THE CHARGE OF MISAPPROPRIATION CANNOT BE ESTABLISHED WITH THE OPINION OF ANY PERSON HOWSOEVER EXPERT IN THE FIELD. THE ORIGINAL BOOKS OF ACCOUNTS OUGHT TO HAVE BEEN PRODUCED AND THE BANK STATEMENT WITH REGARD TO THE PAYMENT SHOULD HAVE BEEN PRODUCED WHEREVER NECESSARY.

Headnote:
STIFFEL UND SCHUH (INDIA) LIMITED - COMPANY - SECTIONS 3, 453(1), 543(1), 543(2) - THE COURT HELD THAT THE CHARGE OF MISAPPROPRIATION CANNOT BE ESTABLISHED WITH THE OPINION OF ANY PERSON HOWSOEVER EXPERT IN THE FIELD. THE ORIGINAL BOOKS OF ACCOUNTS OUGHT TO HAVE BEEN PRODUCED AND THE BANK STATEMENT WITH REGARD TO THE PAYMENT SHOULD HAVE BEEN PRODUCED WHEREVER NECESSARY.
Fact of the Case:

THE OFFICIAL LIQUIDATOR FILED AN APPLICATION UNDER SECTION 453(1) OF THE COMPANIES ACT, 1956, AGAINST THE APPELLANT, A FORMER DIRECTOR OF THE COMPANY, ALLEGING MISFEASANCE AND MISAPPROPRIATION OF FUNDS. THE OFFICIAL LIQUIDATOR APPOINTED AN AUDITOR TO INVESTIGATE THE AFFAIRS OF THE COMPANY, AND BASED ON THE AUDITOR'S REPORT, FILED THE APPLICATION SEEKING RECOVERY OF VARIOUS AMOUNTS FROM THE APPELLANT.
Finding of the Court:

THE COURT HELD THAT THE LEARNED TRIAL JUDGE ERRED IN RELYING SOLELY ON THE OPINION OF THE INVESTIGATING AUDITOR WITHOUT CONSIDERING THE EVIDENCE OF THE APPELLANT'S EXPERT WITNESS AND THE APPELLANT'S EXPLANATION IN HIS AFFIDAVITS. THE COURT ALSO HELD THAT THE OFFICIAL LIQUIDATOR FAILED TO PRODUCE THE ORIGINAL BOOKS OF ACCOUNTS AND BANK STATEMENTS TO SUPPORT THE ALLEGATIONS OF MISAPPROPRIATION.
Issues: 1. WHETHER THE LEARNED TRIAL JUDGE ERRED IN RELYING SOLELY ON THE OPINION OF THE INVESTIGATING AUDITOR WITHOUT CONSIDERING THE EVIDENCE OF THE APPELLANT'S EXPERT WITNESS AND THE APPELLANT'S EXPLANATION IN HIS AFFIDAVITS. 2. WHETHER THE OFFICIAL LIQUIDATOR FAILED TO PRODUCE THE ORIGINAL BOOKS OF ACCOUNTS AND BANK STATEMENTS TO SUPPORT THE ALLEGATIONS OF MISAPPROPRIATION. 3. WHETHER THE APPLICATION WAS BARRED BY LIMITATION UNDER SECTION 543(2) OF THE COMPANIES ACT, 1956.
Ratio Decidendi: 1. THE CHARGE OF MISAPPROPRIATION CANNOT BE ESTABLISHED WITH THE OPINION OF ANY PERSON HOWSOEVER EXPERT IN THE FIELD. 2. THE ORIGINAL BOOKS OF ACCOUNTS OUGHT TO HAVE BEEN PRODUCED AND THE BANK STATEMENT WITH REGARD TO THE PAYMENT SHOULD HAVE BEEN PRODUCED WHEREVER NECESSARY. 3. THE APPLICATION UNDER SECTION 543(1) OF THE COMPANIES ACT HAS TO BE MADE WITHIN A PERIOD AS MENTIONED IN SUB-SECTION (2) OF THE SAID ACT, WHICH IS FIVE YEARS FROM THE DATE OF THE ORDER OF 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.
Final Decision: THE COURT SET ASIDE THE JUDGMENT AND ORDER OF THE LEARNED TRIAL JUDGE AND REMANDED THE MATTER WITH A REQUEST TO REHEAR THE CASE, CALLING FOR LEGALLY ACCEPTABLE EVIDENCE AND CONSIDERING THE POINT OF LIMITATION.

JUDGMENT

K.J. Sengupta, J.:-

1. The above appeal has been filed by the lone appellant against the judgment and order dated 20th December, 2007 passed on application made by the Official Liquidator making a claim under Section 453(1) of the Companies Act 1956. By the impugned judgment and order the appellant has been held to be guilty of committing misfeasance as having occasioned loss to the company by willful act of misappropriation. Therefore by the impugned judgment and order the direction was given on the Official Liquidator to recover the sum of Rs.59,70,423/-, Rs.60,16,012/-, Rs.2,99,30,589/- and Rs.37 lakh from the first respondent with interest at the rate of 10 per cent per annum from the date of the order, and also award cost of the proceedings in favour of the Official Liquidator assessed as 3000G.M. The company namely Stiffel Und Schuh (India) Limited was directed to be wound up by the order of the Court dated 15th July, 1999 and the Official Liquidator being the first respondent herein was appointed as Liquidator of the company. Thereafter the Official Liquidator approached this Court on or about 26th April 2002 for obtaining a direction to appoint an Auditor to investigate into the affairs of the company (in liquidation). Accordingly, in terms of the order of this Court an Auditor was appointed and one M/s. Sashi Agarwal was appointed as Auditor and subsequently the said investigating Auditor filed a report as to the affairs of the company. Thereafter based on the report of the said Investigating Auditor the Official Liquidator filed application on 26th August 2004 against appellant herein, one Gautam Mitra, 10, Mahendra Road, Calcutta-700025, Erich Gutmann, Brigitte Stockmann both residents of Austria, one Pramod Kumar Khaitan of 11/11A Mayfair Road, 5th Floor Block-Q Calcutta-700019, one Ranjit Kumar Banerjee of Salt Lake, one Dr. Nitish Kumar Sengupta, Rajendra Nath Sengupta both residents of New Delhi, Subrata Ghosh a resident of Chetla Road, Calcutta, Salil Kumar Gupta resident of Jodhpur Park, Calcutta, Tapas Sengupta resident of Kamal Gandhar, Sarat Ghosh Garden, Sri Purnendu Gupta a resident of New Road, Alipur, Calcutta and one Arindrajit Chowdhury. In the said application respondents and each of them are described to be persons having power of management and control of the said company at the time of winding up. They and each of them were charged with misapplication, misappropriation and/or retention of large fund of the company as such they had become liable and accountable for a sum of Rs.7,30,00,470/-. They were also charged with guilty of misfeasance and breach of trust with following particulars of charges:-

(a) The respondents and each of them had written off the stocks amounting to Rs.2,08,83,446/- for the period 1st April 1996 to 31st March 1997, whereas such adjustment in quantity had not been recorded in the stock register, therefore the Ex-Directors/Officers of the Company had misappropriated/retained a sum of Rs.2,08,83,446/-.

(b) The respondents and each of them for the period ending on 31st March 1997 on behalf of the company advanced a sum of Rs.59,70,423/- to India Laminating & Packaging Limited in which the Managing Director Samdev Dasgupta (appellant herein) was also a Director which was doubtful to be recovered and thereby the respondents have diverted and misappropriated the said amount as such the said respondents and each of them are guilty of misfeasance and breach of trust and are liable to restore the said sum of Rs.59,70,423/- to the till of the Company (in liquidation) together with interest at the rate of 24% per annum.

(c) The respondents and each of them have misappropriated a sum of Rs.2,99,30,589/- by debiting the same amount as prior period adjustment in the profit and loss account for the year ended 31st March 1997, whereas the corresponding journal entry shows that there was return of goods which was sold in 1994-95 although the sale was 100% export sale and the value of

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2011 Supreme(Cal) 1502

IN THE HIGH COURT OF CALCUTTA KALYAN JYOTI SENGUPTA AND ASIM KUMAR RAY, JJ.Samdev Dasgupta Vs. The Official Liquidator & ors. A.P.O. No. 34 of 2008, C.A. No. 418 of 2004, C.P. No. 477 of 1996Decided on : 13.12.2011

THE CHARGE OF MISAPPROPRIATION CANNOT BE ESTABLISHED WITH THE OPINION OF ANY PERSON HOWSOEVER EXPERT IN THE FIELD. THE ORIGINAL BOOKS OF ACCOUNTS OUGHT TO HAVE BEEN PRODUCED AND THE BANK STATEMENT WITH REGARD TO THE PAYMENT SHOULD HAVE BEEN PRODUCED WHEREVER NECESSARY.

IN THE HIGH COURT OF CALCUTTA
KALYAN JYOTI SENGUPTA AND ASIM KUMAR RAY, JJ.
Samdev Dasgupta
Vs.
The Official Liquidator & ors.
A.P.O. No. 34 of 2008, C.A. No. 418 of 2004, C.P. No. 477 of 1996
Decided on : 13.12.2011