Starting point of limitation for filing misfeasance application.

VENKATARAMAN J.

These three appeals arise out of a misfeasance application (Appln. no. 420 of 1952) filed by the joint Official Liquidators of the Nurani Union Bank Ltd., Palghat (in liquidation ) under section 235 of the Indian Companies Act, 1913 (Act VII of 1913) , seeking to make the sevenrespondents in that application pay a sum of Rs. 9, 19, 884-5-0. The sevenpersons who were impleaded as respondents in the application were directorsof the company. The first respondents in the application were directors ofthe company. The first respondent in that application, N.R. Lakshmana Iyerwas the managing director and the seventh respondent, K.N. Ramalinga Iyerwas the secretary. The application was tried by Ramaswami J. who held thatthe misfeasance had been proved. Respondents Nos. 3 and 4 in thatapplication had died before the decision, and in the view that section 235 ofthe Indian Companies Act was a summary procedure available only against thedirectors themselves and not their legal representatives, no order forcompensation was made in respect of those two respondents. The order forcompensation for the sum of Rs. 9, 19, 884-5-0 was passed against the remainingrespondents Nos. 1, 2, 5, 6, and 7. Of them the fifth respondent in theapplication, K.N. Srinivasa Iyer, has filed O.S.A. No 2 of 1961. The sixthrespondent in the application, M.P. ananthasubramania Iyer, has filed O.S.ANo. 4 of 1961 and the managing director, N.R. Lakshmana Iyer, has filedO.S.A. No, 22 of 1962

The facts and the prior history have been set out in sufficient detail in thejudgment under appeal and, hence, it is sufficient to recapitulate them herebriefly. The Nureani Union Bank Ltd. was started in 1929. It was, so tosay, a village institution serving the residents of the small villageNurani, in Palghat. The residents of the village were mostly Brahmins andmost of them were closely inter-related. The directors themselves wereclosely inter-related. In spite of resolutions which had been passed thatadvances should be made only to solvent persons and on adequate security andwith proper safeguards and also only with the sanction of the board ofdirectors in cases where the amount of the loans exceeded a particular sumadvances were made in contravetion of the resolutions. The application ofthe official liquidators shows that the bulk of the advances was shared bySri N.R.Ramaswami Iyer, was the managing director. Sri Ramalinga Iyer was thesecretary. The unauthorised advances were because the other directorsabdicated their duty of exercising even the minimum amount of supervisionexpected of them, particularly in view of the resolutions which they hadpassed. Indeed, they themselves took out advances in excess of thesanctioned amounts and evidently for that reason they were not prepared toexercise any supervision over the acts of the managing directors and thesecretary. Indeed according to the finding of the learned judge they theyall conspired together to loot the money of the bank. The result was thatthe bank crashed. On October 15, 1947, a notice was put up stating that allpayments were suspended

On December 9, 1947, a creditor filed an application, O.P.No. 371 of 1947for the winding up of the company. On December 16, 1947, two advocates [SriP.G.Krishna Iyer and C.S.Vidyasankar] were appointed provisional liquidatorsLater in Application No. 194 of 1948, a scheme of composition was proposedand sanctioned according to which the directors undertook to pay 12 annas inthe rupee to the creditors. Actually only 8 annas was paid. Theapplication, O.P. No. 371 of 1947, was revived and the winding up was orderedon November 1, 1949, and the official liquidators were appointed. The publicexamination of the directors took place in 1950, and on February 2, 1952, theofficial liquidators filed Application No. 420 of 1952, for misfeasance undersection 235 of the Indian Companies Act

Fifteen detailed charges were framed. Of them the more important charges are1 to 6 involving ne