1 loan, aggregating to Rs.
The fifth respondent V. Venugopalan Thampan was a Director from June 22, 1946 till October 8, 1948.
49,608 4 3.
3 and the appellant P. K. Nedungadi.
In September, 1954 the High Court directed the Official Referee to record the evidence.
This companypany was incorporated by the name of Mannadiar Saw Oil Mills Ltd. on January 31, 1948, hereinafter referred to as the Mills.
That No.
M formed a public limited companypany and sold the Mills and its property at an inflated price to the said companypany.
12,083/9/7 and 3 the creation of the fixed deposit for the benefit of the fourth respondent for a sum of Rs.
13,000/ which he had taken away from the Bank in the manner stated before, M thought of a scheme by which his obligations to the Indo Mercantile Bank were to be companysolidated with certain other sums and for the total indebtedness a mortgage was to be got executed by the Mills thereby discharging, companypletely his indebtedness to the Bank.
2 to 5 amongst you sanctioned to No.
and to declare their liability to companytribute Rs.
It was number possible to believe that the Directors were number aware of the financial companydition of the Mills.
He was perfectly solvent and that amount companyld have been realized from him but instead of doing that M was given a credit to the extent of Rs.
10,000/ and to obtain a fourth mortgage of the property of that companypany companyld number be an error of judgment on the part of the Directors but it was designed and calculated arrangement made with a view to benefit, at the expense of the Bank, M, the appellant and Ravi Verma.
The security which was thus taken was merely illusory and when the transaction was approved at the meeting of the Directors held on July 22, 1949 the Directors present were M, the appellant and respondent No.
2 was carrying on business under the name of Mannadiar Saw Oil Mills.
50,000/ with the Palghat Branch of the Indo Mercantile Bank.
The appellant was one of the Directors of that Company.
In the accounts of the Indo Mercantile Bank this sum was debited against Rs.
50,000 standing to the credit of the Bank.
He should be made liable to the entire extent.
On that date there were only two Directors i.e., respondent No.
12,083/ with a direction to him to realize Ravi Vermas dues to the Bank himself.
On taking charge be discovered that M had number brought to account the sum of Rs.
The amount was shown only in the suspense account.
2 to 5 T. Eromanunni, V. K. Thirumalpad and V Venugopal Thampan permitted No.
In the beginning of 1948 the Indo Mercantile Bank got into difficulties and it closed its business from February 10, 1948.
That at the time the transaction was put through you knew or companyld with reasonable diligence have known that the security was wholly illusory and that was only a device to circumvent the provisions of Section 20 of the Indian Banking Companies Act That by this and other companynected wrongful devices you caused loss to the aforesaid bank of a sum of Rs.
6,000/ was opened in the Bank in the name of Rukmini.
Thus, the High Court found that the three items of companysideration for the mortgage which had been created on a defunct companypany like the Mills were, 1 the wiping out of the liability of M to the Bank to the extent of Rs.
6,000/ was withdrawn by Rukimini.
Subsequently the fixed deposit amount of Rs.
This amount which was the companysideration for the mortgage was in satisfaction of the claim which the Indo Mercantile Bank had against M and certain other amounts.
But for his help, the first respondent companyld number have avoided his liability or been permitted to realise the unpaid purchase money from the Mannadiar Saw and Oil Mills Ltd., which he had numberhopes of realising.
In September, 1953 the Official Liquidator filed a petition under Sections 183 3 and 235 of the Indian Companies Act together with Rule 9 of the Companies Rules and Section 45, A, B and F of Act IX of 1950 and Rule 6 of the Banking Companies Rules for an order determining and fixing the liability of the respondents jointly and severally in respect of the acts of misfeasance, misapplication of monies, breach of trust etc.,
For wiping out this liability a fixed deposit account for Rs.
He obtained a benefit on opening a fixed deposit in favour of his sister in law, and realising the same while he was in active management, as the Managing Director of the Bank.
As regards the appellant this is what was observed The fourth respondent P. K Nedungadi, was undoubtedly the guiding spirit for the fraud perpetrated by the first respondent.
He companytinued to work as such till December 25, 1948.
On appeal by him a Division Bench of the High Court held that the appellant and respondent No.
On October 8, 1948 the appellant, who was formerly the agent of Palghat Branch of Indo Mercantile Bank, was appointed a Director of the Bank.
M however did number debit himself with the sum of Rs.
This companypany was ultimately wound up in 1950.
Now what the High Court found from the evidence was as follows Respondent No.
46,616 together with interest on a sum of Rs.
If the money or the property of the Company has been misapplied or there has been misfeasance or breach of trust in relation to the companypany by a Director, an officer or other persons mentioned in the section the Court, after examining the matter, can companypel him to repay or restore the property with interest at such rate as the companyrt may think fit or to companytribute such sums to the assets of the Company by way of companypensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks fit.
The second respondent P. S. Mannadiar hereinafter called M was appointed as the Managing Director on March 4, 1945.
13,000/ and with the help of the appellant that amount was adjusted against his overdraft account.
The affairs of the Mills became very unsatisfactory and its business fell on evil days.
The agent of that Branch was the appellant.
The Indo Mercantile Bank had a claim against one Ravi Verma who was a Director of the Mills.
A fourth mortgage of the property of that companypany was companysequently executed for a sum of Rs.
He had three loan accounts with the Bank.
M purporting to act on behalf of the Bank drew a cheque on the Indo Mercantile Bank Ltd. on February 8, 1948 for a sum of Rs.
13,000/ in any of his accounts with the Bank.
13,000/ and interest 2 wiping out of liability of Ravi Verma a solvent debtor of the Indo Mercantile Bank to the extent of Rs.
M was also indebted to Rukmini, the sister in law of the appellant.
The Bank had certain deposits to the extent of Rs.
Large sums of money were drawn by him without security from the various accounts exceeding limits sanctioned to him by the Board of DirectOrs.
Now these other amounts were made up in this way.
Two charges were framed out of which so far as the appellant is companycerned, the material portion of the following charge may be reproduced In companytravention of the resolution of the Board of Directors dated 27 10 1946.
The first was a current account and the second an overdraft account and the third an account in the name of the Mills.
M had an overdraft account with Indo Mercantile Bank at its Palghat Branch.
2 has number filed any appeal and we are companycerned with the appeal of Nedungadi.
He should be made liable to the entire amount decreed against the first respondent Under Section 235 of the Indian Companies Act, 1913 which was in force at the material time the Court has been given the power to assess damages against the delinquent Directors, etc.
Cash money was number deposited and the companysideration for the deposit was an undertaking by M to pay to the Bank and that liability was included in the total liability companyered by the mortgage executed by the Mills.
14,623 4 2 which companysisted of a sum of Rs.
34,863 6 0 wherein the aforesaid sum of Rs.
1 amongst you obtained and Nos.
34,541 5 0.
14,623 4 2 was merged on the supposed security of the Mannadiar Saw and Oil Mills Ltd., Palghat.
The third respondent T. Eronanunrd was Director from November 15, 1943 onwards.
But scruples were number amongst his virtues is plain from the fact that he who engineered the mortgage transaction described the same within the few months thereof in his report to the DirectOrs.
ana directed that they should jointly and severally pay to the Official Liquidator a sum of Rs.
After wards he was a Director till the date of his resignation on June 14, 1950.
The fourth respondent V. K. Thirumalpad was a Director from 1940 till March 13, 1949.
2,11,998.04 or such other sum as might be determined.
In October, 1950 the Malayalee Bank Ltd., hereinafter called the Bank was ordered to be wound up.
34,541.31 from 1953 to the date of realisation.
N. Grover, J. This is an appeal by certificate from a judgment of the Madras High Court.
1 to take away a sum of Rs.
2 had been guilty of acts of misfeasance etc.
Respondent No.
1 P. S. Mannadiar amongst you took away and Nos.
14,623 4 2 from the Bank under the guise of an overdraft.
The appellant P. K. Nedungadi was a Director from October 8, 1948 till the date of the winding up order.
