Judgement

JAGANMOHAN REDDY, J.:- This appeal is by certificate against the judgment of the High Court of Bombay varying the judgment and decree passed against respondents 1 to 4 by the District Judge of Nagpur on an application under Section 235 of the Indian Companies Act 7 of 1913 - hereinafter called the Act .

2. It appears that in or about April 1949 the Industrial & Agricultural Engineering Company (C.P.) Ltd. - hereinafter referred to as the Company was formed under the Act with its registered office situated at Nagpur. From the date of the Company s incorporation till August 27, 1952 one Shantilal Nemchand Shah respondent 5 was the Managing Director, while responents 1 to 4 were the Directors of the Company. On August 27, 1952, respondent 5 resigned as Managing Director and in his place two Directors C.V.Krishnamurthi respondent 2 and Mr. Ganpatram responent 3 were appointed Directors. These two new Directors were the employees and Directors of a concern known as Industrial & Agricultural Engineering Company (Bombay) Ltd. - hereinafter called the Bombay Company . Respondent 4 T. K. Shamu is the cousin of respondent 1 Raghawa Desikachar. There was also a partnership firm consisting of respondent 1 and some others. The office of this partnership was located in the office of the Bombay Company. After August 27, 1952, responent 5 having resigned the office of Managing Director was only a shareholder and it transpired that as the Company was not making profits, the Directors called a meeting of the shareholders of the Company on July 29, 1954, in order to obtain a Special Resolution for voluntary liquidation of the Company. Even before this meeting took place, respondent 5 as shareholder of the Company filed an application on July 26, 1954 in the District Court at Nagpur against the Company, respondnets 1 to 4 and other parties praying for an order for compulsory winding up of the Company. The District Judge passed an order on July 13, 1955 directing compulsory winding up of the Company and appointed one K. S. Misra as the Official Liquidator of the said Company. The Official Liquidator Misra made a report to the District Court on April 28, 1956 asking the Court to pass an order for the public examination of respondents 1 to 4 - the Directors of the Company. The District Judge passed the order prayed for under Section 196 of the Act on July 7, 1956. Pursuant to the said order respondents 1 to 4 were examined by the Official Liquidator, and cross-examined by other parties. The Official Liquidator also asked for the examination of respondent 5 who however was directed by the District Judge to be present in the Court. But since the District Judge was not in a position to know why and for what purpose respondent 5 was to be examined he directed the Official Liquidator or Mr. Mani to make an application for that purpose. On June 29, 1957 the Official Liquidator stated that he did not want to examine respondent 5. Again on July 10, 1957 the Official Liquidator requested the Court to examine responent 5 and the learned Judge passed an order on the same day directing examination of respondent 5 at 3 P.M. on that day. On July 11, 1957, the Official Liquidator made an application that as the four Directors respondents 1 to 4 had illegally withheld or retained certain amounts specified therein they became liable to refund or repay the amounts with costs and with such interst as the Court deems fit. The items which were said to be withheld were as follows:

(1) Commission in respect of sales of General Motors pumping sets worth about Rs.5 lakhs at 5 per cent to Bombay. ...... Rs. 20,000-0-0

(2) Three per cent commission on General Motors supplied, transaction worth Rs.12 lakhs. ...... Rs. 36,000-0-0

(3) Commission due on other articles supplied to Model Mills and Power House etc. ...... Rs. 30,000-0-0

(4) For stock, furniture, motor car etc. purchased by the Bombay Company at a very low price. The amount mentioned being the difference b