Case Law Companies Act The Official Liquidator Vs Parthasarathi Sinha And Others

Case Law Companies Act

The Official Liquidator Vs

Parthasarathi Sinha And Others






CITATION: 1983 AIR  188   1983 SCR  (2) 211 1983 SCC  (1) 538   1982 SCALE  (2)1317


ACT: Companies Act,  1956-Sections  543 and  634-Scope  of- Misfeasance and breach of trust alleged against directors of a company in liquidation-Death of a director during pendency of proceedings-Heirs  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 representatives.


HEADNOTE: The respondents were the heirs and legal representatives of  one of  the directors  of a  Company  in liquidation. 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 misfeasance 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 respondents as  his heirs  and legal representatives. At the instance of the Official Liquidator the 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  no  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  arising  under  the  misfeasance proceedings is  founded on  the principle  that a person who has 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   such  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   occasioned  by   his misfeasance. Whenever  there  is  a  relationship  based  on contract, quasi  contract,  some  fiduciary  relation  or  a failure to perform a duty, there is no 212 abatement of  the liability  on the 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 Tendolkar’s  case this  Court  did  not consider the effect of section 634 of the Act which made the relevant 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 the proceedings under section 543 a declaration  of the  liability is  made. Such  declaration partakes of  the character  of a decree in a suit. When once such declaration  is made  it can  be enforced under section 634 of  the Act and where the order made by one 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 such execution  proceedings the  provisions of section 50 of the Code  of Civil  Procedure 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  Liquidator,   Supreme  Bank   Ltd.  v. P.A. Tendolkar (dead)  by L.Rs,  & Ors.,  [1973]  3  S.C.R.  364, applied. Aleykutty Varkey Tharakan & Anr. v. Official Liquidator JUDGMENT: Shiwalik Transport Co. Ltd. (in liquidation) v. Thakur Ajit Singh & Ors., [1978] 48 Comp. Cas. 465, approved.



& CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 3614 of 1982. Appeal by Special Leave  from the  Judgment and  Order dated the  1st August,  1975 of  the Calcutta  High Court in Appeal No. 324 of 1970. Shanker  Ghosh,  A.K.  Verma  and  P.K.  Basu  for  the Appellant. The Judgment of the Court was delivered by VENKATARAMIAH, J.       The short  question which arises for decision in  this appeal  by special  leave is  whether  the proceedings initiated  against a director of a company under section 543 of the Companies Act, 1956 (hereinafter referred to as  ‘the Act’)  can be  continued after his death against his legal representatives and whether any amount declared to be due  in such  proceedings can be realised from the estate of the deceased in the hands of his legal representatives. 213 The facts       of the  present case  may be  briefly stated thus: Ballygunge  Real Property  and Building  Society  Ltd. (hereinafter referred  to as  ‘the Company  in liquidation’) was ordered  to be wound up by the High Court of Calcutta on January 8,1958.  On January 2, 1963, the Official Liquidator took out summons under section 543(1) of the Act against its directors including  Dr.S. N.  Sinha for  a declaration that the said  directors were guilty of misfeasance 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 said proceedings, Dr. S.N. Sinha died on November  16,   1969  intestate   leaving  behind  his  son, Parthasarathi Sinha and two married daughters, Maya Bose and Mira Mitra  as  his  heirs  and  legal  representatives.  On February 12,  1970, Judge’s  summons was  taken out  at  the instance of  the Official  Liquidator for  leave to continue the said  proceedings  against  the  said  heirs  and  legal representatives. The  learned Company  Judge passed an order on November  9,1970 for  substitution of  the said heirs and legal representatives  in  place  of  Dr.  S.N.  Sinha,  the deceased.  Against   that  order,   the  heirs   and   legal representatives of Dr. S.N. Sinha preferred an appeal before the Division  Bench of the Calcutta High Court under section 483 of  the Act.

That appeal  was allowed  by the  Division Bench on  August 1,  1975 and save and except that the death of Dr.  S.N. Sinha  was recorded,  the order  of the Company Judge was  set aside. This appeal is filed against the order of the Division Bench. Before the       Division  Bench  of  the  High  Court,  the principal contention  urged on behalf of the heirs and legal representatives of  Dr. S.N.  Sinha, since deceased was that in  view   of  the   decision  of  this  Court  in  Official Liquidator, Supreme Bank Ltd. v. P.A. Tendolkar (dead) by L. Rs.  &   Ors.(1)  no   further  action  in  the  misfeasance proceedings could be taken against them and we are concerned only with  that contention  in this appeal. Since the effect of the  above decision  is understood in one way by the High Court of  Calcutta in  this case and differently by the High Court of  Kerala in  Aleykutty Varkey  Tharakan  &  Anr.  v. Official Liquidator  & Ors.(2)  and by  the  High  Court  of Punjab and  Haryana  in  Shiwalik  Transport  Co.  Ltd.  (in liquidation) v. Thakur Ajit Singh & Ors.(3) we 214 shall proceed  to discuss  the decision  in Tendolkar’s case (supra) at  some length.  Before doing so, we shall refer to the relevant  provisions of  law and  the specific averments made in this case by the Official Liquidator. Section 543 of the Act reads as follows: “543. Power  of Court to assess  damages  against delinquent directors,  etc.-(1)

If in  the  course  of winding up of a company, it appears that any person who has taken part in  the promotion  or formation  of the company, or  any past  or       present  director,  managing agent, secretaries and treasurers, manager, liquidator or officer of the company- (a)  has misapplied, or retained, or become liable or accountable  for, any money or property of the company; or (b)  has been guilty of any misfeasance or breach of trust in relation to the company; the Court       may, on  the  application  of  the  Official Liquidator, of  the liquidator,  or of  any creditor or contributory, made  within the  time specified  in that behalf in sub-section (2), examine into the conduct of the person,  director, managing  agent, secretaries and treasurers, manager,  liquidator officer aforesaid, and compel him to repay or restore the money or property or any part  thereof respectively,  with interest  at such rate as  the Court thinks just,  or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks just. (2) An  application under sub-section

(1) shall be made within  five years  from the date of the order for winding  up,or of  the  first  appointment  of  the liquidator in the winding up, or of the misapplication, retainer, misfeasance  or breach  of trust, as the case may be, whichever is longer. 215 (3) This  section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.” Section 634 of the Act reads: “634. Enforcement  of order  of  Courts-Any  order made by  a Court  under this Act may be enforced in the same manner  as a decree made  by the  Court in a suit pending therein”. Section 2(11)  of the  Code of  Civil Procedure defines the expression  ‘legal representative’  as ‘a  person who in law represents  the estate of a deceased person and includes any person  who intermeddles with the estate of the deceased and where  a party  sues or  is  sued  in  a  representative character the  person on  whom the  estate devolves  on  the death of the party so suing or sued’. Section 50 of the Code of Civil Procedure reads: “50. Legal  representative-

(1)  Where a  judgment debtor dies before the decree has been fully satisfied, the holder  of the  decree may apply to the Court which passed  it to  execute  the  same  against  the  legal representative of the deceased. (2) Where the  decree is  executed against  such legal representative,  he shall  be liable only to the extent of  the property  of the deceased which has come to his  hands and has not  been duly disposed of; and, for the  purpose of  ascertaining such  liability, the Court executing the decree may, of its own motion or on the application of the decree-holder, compel such legal representative to produce such  accounts as  it thinks fit”. The Official  Liquidator pleaded  before the High Court that due  to various  breaches of  trust and/or  breaches of contract, express  or implied  and/or breaches  of fiduciary duties and other acts of misfeasance on the part of Dr. S.N. Sinha, since  deceased, loss  had been caused to the Company in liquidation  and that  the assets  of Dr.  S.N. Sinha had benefitted thereby.  He further  alleged that  the assets of Dr.  S.N.  Sinha  in  the  hands  of  his  heirs  and  legal representatives were  liable for the claims made in the said misfeasance proceedings. 216 We shall  now revert  to Tendolkar’s case (supra). That case arose  out of certain misfeasance proceedings commenced by the  Official Liquidator in the winding up proceedings of a banking  company against  the managing director, the other directors and  some of  the employees of the company. Two of the directors  died while  the proceedings were pending. The Company  Judge   dismissed  the   proceedings  against   the employees as  time barred  and held  that the  heirs of  the deceased directors could not be proceeded against. He was of the view  that the  misfeasance proceedings being of special nature  involving  an  enquiry  into  the  alleged  wrongful conduct of directors personally,

the liability of a director for  such   wrong  doing  was  personal  in  character  and, therefore, vanished  with the  death of the director. But in respect of  the managing  director and  those directors  who were alive  when he  gave  his  decision,  he  gave  certain directions regarding  their  individual  liability.  Against that decision  five appeals  were filed  before the Division Bench of  the High  Court. In those appeals, the correctness of the decision of the Company Judge to exempt the heirs and legal representatives  of the two deceased directors was not questioned by  any party.  In those  appeals,  the  Division Bench reduced  the total  liability of the directors and the individual liability  of the  managing  director  though  it placed a  larger share  of the burden of contribution on the managing  director.  Against  that  judgment,  the  Official Liquidator  appealed   to  this  Court  in  respect  of  the liability of  the managing director and two other directors. One of the two directors namely, P.A. Tendolkar died pending the grant  of his  own application  for a  certificate under Article 133  of the  Constitution. His  heirs got themselves impleaded and  contended that  the proceedings  against them could not  be continued  and also that the claim against the deceased director  was untenable on merits. Dealing with the liability of  the heirs and legal representatives of persons against whom  action was  taken under section 542 and 543 of the Act, this Court observed at page 380 thus: “The maxim  actio personalis    moritur cum persons, as pointed in Winfield’s Law of Tort (Eighth Edn. 603- 605), was an invention  of English Common Lawyers.

It seemed to  have resulted from the strong quasi-criminal character of  the action  for  trespass.  Just  like  a prosecution for  a criminal  offence,  the action  for trespass, which  was “the  parent of much of our modern law of tort”, was 217 held, by  applying this  maxim,  to  be  incapable  of surviving the  death of  the wrongdoer,  and,  in  some cases, even  of the  party injured. The maxim, with its extensions, was  criticised by Winfield and found to be “pregnant with  a good deal more mischief than was ever born of  it”. Whatever view one may take of the justice of the  principle, it  was clear  that it  would not be applicable to  actions based  on contract  or  where  a tortfeasor’s estate  had benefitted  from a wrong done. Its application  was generally  confined to actions for damages for defamation, seduction, inducing a spouse to remain apart from the other, and adultery. We see no reason to extend the maxim, as a general principle,       even   to  cases   involving  breaches   of fiduciary duties  or where the personal conduct of the deceased Director has been fully enquired into, and the only question  for determination,  on an appeal, is the extent  of  the  liability  incurred  by  the  deceased Director. Such  liability must  necessarily be confined to the  assets or estate left  by the  deceased in the hands of  the successors. In so far as an heir or legal representative has       an interest  in the  assets of  the deceased and  represents the estate, and the liquidator represents the  interests of  the Company, the heirs as well as  the liquidator  should, in  equity be  able to question  a   decision  which   affects  the  interests represented.

” At a  later stage in the same case, this Court made the following observations at pages 381-382: “It will  be seen  that, while  Section 335 of the Act of  1913, like  Section 543 of the Companies Act of 1956, to  which it corresponds. gives the power to the Court to  enquire into  the conduct  of  “any  past  or present Director”, yet, both Section 235 of the Act of 1913 and  Section 543  of the  Companies  Act  of  1956 confine the  power of  the Court  to  make       orders  for repayment or  restoration  of  money  or  property  or contribution to  the assets  of the Company against the individuals occupying  the capacities,  either  in the past or  present, mentioned  therein. This  power  does not, on  the language  of these  provisions, extend  to making compulsive orders against heirs of delinquents. 218 As the  power to  take  these  special  proceedings  is discretionary and   does  not  exhaust  other  remedies, although, the  Court may,   as a  matter of  justice and equity, drop  proceedings against delinquent Directors, Managers, or  Officers who are no longer alive, leaving the complainant  to his ordinary remedy by a civil suit against the  assets of  the  deceased,  yet,  where  no injustice may be caused by continuing these proceedings against past  Director, even  though he  be  dead, the proceedings could continue after giving persons who may be interested opportunities to be heard. But, even such proceedings can  only result  in a declaration of  the liability, of a deceased director, because the language of Section       235 of the Act of 1913, as already noticed, does not authorise passing of orders to compel heirs or legal representatives  to do  anything. Such compulsive proceedings as  may become necessary against those upon whom devolve  the assets  or the  estate of  a deceased delinquent Director,  who may  have become liable could only lie outside Section 235 of the Act of 1913.” Again in  the same case, it was observed by this Court at page 383 thus: “It may  be possible    (though we  need express  no final opinion  on the  matter) where a proceeding under Section 543 is covered also by the terms of Section 542 of the  Companies Act  of 1956,  to give  directions to persons other  than those   whose  conduct  is  enquired into,  including  directions  to   heirs   and   legal representatives, for   the   purpose   of   enforcing declaration. But, we think that the power under Section 235 of  the Act  of 1913,

which corresponds to Section 543 of  the Act of 1956, would not extend beyond making a declaration  against a deceased Director provided he, in his  life time,       or his heirs, after his death, have had due  opportunity of  putting forward  the  case  on behalf of  the allegedly delinquent Director. If either a Liquidator  or the  heir of  a  delinquent  Director, against whom  a declaration of liability has been made, can question determination of liability of the deceased delinquent, who  was alive       at the time of the Judgment against him,  it is  obvious that  the Appellate  Court could give  a declaration either reducing or increasing the liability even though it may not be able to enforce it by an order under Section 235 of the Act. If 219 the declaration  can be  questioned by an appeal, as we think that       it can, the liability can be not only wiped off or  reduced but  also increased  on an appeal heard after the death of a Director held liable. Applying the    principles laid  down above  to  the case before  us, we  find that  Tendolkar       had  a  full opportunity   of         defending   himself   against   the misfeasance proceedings  taken by       the  liquidator.  He also exercised his right of appeal against the order of the Company  Judge.  The  Division  Bench,  as  already observed, reduced       his liability.  His heirs were heard on merits       in the appeal before us. Any order passed by us could  only affect  the assets       or the estate of the deceased Tendolkar. But, as already indicated by us, we cannot, in these proceedings, pass an order against the heirs to Tendolkar so as to compel them to do anything. The  OFFICIAL   Liquidator       or  the  co-Directors  may, however, take any other proceeding which may be open to them under       the law so as to obtain the contribution of Tendolkar.

” Finally  this  Court  gave inter  alia  the  following direction occurring at pages 400-401: “(6) The  case is  remanded to the learned Company Judge for       passing such  orders  against  the  Managing Director Samant  and Director  Ajgaonkar, under Section 235  of   the  Act       of  1913,  as  may  be  needed  for discharging the  liabilities determined  above, but  no such orders  will be passed against the heirs and legal representatives of       deceased  Director  P.A.  Tendolkar under Section  235 of  the Act  of 1913, although their liabilities are  declared. The  Official Liquidator and L.S. Ajgaonkar  are, however,  left free  to seek       such other   remedies,  if   necessary,   by   appropriate proceedings under the law, against the estate or assets of P.A. Tendolkar. as may be open to them.” Justice Masud  of the Calcutta High Court who heard the case under  appeal understood  the above  decision  of  this Court thus: “The observation  of the  Supreme  Court  give  an indication that in a proper case the declaration of the 220 liability of  a delinquent  Director, who  subsequently dies,  is       possible  but  no  order  for  repayment  or restoring the  money or property lying in possession of the heirs can be  passed against  the heirs  or  legal representatives of such Directors.” Justice Ghose,  the other  Judge of  the Division Bench observed: “In official    Liquidator Supreme Bank Ltd. v. P.R. Tendolkar (Dead)  by L. Rs. and Others, respondents AIR 1973 S.C.  1104 the  Supreme Court  held that  where  a delinquent Director  was examined in a proceeding under Section 235  of the  Indian Companies  Act,  1913,and thereafter dies  before an order for  payment was made against him, in such proceeding the order that could be passed in       the said  misfeasance proceeding  as against the deceased  Director was  merely a  declaration as to his liability  to the  Company in liquidation. No order for payment  for the  discharge of such liability could be made.  The Supreme  Court  observed  that  before  a declaration as  to liability could be made against such Director, his heirs and personal representatives should be heard.   The  Supreme   Court,  however,  expressly negatived the  contention that  where a  Director  died after he  had  been  examined  in  a  proceeding  under Section 235  of the  repealed Act,  his heirs  or legal representatives or  his estate could be directed to pay up the loss occasioned to the Company on account of the misfeasance of such Director in such proceeding. It is, therefore, apparent   from  a  perusal  of  the  above mentioned authorities that Section 543 has not made any departures from  the provision contained in Section 235 of the  repealed Act  and in  the premises it has to be held  that the  cause  of  action  in  a  misfeasance proceeding initiated  under Section 235 of the repealed Act of  Section 543  of the Companies Act, 1956 does at all survive  against the heirs or legal representatives of a  delinquent Director  or officer etc.

of a company and such  heirs  or  legal representatives  cannot  be substituted in  the place and instead  of  a  deceased delinquent Director, Officer etc.” The effect of the decision of this Court in Tendolkar’s case (supra)  came up  for consideration in Aleykutty Varkey Tharakan’s 221 case (supra)  before the Kerala High Court. In that case the legal representatives  of two  persons against  whom  orders under Section  543 of  the Act  had been  passed by the High Court and  against which  petitions for leave to appeal were pending in  this Court  after the  death  of  the  said  two persons questioned  before the Kerala High Court an order of appointment of  a receiver  in execution of the order passed under Section  543 of  the Act. The contention urged by them was that  in execution  of an order under section 543 of the Act, no  order such  as the one under appeal could be passed against the  legal representatives  of the persons proceeded against. In that case the Kerala High Court dealing with the decision in Tendolkar’s case (supra) observed thus; “Considerable argument  turned on  the  scope    and effect of the above decision of the Supreme Court, and, in  particular, of  the observations in the paragraphs that we  have quoted  above. As  we understand the said judgment, we  do not  think that  the decision  or  the observations made  lend countenance  to the proposition sought to  be advanced  before us  that an  order under Section 543  of the  Companies Act,  passed  against  a director or  directors cannot  be executed in the modes known to  and sanctioned  by, the Civil Procedure Code, against  his   estate  in   the  hands   of  his  legal representatives. The  proceedings       before  the  Supreme Court, it   should be remembered, arose by way of appeal against the proceedings started under s. 543 of the Act itself, and, therefore, were a continuation of the said proceedings. No  question       directly  arose  before  the Supreme Court  as to  whether  an order  passed  under section 543  could, or  could not,       be executed against the estate of the deceased director in the hands of his legal  representatives.


In  paragraph  22   of  the judgement, the Supreme Court observed that the possible liabilities of  the legal representatives of two of the directors on  whom their assets and properties may have developed, do  not call  for a decision from the court. But the  general question       of liability  of  heirs  and legal  representatives   of  delinquent  directors  had arisen for  consideration. It was on this question that the  Supreme   Court  pronounced.        We  are  unable  to understand  the   decision   as   authority   for   the proposition which counsel for the appellant put forward before us.” 222 The above view of the Kerala High Court was approved by the Punjab  and Haryana  High Court  in  Shiwalik  Transport Co’s. case  (supra). Chinnappa  Reddy, J.  speaking for  the High Court of Punjab and Haryana observed: “Section 543    provides for  the assessment  of the loss or  damage suffered  by the  company consequent on acts of  misfeasance or  breach of  trust committed  by directors and  officers of the  company  and  for  the making of       a compulsive repayment against the director. Though the  object of  assessing the damages is for the purpose  of  recompensing the  loss  suffered  by  the company and,  therefore, the  cause  must  survive  the death of  the director  to that extent, the language of the provision  insofar as  it relates to the compulsive order is  so peremptorily directed against the director that  it must  be  held  that  the  compulsive  order contemplated by  the section cannot be made against the legal representatives.  Thus, while  the loss or damage may be  determined and declared even after the death of the delinquent  director, no  compulsive order  may  be made against the legal representatives. The proceedings under section  543 may  be continued  against the legal representatives for  the  purpose of  determining  and declaring the loss or damage caused to the company, but not to  make an order for recovery against them. We are relieved of  the necessity of considering the matter at greater length  because of       a recent  decision  of  the Supreme Court in Official Liquidator, Supreme Bank Ltd. v. P.A.  Tendolkar [1973]  43 Comp Cas 382. The Supreme Court, there,  considered the  broad question whether a proceeding under  Section 235  of the  Indian Companies Act of  1913 which  corresponded to  Section 543 of the 1956 Act,       survived the  death of the director, though, on the  facts of  the case,  the  question really  was whether the  legal representatives  could  continue  an appeal filed  by a       deceased director  against an order made under Section 235.

Having given  our anxious consideration to the question before us, we are of the view that the Kerala and Punjab and Haryana High Courts have applied the decision in Tendolkar’s case (supra)  correctly and  that the  two learned Judges of the Calcutta  High Court  who delivered  the judgment  under appeal erred  in its  application. If  this Court had really come to the conclusion that on the death of a 223 person against  whom proceedings  under Section 543 had been initiated such  proceedings could  not be  proceeded against his legal  representatives, the  final order  would not have been what  was actually  made therein. “The true doctrine is that whenever  you find  that the deceased person has by his wrong diverted  either  property  or  the  proceeds  of  the property belonging  to someone else into his own estate, you can then  have recourse  to that  estate through  his  legal representative when  he is  dead, to  recover it.” The legal representative, of  course, would  not be liable for any sum beyond the value of the estate of the deceased in his hands. The liability arising under the misfeasance proceedings is founded  on the  principle that  a person  who has caused loss to  the company  by an act amounting to breach of trust should make  good the  loss. Section 543 of the Act does not really create  any  new  liability.  It  only  provides  for summary remedy  for determining  the amount  payable by such 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 for compensating the  company in  respect of the loss occasioned by his  misfeasance. Whenever  there is a relationship based on contract,  quasi-contract, some fiduciary relation  or a failure to  perform a  duty, there  is no  abatement of  the liability on  the 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 Tendolkar’s case  (supra) this  Court did  not consider  the effect of  section 634  of the  Act which  made the relevant provisions of  the  Code  of  Civil  Procedure  relating  to execution of  decrees applicable  to orders  passed  by  the court under the Act.


At the  conclusion of the proceedings under section 543 a declaration  of the  liability is  made. Such  declaration partakes of  the character  of a decree in a suit. When once such declaration  is made  it can  be enforced under section 634 of  the Act and where the order made by one 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 such execution  proceedings the  provisions of section 50 of the Code  of Civil  Procedure 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 224 accordingly. Any  other construction  of the  provisions  of section 543  of the  Act would  make the  entire process  of determination  of   the  liability   of  persons   under  it meaningless. We are,  therefore, of  opinion that  the view taken by the Division  Bench of  the High  Court of  Calcutta in this case is  erroneous. We,  therefore, allow  this appeal,  set aside the  judgment of  the Division Bench of the High Court and restore  the order  of the  learned Company  Judge.  The misfeasance proceedings  shall now  be continued accordingly against the  heirs and  legal representatives  of  Dr.  S.N. Sinha since deceased. There shall be no order as to costs. P.B.R

Appeal allowed. 225

Leave a Comment