Bombay High Court

In The Matter Of M/S Wopolin ... vs Hargovind Gangabisan Bajaj And ... on 7 September, 2021

Bench: S. M. Modak

olr.18.15.jud                               1

    IN THE HIGH COURT OF JUDICATURE AT BOMBAY
              NAGPUR BENCH, NAGPUR

              Company Application [CAO] No.160 of 2016
                                  with
              Company Application [CAO] No.161 of 2016
                                  with
              Company Application [CAO] No.162 of 2016
                                  with
              Company Application [CAO] No.228 of 2016
                                   in
               Official Liquidator Report No.18 of 2015
                                   in
                   Company Petition No.17 of 2009

Appellant                :      Official Liquidator & Liquidator of
                                M/s. Wopolin Plastics Ltd. (In Prov. Liqn)
                                High Court Bombay, Bench at Nagpur,
                                N.S. Bldg. 2nd Floor, Opp. V.C.A. Ground,
                                Civil Lines, Nagpur.
                                -- Versus -

Non-Applicants : 1] Shri Hargovind Gangabisan Bajaj,
                    Saket, SS, Farmland, Ramdaspeth,
                    Nagpur.

                             2] Shri Vinodkumar Gangabisan Bajaj,
                                254, Pandit R.S. Shukla Marg,
                                Civil Lines, Nagpur - 440 001.

                             3] Shri Kishor V. Rathi,
                                A/20, Jeevan Chhaya, Ramdaspeth,
                                Nagpur - 440 010.

                             4] Shri Nareshprasad Falgoprasad Tiwari,
                                100/1, Shantinagar Colony, Behind Garden,
                                Shantinagar, Nayapura, Mangalvari,
                                Nagpur - 440 002.

                             5] Shri Sudhakar Pandharinath Kolarkar,
                                Qtr. No.80/B, Rameshwari Road,
                                Empress Mill Colony, PO Bhagwan Nagar,
                                Nagpur - 440 027.




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           Shri A.C. Dharmadhikari, Advocate for the Non-Applicants.
           Dr. Anjan De, Advocate for the Applicant/Official Liquidator.
          =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=

                         CORAM                 : S.M. MODAK, J.

                         RESERVED ON           : 29th JULY, 2021.
                         PRONOUNCED ON         : 7th SEPTEMBER, 2021.


J U D G M E N T :-

The directors of the company by name M/s. Wopolin

Plastics Ltd., formerly known as M/s. Bajaj Plastics Ltd., are asking for

discharge from the present proceedings. It is for the reason that the

allegations in the report submitted by the Official Liquidator are vague.

02] These applications for discharge are filed in a report

submitted under Section 543 of the Companies Act requesting for

issuing summons to the non-applicants-directors. This Court has

already issued notice to the non-applicants. On this background, I

have heard learned Advocate Shri A.C. Dharmadhikari for the non-

applicants and learned Advocate Dr. Anjan De for the Official

Liquidator.

03] The sum and substance of their applications is as follows :

i. The Official Liquidator has blindly accepted the report

dated 19/10/2015 given by the Chartered Accountant

without applying his mind.

ii. The Official Liquidator has not ascertained as to whether

the case of misfeasance is made out against the non-

applicants.

iii. Clarification or explanation of the non-applicants were not

called by the Chartered Accountant.

iv. The allegations made in the Official Liquidator Report are

vague and they are general in nature.

v. The exact role played by the individual director in causing

alleged losses to the company is not pleaded in the report.

vi. There is a specific ground taken by non-applicant No.5

about his nomination as a director in the year 2009.

Whereas, the Chartered Accountant has prepared the

report on the basis of balance-sheet and profit and loss

account audited up to 31st March, 2008.

04] By way of an additional affidavit, non-applicant Nos.1, 2, 4

& 5 have taken the following grounds :

i. Even though there was a demand of custom duty to the

tune of Rs.9.31 crores by the Commissioner, the applicant-

company obtained favourable order from the Tribunal and it

was apprised to the Official Liquidator, but he has not

intimated this fact to the Chartered Accountant.

ii. Assets Reconstruction Company [India] Limited ('ARCIL' for

short) has sold the assets of the company to one M/s.

Haripack Extrusions (Vidarbha) Pvt. Ltd. as per the tender

and they have taken the responsibility to discharge all the

liabilities and, hence, these non-applicants are not

responsible for any alleged losses.

iii. Debit balance of profit and loss account is shown in the

Chartered Accountant Report, however, it is not explained

how it is attributable to the acts of the non-applicants.

iv. IDBI was appointed as an operating agency by BFIR for the

period from 11/11/1999 to 12/09/2005. During that period,

there was a loss of Rs.7.93 crores and it was caused

because there was no control of the non-applicants over

the functioning of the company.

v. No actual loss is caused to the company as 100% financial

creditors debt was satisfied and their NOC was received by

ARCIL

05] Learned Advocate Shri A.C. Dharmadhikari for the non-applicants

relied upon the following judgments:

i. Narayan vs. The Official Liquidator of Maharashtra

Asbestos Pvt. Ltd. - (Division Bench of Bombay High Court,

Nagpur Bench in Company Appeal No.13/2008)

ii. Official Liquidator, High Court, Madras vs. Gautham Dhiraj

Mal Ranka & others - (2007 SCC OnLine Mad 888).

iii. Security and Finance Pvt. Ltd. vs. B.K. Bedi & others -

(1990 SCC OnLine Del 102)

iv. The Official Liquidator vs. M/s. Nathmal Kisanlal & others -

(Bombay High Court in Company Application No.16/1972)

v. The Official Liquidator & Liquidator of M/s. John Galt

Laboratories Ltd. vs. Shri R.B. Sangare & others - (Bombay

High Court in Company Application No.16/1972).

06] Whereas, the Official Liquidator has opposed the prayer for

discharge on the following grounds:

i. Official Liquidator was appointed as a Provisional Liquidator

as per the order dated 22/10/2010.

ii. Non-Applicant No.1-Hargovind Bajaj and non-applicant

No.2-Vinodkumar Bajaj are the promoters/directors of the

company since incorporation.

iii. Official Liquidator has taken possession of books of

accounts of the company from ex-

directors on 04/02/2011.

iv. ARCIL has taken over the assets of the company on

22/06/2006 as per the provisions of SARFAESI Act, 2002.

v. The Chartered Accountant was appointed to carry out the

investigation as per the order of this Court.

vi. ARCIL has sold the assets of the company including stock

for an amount of Rs.29.03 crores, however, break up of

aggregate consideration is not available.

vii. This was prior to winding up order. The Chartered

Accountant in his report has considered the factors prior to

holding the ex-directors responsible for the losses to the

tune of Rs.42,22,20,742/-.

viii. Non-applicant Nos.1 & 2 have resigned on 03/03/2009 and

in their place, non-applicant No.4-Nareshprasad Tiwari and

non-applicant No.5-Sudhakar Kolarkar were appointed in a

casual vacancy from 03/03/2009.

ix. The developments in the appeal filed before the Appellate

Tribunal subsequent to the investigation report of the

Chartered Accountant.

OBSERVATIONS

08] If the judgments relied upon by the non-applicants are perused,

the following principles emerge :-

i. In the case of Narayan (cited supra), the Division Bench of

this Court has discharged the non-applicants therein by

setting aside the order of the Company Court. Active

engagement in the administration or management of the

affairs of the company is required prior to making

declaration under Section 543 of the Companies Act.

ii. In the case of Gautham Dhiraj (cited supra), the High Court

of Madras was pleased to discharge the directors as the

misfeasance and non-feasance charges were found general

in nature without pinpointing a specific act of dishonesty

and misappropriation.

iii. In the case of B.K. Bedi (cited supra), the High Court of

Delhi was pleased to discharge the directors, because there

were no specific allegations. When the allegations are not

specific and details of fraud are not given, then the Court

cannot indulge in a fishing or roving enquiry. The enquiry

is to be confined to the purpose with which the business of

the company had been carried on and the persons who

were knowingly parties to that act. There has to be positive

and specific evidence and pleadings in respect of the

individual director.

iv. In the case of M/s. Nathmal Kisanlal (cited supra), this

Court was pleased to reject the request of the Official

Liquidator to take action under Section 543 of the

Companies Act. This Court has laid down similar principles

as mentioned above. However, this order was passed after

the evidence was recorded.

v. So also in the case of R.B. Sangare (cited supra), this Court

was pleased to drop the request of the Official Liquidator

for taking action under Sections 542 & 543 of the

Companies Act. Similar principles were laid down.

However, this order was passed after the oral evidence was

recorded.

09] If the above principles are applied to the case before us, we

can find that in the report of the Chartered Accountant, no doubt, he

has quantified the loss to the tune of Rs.42,15,20,742/-. He has also

categorized the different heads. While giving his opinion, he has

considered the record made available up to 31/03/2008. According to

him, it was incomplete. He has noted the fact of selling of assets to

ARCIL. However, when the report is perused, one can come to an

inevitable conclusion that, there is no specific mention as to which

director is liable and to what extent. In general, he has said about the

total loss without specifying about the individual liability of the

directors. Before making a declaration under Section 543 of the

Companies Act, the Court must satisfy itself about the liability of

individual directors, without that, declaration cannot be made.

10] One may say that these lacunae in the report of the

Chartered Accountant can be filled in, if the evidence is allowed to be

adduced. However, it has already been held that if the report is

lacking in those particulars, the Court cannot hold a roving enquiry. It

was incumbent on the Official Liquidator to rectify these defects. He

ought to have considered those defects prior to filing of Official

Liquidator Report in this Court. It has also been observed that "the

general principle of liability of joint tortfeasors cannot apply to

misfeasance.

In order to prove misfeasance, it must be proved

(I) that there was a breach of trust and

(ii) it has resulted in pecuniary loss to the company.

(Paragraph 22 of B.K. Bedi's judgment).

11] It is also pertinent to note that this Court as per the order

dated 11/03/2021 passed in Company Petition No.17/2009 allowed the

winding up of the company under Section 433(a) of the Companies Act

and the appointment of the Provisional Liquidator was confirmed.

12] In view of the above circumstances, I do not think that the

proceedings against all the non-applicants can be continued. I have not

expressed any opinion about the objection taken by the non-applicants

other than vagueness of the allegations. Therefore, the applications

deserve to be allowed. Hence, the following order :

I. The non-applicants are discharged from the proceedings.

II. The Official Liquidator Report is dismissed.

III. All the civil applications are allowed and disposed of

accordingly.