Steel Authority Of India Ltd. vs Colet Steels Pvt. Ltd. And Ors.
2002 Latest Caselaw 562 Del

JUDGMENT

J.D. Kapoor, J.

1. These are the applications moved by defendant Nos. 3 & 4 for rejecting the plaint against them for non-disclosure of cause of action or in the alternative, deletion of their names being unnecessary parties.

2. Admittedly, defendant Nos. 3 & 4 were once directors of defendant No. 1-Company. Defendant No. 2 is the promotor. Suit has already been decreed against defendants 1 & 2.

3. The main contention is that both defendants 3 & 4 had resigned from the directorship of defendant No.1 Company on 29.8.1996 and 14.1.1997 respectively. Their resignations were accepted by resolution of the Company and intimation about their resignations were also sent to the Registrar of Companies. It is contended that transactions in question took place much after their resignations, they were no where connected with the affairs of the Company and moreover as per own showing of the plaintiff, cause of action to file suit arose against the defendants from May, 1997 onwards. It is further contended hat none of these defendants signed any request, assurance or cheque or any document for the transactions which are subject matter of the present suit. Even otherwise they are not personally liable for any liability of the Company because they are neither the Directors nor shareholders of the Company.

4. On the contrary, plaintiff has contended that it did not receive any information or letter sent by defendants 3 & 4 about resigning form the Directorship of defendant No. 1-Company nor did defendants 3 & 4 referred whether they were served with legal notice. Documents filed by defendant No. 2 in some other case show that these defendants have been representing defendant No. 1-Company even after having resigned from Directorship.

5. Admittedly, transactions between he parties giving rise to the instant suit took place between 11.7.1997 to 29.8.1997. Defendant No. 3 resigned on 29.8.1996 and defendant No. 4 resigned on 14.1.1997. Intimation of their resignations were sent to Registrar of Companies. Affidavits have been filed to the effect that since their resignations they did nt perform nay function on behalf of company in any capacity whatsoever. None of these defendants signed any request, assurance or cheque or nay other document for the alleged transactions.

6. Though Director of a Company has liability towards acts of omission or commission of the Company but if he ceases to be the Director, he cannot be saddled with the liability for subsequent acts. In such an event, a person can be held liable only if he furnishes any guarantee or signs any document, request, cheque or gives assurance in his individual capacity. Merely because once a person happened to be the director of a Company would not make him labile for the acts of the Company for the period when the person did not hold office of director. Defendants 3 & 4 did not commit themselves either in writing or orally for being responsible or liable for the acts or transactions of the Company.

7. It appears that plaintiff has filed suit on the previous knowledge that defendants 3 & 4 were directors of the Company. Once their resignations were notified and intimated to the Registrar of companies, they were supposed to have severed all their links with the Company. Defendant Nos. 3 & 4 appear to have been improperly joined and even otherwise their presence is not necessary to enable the court for effectual and complete adjudication and settle all the questions involved in the suit since suit has already been decreed against the Company and the promotor.

8. In the result, applications are allowed. Names of defendant Nos. 3 & 4 are struck off from the array of parties.

9. The interim order dated 9.8.1999 passed against defendants 3 & 4 stands vacated.

As a consequence, leave to defend application being IA. 13339/2000 moved by defendant No. 3 also stand dismissed having become infructuous.

10. All these applications stand disposed of accordingly.