Judgment

GROVER, J.: - This is an appeal by certificate from a judgment of the Madras High Court.

2. In October, 1950 the Malayalee Bank Ltd., hereinafter called the "Bank" was ordered to be wound up. On that date there were only two Directors i. e., respondent No. 3 and the appellant P. K. Nedungadi. The second respondent P. S. Mannadiar hereinafter called "M" was appointed as the Managing Director on March 4, 1945. He continued to work as such till December 25, 1948. Afterwards he was a Director till the date of his resignation on June 14, 1950. The third respondent T. Eronanunni was Director from November 15, 1943 onwards. The fourth respondent V. K. Thirumalpad was a Director from 1940 till March 13, 1949. The appellant P. K. Nedungadi was a Director from October 8, 1948 till the date of the winding up order. The fifth respondent V. Venugopalan Thampan was a Director from June 22, 1946 till October 8, 1948.

3. In September, 1953 the Official Liquidator filed a petition under Sections 183 (3) and 235 of the Indian Companies Act together with Rule 9 of the Companies Rules and Sec. 45, A, B. and F of Act IX of 1950 and Rule 6 of the Banking Companies Rules for an order determining and fixing the liability of the respondents jointly and severally in respect of the acts of misfeasance, misapplication of monies, breach of trust etc., and to declare their liability to contribute Rs. 2,11,998.04 or such other sum as might be determined. In September, 1954 the High Court directed the Official Referee to record the evidence. Two charges were framed out of which so far as the appellant is concerned, the material portion of the following charge may be reproduced :

"In contravention of the resolution of the Board of Directors dated 27-10-1946. No. 1 (P. S. Mannadiar) amongst you took away and Nos. 2 to 5 (T. Eromanunni V. K. Thirumalpad and V Venugopal Thampan) permitted No. 1 to take away a sum of Rs. 14,623-4-2 from the Bank under the guise of an overdraft.

That No. 1 amongst you obtained and Nos. 2 to 5 amongst you sanctioned to No. 1 loan, aggregating to Rs. 34,863-6-0 (wherein the aforesaid sum of Rs. 14,623-4-2 was merged) on the supposed security of the Mannadiar Saw and Oil Mills Ltd., Palghat.That at the time the transaction was put through you knew or could with reasonable diligence have known that the security was wholly illusory and that was only a device to circumvent the provisions of Section 20 of the Indian Banking Companies Act.

That by this and other connected wrongful devices you caused loss to the aforesaid bank of a sum of Rs. 49,608-4-3".

A learned Single Judge took the view that all the Directors left everything in the hands of respondent No 2 and that was the reason why the transactions which had been brought about had taken place. According to the learned Judge any criminal prosecution in the circumstances disclosed would have failed and therefore he dismissed the application of the Official Liquidator. On appeal by him a Division Bench of the High Court held that the appellant and respondent No. 2 had been guilty of acts of misfeasance etc. and directed that they should jointly and severally pay to the Official Liquidator a sum of Rs. 46,616 together with interest on a sum of Rs. 34,541.31 from 1953 to the date of realisation. It is unnecessary to refer to the liability of the other respondents which was determined. Respondent No. 2 has not filed any appeal and we are concerned with the appeal of Nedungadi.

4. Now what the High Court found from the evidence was as follows : Respondent No. 2 was carrying on business under the name of Mannadiar Saw & Oil Mills. He had three loan accounts with the Bank The first was a current account and the second an overdraft account and the third an account in the name of the Mills. Large sums of money were drawn by him without security from the various accounts exceeding limits sanctioned to him by the Board of Directors. The affairs of the Mills became very unsatisfactory and its bu