LexTHE OFFICIAL LIQUIDATOR versus PARTHASARATHI SINHA & OTHERS
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.. rr . ,. 211 A THE OFFICIAL LIQUIDATOR v. PARTHASARATHI SINHA & OTHERS B December 17, 1982 (S. MURTAZA FAZAL ALI AND E.S. VENKATARAMIAH, JJ.J Companies Ac/, 1956-Sections 543 and 634-Scope of-Misfeasance tJNl breach of trust alleged against dirttctorsof a coinpany in liquidation-Death ofa C director during pendency of prOcetdings-Hefrs and legal representatives of deceased director, if could be substituted in place of deceased director-After declaration of liability of director, if amounts due could be realised from legal representatires . The respondents were the heirs and legal repre.!ientatives of one of the directors of a Company in 1iquidatio9. When the company was ordered to be wound up, the Official Liquidator took out summons under section 543 (1) of the Companies Act against its directors for a declaration that the said directors were guilty of misfeasa.qce and breach of trust and also fOr an order directing them to repay or restore the money or property of the company in liquidation which they were alleged_ to have retained wrongfully. During the pendency of the proceedings one of the directors died intestate leaving behind the respondenta as his heirs and legal representatives. At the instance of the Official Liquidator tho Company Judge passed an order substituting the respondents in place of the deceased director. ; Allowing the respondents' appeal, a Division Bench of the High Court held that µo further action in the misfeasance proceedings could be taken against the legal representatives of the deceased director. In coming to this conclusion the High Court purported to follow the decision of this Court in Official Liquidator v. P.A.. Tendolkar (dead) by L. Rs., [1973] 3 S.C.R. 364. Allowing the Appeal, HELD : The liability ans1ng under the misfeasance proceedings is founded on the principle that a person who bas caused loss to the company by an act amounting to breach of trust should make good the loss. Section 543 of the Act provides for a summary remedy for determining the amount payable by sllch person on proof of the necessary ingredients. The section authorises the Court to direct such persons chargeable under it to pay a sum of money to the Company by way of compensation. This is not a provision intended to punish a man who has been found guilty of misfeasance but is only intended for compensating the company in respect of the loss occa~ioned by his misfeasance. Whenever there is a relationship based on contract. quasi- · contract, some fiduciary relatio!l 0r a failure to perforll! a dutr, there is DQ ·~- D E F G H A B c 0 E 212 SUPREME COURT RBPORTP (1983] 2 S.C.R. abatement of the liability on thi: death of the wrong doer. When once the liability is declared, it is open to the Official Liquidator to realise the amount due by resorting to section 634 of the Act and section 50 of the Code of Civil Procedure. In Tendo/kar"s case this Court did not consider the effect of section 634 of the Act which made the rekvant provisions of the Code of Civil Procedure relating to execution of decrees applicable to orders passed by; the Court under the Act. [223 C·F] At the conclusion of th~: proceedings under section 543 a declaration of the liability is made. Such dec',aration partakes of the charact_er of a decree in a suit. When once such declaration is made it can be enfotced under section 634 of 1he Act and where the order made by oae court has to be executed by another court the procedure prescribed by section 635 of the Act has to be followed. In the course of suet. execution proceedings the provisions of section SO of.the Code of Civil Procedu:~~ have to. be- applied when the person who is made liable dies before the order is satisfied and the liability of the legal representatives should be determined accordingly. [223 G-H] Official Liquidato', Supr.!me Bank Ltd. v. P.A. Tendolkar (dead) by L. Rs, & Ors., [1973] 3 S.C.R. 364, applied. A/eykutty Varkey Thai·akan & Anr. v. Official Liquidator & Ors., [1978] 4 Comp. Cas. 472, approved. Shiwalik Transport Co. Ltd. (in liquidation) v. Thakur Ajit Singh & Ors., [1978] 48 Comp. Cas. 465, approved. CIVIL APPELLATE JURISDICTION Civil AppealJNo. 3614 of 1982 .. Appeal by Special Leave from the Judgment and Order dated .,.. > • the !st August, 1975 of the Calcutta High Court in Appeal No. /~ F 324 Of i 97Q. . Shanker Ghosh, A.'K. Verma and P.K. Basu for the Appellan
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