Case: Official Liquidator, High Court, Bombay Vs. Taru Jethmal Lalvani and Others

the directors died. The Court allowed the substitution of his heirs and legal representatives in the misfeasance proceedings. In view of this judgment, the contention of respondent No.12 (son of deceased respondent No.16 in Company Application No.16 of 1981) that the liability of the deceased respondent No.16 does not survive and hence he as an heir, cannot be brought on record, cannot be accepted.12.The present case, however, is somewhat different from the above cases decided by the Supreme Court. In the present case, respondent Nos.1 and 16 had died before the misfeasance summons was taken out. So that the misfeasance summons itself is being taken out against the heirs and legal representatives of the deceased. The appellant contends that in view of the principle laid down by the Supreme Court that the liability of a director or officer does not abate on his death, a misfeasance summons can be taken out against the heirs and legal representatives of such a deceased director or officer. Kerala High Court, however, in the case of Official Liquidator v. Ramakrishna Iyer, reported in 64 Company Cases, pg. 855, held that under section 543, a proceedings cannot be initiated against the legal representatives of a deceased director. The Kerala High Court has referred to the language of section 543 which contemplates a proceeding being taken out only against director, managing agent, secretary, treasurer, liquidator or officer of the company. The view taken by the Kerala High Court is supported by the decision in the case of Feltoms Executors, 1865-66 1 L.R. Eq. pg. 219, where section 165 of the English Companies Act, 1862, which is similar to our section 543 was considered. Vice Chancellor Kindersley held that the words "compel him to pay" in that section cannot be applied to executors and administrators of a deceased director. The same ratio was applied in the case of In re British Guardian Life Assurance Company, 1880 14 Ch.D. pg. 335.13.The Kerala High Court has also emphasised the aspect of difficulty faced by legal representatives in defending such an action and consequently whether it would be just, fair or equitable to allow such proceedings to be initiated and continued. This letter aspect has been referred to by the Supreme Court also in its judgment in the case of Official Liquidator v. Tendolkar, (supra). The Kerala High Court held that bearing all these aspects in mind, the proceedings cannot be initiated under section 543 against the legal representatives of a delinquent director or officer. The aspect of practical difficulties of the heirs of the deceased director or officer to defend such a proceeding and whether it would be just and fair to permit such a proceeding to be initiated do need to be considered when misfeasance proceedings are sought to be initiated against the heirs. This aspect will have to be considered by the Court on the basis of circumstances of each case. In the case before us, however, the very initiation of proceedings against the heirs and legal representatives of the deceased respondent No.16 is far beyond the period of limitation under section 543(2) of the Companies Act. Therefore, we have not examined the question raised by the Kerala High Court in the present case. There is no doubt that the misfeasance summons is hopelessly time barred in so far as it is sought to be directed against the heirs of respondent No.16.14.In the case of respondent No.1, however, his son who is one of his heirs, has been a party to the misfeasance summons right from inception as one of the delinquent officers of the Company. As far as he is concerned, the Official Liquidator is merely required to change his description as an heir and legal representative of respondent No.1 also. However, the Official Liquidator cannot ask for any compulsive order against him in his capacity as an heir of deceased respondent No.1. The Official Liquidator can certainly ask for a declaratory order against him as held by the Supreme Court in the above decisions. The Official Liquidator is, therefore, entitled to pursue his remedy against the estate of the deceased respondent No.1 coming to the share of respondent No. 9 in Company Application No. 75 of 1988. In the Company Application No. 75 of 1988 for amendment however no such amendments are asked for. Therefore, no relief can be granted to the Official Liquidator under the persent Company Application which has been rightly dismissed by the learned Single Judge. We are also informed that Misfeasance Summons itself has also been dismissed and an appeal from that order is before us for consideration. Therefore, if the misfeasance summons is restored the Official Liquidator is at liberty to take out an appropriate application to amend the misfeasance summons to bring on record respondent No. 9 in Company Application No. 75 of 1988 in his capacity as an heir of original respondent No. 1 also.15. As regards the other heirs of resondent No. 1 that the Official Liquidator is seeking to bring on record the application may not be hit by section 543(2) of the Companies Act, 1956. But the Official Liquidator became aware in 1981 about the death of respondent No.1. He was throughout aware of the fact one of the sons of respondent No.1 viz., respondent No.9 (in Company Application No.75 of 1988) was already on record as a party to the misfeasance summons. He has made no attempt to enquire from respondent No.9 regarding other heirs of respondent No.1. Only in 1988 he made an application to bring on record the other heirs of respondent No.1. Such an application, made 7 years after the knowledge of the death of respondent No.1, would also be barred under Article 137 of the Limitation Act. This, however, does not preclude the Official Liquidator from taking out any other proceedings in accordance with law against the heirs and legal representatives of the deceased respondent Nos. 1 and 16.16.In the premises the learned Judge has rightly dismissed the Company Application.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Therefore, in view of section 543(2), in the present case the Official Liquidator should have taken out Misfeasance Summons within 5 years of the winding up order. He has done so by taking out the Misfeasance Summons on 15th June, 1981 which is before the expiry of five years from the date of the winding up order. He has, however, joined as party respondents at least two persons who were dead at that time viz.,respondent Nos.1 and 16. No Misfeasance Summons could have been taken out against a dead person. Therefore, Misfeasance Summons No.161 of 1981 cannot be considered as having been instituted against respondent Nos.1 and 16 ondo not see why a misfeasance summons should not be governed by the samefurther submits that even though the misfeasance summons is taken out against dead respondents, their heirs can be subsequently brought on record even beyond the period prescribed under section 543(2), because according to him, under section 543(2) only an application is required to be made within the prescribed period. Once an application is made, somebody can be subsequently joined as a party to it. Such an interpretation cannot be accepted. Section 543(2), when it refers to an application, must necessarily refer to an application against a specified person or persons. It cannot be an application in the abstract. Therefore, when the heir of a respondent who wasat the time when the original misfeasance summons was taken out, is brought on record, it is equivalent to taking out a fresh misfeasance summons against the heir. There is no question here of the amendment relating back to the date of the original misfeasance summons against some other parties. Therefore, this contention must be rejected. In view of this position, we do not see how the present Company Application No.75 of 1988 can beSupreme Court, therefore, held that in a proceeding under section 543 of the Companies Act, the death of one of the officers will not result in abatement of his liability. His heirs can be brought on record for the purpose of pursuing the remedy under section 543 as against the estate of the deceased officer or director. In this case, the Supreme Court was concerned with a situation where, during the pendency of misfeasance proceedings one of the directors died. The Court allowed the substitution of his heirs and legal representatives in the misfeasance proceedings. In view of this judgment, the contention of respondent No.12 (son of deceased respondent No.16 in Company Application No.16 of 1981) that the liability of the deceased respondent No.16 does not survive and hence he as an heir, cannot be brought on record, cannot beKerala High Court has also emphasised the aspect of difficulty faced by legal representatives in defending such an action and consequently whether it would be just, fair or equitable to allow such proceedings to be initiated and continued. This letter aspect has been referred to by the Supreme Court also in its judgment in the case of Official Liquidator v. Tendolkar, (supra). The Kerala High Court held that bearing all these aspects in mind, the proceedings cannot be initiated under section 543 against the legal representatives of a delinquent director or officer. The aspect of practical difficulties of the heirs of the deceased director or officer to defend such a proceeding and whether it would be just and fair to permit such a proceeding to be initiated do need to be considered when misfeasance proceedings are sought to be initiated against the heirs. This aspect will have to be considered by the Court on the basis of circumstances of each case. In the case before us, however, the very initiation of proceedings against the heirs and legal representatives of the deceased respondent No.16 is far beyond the period of limitation under section 543(2) of the Companies Act. Therefore, we have not examined the question raised by the Kerala High Court in the present case. There is no doubt that the misfeasance summons is hopelessly time barred in so far as it is sought to be directed against the heirs of respondent No.16.14.In the case of respondent No.1, however, his son who is one of his heirs, has been a party to the misfeasance summons right from inception as one of the delinquent officers of the Company. As far as he is concerned, the Official Liquidator is merely required to change his description as an heir and legal representative of respondent No.1 also. However, the Official Liquidator cannot ask for any compulsive order against him in his capacity as an heir of deceased respondent No.1. The Official Liquidator can certainly ask for a declaratory order against him as held by the Supreme Court in the above decisions. The Official Liquidator is, therefore, entitled to pursue his remedy against the estate of the deceased respondent No.1 coming to the share of respondent No. 9 in Company Application No. 75 of 1988. In the Company Application No. 75 of 1988 for amendment however no such amendments are asked for. Therefore, no relief can be granted to the Official Liquidator under the persent Company Application which has been rightly dismissed by the learned Single Judge. We are also informed that Misfeasance Summons itself has also been dismissed and an appeal from that order is before us for consideration. Therefore, if the misfeasance summons is restored the Official Liquidator is at liberty to take out an appropriate application to amend the misfeasance summons to bring on record respondent No. 9 in Company Application No. 75 of 1988 in his capacity as an heir of original respondent No. 1 also.15. As regards the other heirs of resondent No. 1 that the Official Liquidator is seeking to bring on record the application may not be hit by section 543(2) of the Companies Act, 1956. But the Official Liquidator became aware in 1981 about the death of respondent No.1. He was throughout aware of the fact one of the sons of respondent No.1 viz., respondent No.9 (in Company Application No.75 of 1988) was already on record as a party to the misfeasance summons. He has made no attempt to enquire from respondent No.9 regarding other heirs of respondent No.1. Only in 1988 he made an application to bring on record the other heirs of respondent No.1. Such an application, made 7 years after the knowledge of the death of respondent No.1, would also be barred under Article 137 of the Limitation Act. This, however, does not preclude the Official Liquidator from taking out any other proceedings in accordance with law against the heirs and legal representatives of the deceased respondent Nos. 1 and 16.16.In the premises the learned Judge has rightly dismissed the Company Application.