ORDER : By this application, brought under Section 543 of the Companies Act read with Section 45-H of the Banking Companies Act, the Official Liquidator of the Palai Central Rank Ltd. seeks to recover about Rs. 250 lakhs from the ten respondents, former directors and officers of the banking company.

2. The company was incorporated in 1927; on the 5th of December 1960 it was ordered to be wound up on an application made by the Reserve Bank of India on the 8th August 1960 (on which very day a provisional liquidator was appointed) under Section 38(3)(b)(iii) of the Banking Companies Act; and it was on the 4th April 1963, that the liquidator instituted the present application. The company is an insolvent company. Its paid up capital amounts to nearly Rs. 25 lakhs; its outside liabilities to about Rs. 1007.50 lakhs; the realisations up to date to a little over Rs. 700 lakhs; future realisations are estimated at about Rs. 40 lakhs; and so, allowing for the expenses of the liquidation, the expected deficit, leaving out of account the share liability, is in the neighbourhood of Rs. 265 lakhs.

3. Respondents, 1, 2, 3, 4 and 7 were directors of the bank when the provisional liquidator took charge on the 8th August 1960. The 1st respondent was the managing director from the very beginning, i.e., from the 26th January 1927, till the 1st April 1960 when he ceased to be the managing director and continued as an ordinary director. The 2nd respondent was a director from the beginning till the end; and from 1937 to 1957 he was also functioning as the manager of the Madras Branch of the hank, as a paid manager till the 1st January 1955 and thereafter in

an honorary capacity. The 3rd respondent was a director from the 23rd December 1938, and the 4th respondent from the 14th January 1935, both till the end. The latter was also a salaried officer of the bank under the designation, Special Attorney, from 1933 to 1955. The 5th respondent was a director of the bank from the 30th March 1940 till the 12th August 1943, and again from the 16th July 1947 till the 29th December 1954. He was, in addition, a salaried officer of the bank from 1933 till the end - he was attached to the head office of the bank from 1949 till the end, from the 1st January 1956 onwards as office manager. The 6th respondent was a director of the bank from the 12th August 1943 till the 28th March 1956. He was also a salaried officer from the 18th August 1948 till the end. The 7th respondent was a director of the bank from the 5th February 1955 till the end while the 8th respondent was its auditor from the 8th January 1947 till the end. The 9th and 10th respondents were salaried officers of the bank, the former from the 22nd October 1937 till the 1st August 1958 and the latter from the 16th May 1949 till the end.

4. Respondents 2 and 4 are brothers and the former is the son-in-law of the 1st respondent. The 7th respondent is the 1st respondent's brother's son. Respondents 5, 6 and 10 are brothers. They are the first cousins of the 1st respondent, being the sons of the 1st respondent's father's brother.

5. The claim is brought under four heads A, B, C and P. Claim A which accounts for over Rs. 240 lakhs is in respect of bad and irrecoverable advances; Claim B which amounts to over Rs. 21.6 lakhs is in respect of taxes and dividends paid for the years 1936 to 1949 as income and profits not really earned but made to appear as earned by falsifying the balance sheets and profit and loss accounts, fictitious entries being made in the books for this purpose; Claim C amounting to nearly Rs. 25.5 lakhs is in respect of similar payments for the years 1950 to 1958, the only difference being that the false income and profits were made to appear by debiting interest, which there was no prospect of ever realising, on the bad and irrecoverable advances in Claim A, credit being taken in the profit and loss account; and claim D which is for Rs. 15,000 - is in respect of unauthorised appropriation of the

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