taking any collateral security, huge money and loans were advanced without taking collateral security and even without mentioning addresses of the said individuals, a serious view has to be taken and the respondents-Directors cannot be left scott-free. It is settled principle of law that each case has to be examined on its facts which have come on record. Present is a case where a Company, which was floated as a non-banking finance company, funds and advances received from sister concerns were further siphoned to individuals. The deposits from public were obtained in huge number and thereafter, the Company application was moved for winding up. This Court, thus, is satisfied that the respondents- Directors are guilty of having committed acts of misfeasance with respect to amount of Rs. 2,85,02345/- and Rs. 38,995081/- and other amounts mentioned in Para 17 and 18 of the report of the Chartered Accountant and they are as such guilty under Section 543 of the Act of 1956. 24. The next issue No. 4, however, is not required to be looked into and counsel for the OL does not press the same. 25. Having noted above, this Court finds that the respondents- Directors have been guilty of breach of trust in relation of the Company being Directors of the Company and have become liable and accountable for the properties of the Company in liquidation in terms of Section 543-A and 543-B of the Companies Act, 1956 and having examined their conduct, they are held liable to repay the amount to the Company to the tune of Rs. 2,85,02345/- and Rs. 3,89,95,081/- and other amounts mentioned in Para 17 and 18 of the report of the Chartered Accountant.. The amount shall carry interest at the rate of 12% per annum from this date upto the date of recovery. 26. The amount, as ascertained above, shall be recoverable from respondents-Directors as well as from their family members from all assignees etc. 3,89,95,081/- and other amounts mentioned in Para 17 and 18 of the report of the Chartered Accountant.. The amount shall carry interest at the rate of 12% per annum from this date upto the date of recovery. 26. The amount, as ascertained above, shall be recoverable from respondents-Directors as well as from their family members from all assignees etc. and their properties/assets which shall be attached by the Official Liquidator for recovery and the Official Liquidator is empowered to take all steps for the said purpose of recovering the said amount and if it is found that they have sold or disbursed their personal properties in any manner during the pendency of the proceedings, the same shall also be recovered from the subsequent purchasers or assignees etc. 27. The company application is accordingly allowed.