Individual acts of fraud need not be specified.

This application is taken out by the Official Liquidator, Madras High Court, the Official Liquidator of Manasuba & Company (P.), Limited under sections 455 and 478 of the Companies Act, 1956 for directing the public examination of the three directors, namely, C. V. Raman, T. V. Narayanaswami Aiyar and T. K. Balasubramaniam, and the Secretary of the Company, R. S. Rangarajan.

The company, Manasuba & Company (Private) Limited, was incorporated on 13th May, 1957, under the Companies Act, 1956 as a private limited company. It ceased to do business as from 21st May, 1961. It was ordered to be wound up. A preliminary report under section 455 of the Companies Act was filed on 17th December, 1962, by the Official Liquidator and was ordered by this Court on 25th January, 1963. The Official Liquidator filed a further report under section 455 (2) stating that fraud had been committed in the conduct of the business of the company and that a public examination of the persons mentioned above should be conducted.

The three persons C. V. Raman, T.V. Narayanaswami Aiyar and T. K. Balasubramaniam, and one T. N. Nagarajan, were the promoter-directors of the company. Nagarajan subsequently resigned his post as director. C. V. Raman was appointed Managing Director of the Company in charge of all business by a resolution of the company dated 24th September, 1957, and was paid a sum of Rs. 550 per month from 1st September, 1957, as salary for managing the company’s affairs. Narayanaswami Aiyar, who was another promoter-director of the company, was paid Rs. 325 per month as salary for advising the company in the matter of providing finances for various works, contracts etc. His salary was increased to Rs. 550 per month with effect from 1st June, 1958. He acted as Chairman at the meetings of the Board of Directors at all material times. Balasubramaniam was also a promoterdirector of the company, and by a resolution of the Board dated 6th October, 1958, he was being paid Rs. 500 per month with effect from 1st May, 1958, for looking after the agency work and canvassing for various agencies and for looking after the other interests of the Company. Rangarajan was appointed Secretary of the company by a resolution of the Board dated 13th May, 1957, and was authorised to carry on the day to day affairs of the company taking instructions from any of the directors.

The company entered into several contracts for construction of buildings and quarters as well as supply of building and road materials to the Neyveli Lignite Corporation and the Integral Coach Factory and supplies to the Madras Port Trust, etc. As the undertakings by the Company involved huge expenditure, it was provided in the Articles of Association that the Directors may raise or borrow monies. The Directors by resolutions permitted the Managing Director to do various acts and subsequently ratified those acts of the Managing Director. The company passed various resolutions for borrowing moneys from several banks like the Bank of Baroda, Pandyan Bank, Indian Bank, etc. In pursuance of those resolutions large amounts were borrowed.

Apart from those borrowings the company indulged in several transactions which are not permissible in law. The company purchased two cars and twenty-one lorries. The company had paid the full price only for a few of these vehicles. With regard to the other vehicles, the company would appear to have paid only small amounts by way of advance and the balance was paid by borrowing from certain financing firms and Multani money-lenders, by executing hypothecation deeds in favour of the Banks and hire purchase agreements in favour of the financing firms and the individual financiers.

The company also borrowed from banks by discounting bills for supply of materials to public concerns like Neyveli Lignite Corporation, the Integral Coach Factory, Madras Port Trust, etc. It was found that several of the documents connected with the borrowings from several banks appeared to be n