1. This application has been filed under Section 543(1) of the Companies Act, 1956 read with Rule 260 of the Company (Court) Rules, 1959 seeking for the following reliefs:-

"a. summon the respondents 1 to 4 herein for the purpose of examination with regard to the matter specified therein.

b. direct the Ex-Directors to make good an amount of Rs.1,62,470/- jointly or severally as described in para 8(i) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable court may fix with effect from the date of winding up.

c. direct the ex-directors to make good an amount of Rs.2100/- jointly or severally as described in para 8(ii) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable court may fix with effect from the date of winding up.

d. direct the ex-directors to make good an amount of Rs.34,075/- jointly or severally as described in para 8 (iii) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable court may fix with effect from the date of winding up.

e. direct the ex-directors to make Rs.2,93,754/- good jointly and severally as described in para-8(iv) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable Court may fix with effect from the date of winding up.

f. direct the ex-directors to make Rs.6,055/- good jointly and severally as described in para- 8(v) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable Court may fix with effect from the date of winding up.

g. to order that the respondents do pay the costs of and incidental to this application.

h. to pass such other order or orders as this Honourable Court may deem fit and proper in the circumstances of the case."

2. The case that is made out in the application is that the Directors have committed lapses in the course of conduct of affairs of the Company and taking note of certain discrepancies as have come out from the Balance Sheet, the Points of Claim as detailed in para-8 of the application has been putforth in support of the prayers sought for.

3. It is asserted that the total misfeasance claim amounts to Rs.4,98,454/- alongwith interest @ 18% p.a.

4. The respondent No.1 has filed the statement of objections on 09.08.2007. The first respondent has denied the averments while contending that as regards to the claim of mismanagement with respect to the assets amounting to Rs.1,62,470/- as shown in the Balance Sheet, it is pointed out that the assets were not in good condition and the local creditors who had dues had taken over these items which was even prior to the filing of Company Petition No.90/2000.

5. As regards the claim of Rs.2,100/-, it is pointed out that the amount of Rs.2,100/- was kept as Fixed Deposit in the form of National Savings Certificate (NSC) in the Commercial Tax Department which could be claimed.

6. As regards the assertion that the inventories were valued at Rs.34,075/-, though the same was not handed over to the Official Liquidator, it is submitted that the HDPE barrels were dispatched as containers for a consignment to M/s.Oceania Peninsula (P) Ltd., Bengaluru and the said consignee was not traceable despite best efforts.

7. As regards the loans and advances of Rs.2,93,754/-, it is pointed out that a sum of Rs.1,05,020/- had been paid as initial advance to KIADB for purchase of industrial land, which had been forfeited. A sum of Rs.57,700/- had been kept as security deposit in M/s.Manipal Finance Corporation Ltd. for purchase of computers, which has been adjusted by them for their dues. Further, a sum of Rs.1,20,000/- deposited with Polyene General was adjusted by them towards their dues.

8. It is further submitted that a sum of Rs.9,405/- has been adjusted by M/s.Manipal Finance Corporation Ltd. towards TDS and a sum of Rs.7,423/- payable by way of interest was also adjusted by M/s.Manipal Finance Corporation Ltd. towards their dues.

9. It is further submitted that a sum of Rs.1,206/-, the accrued interest on NSC could be retrieved.

10. It is submitted by the respondents that the economic distress of the Company was attributable to the business loss, as Gherkins crop had failed and many of the agriculturists who had received the money as advance from the Company failed to keep up their commitment.

11. It is further submitted that the respondents, who had given their personal guarantee had taken steps to sell the site of respondent No.1 and house of respondent No.2 in order to liquidate the bank debts by settlement with the Banks. Accordingly, it is submitted that the present application requires to be rejected.

12. The matter was subsequently relegated for enquiry. The Official Liquidator has lead in evidence as PW.1 and has reiterated the averments in the application. The respondents have adduced the evidence of Sri D.S.V. Dixit (DW.1), through whom various documents have been marked.

13. Exhibit-D7 produced by DW1 is the letter addressed to the Official Liquidator providing the various details. Exhibit-D9 refers to the aspect relating to NSC, while clarifying that the NSCs are with the Sales Tax Department, Mysore. The copies of NSCs are produced alongwith Exhibit-D9.

14. As regards the HDPE barrels, the letter of DW.1 by way of an explanation would reveal that DW.1 has made attempts to locate the address of M/s.Oceania Peninsula (P) Ltd., and it is pointed out that they could not obtain the address of the said Company, despite best efforts.

15. As regards the purchase of HDPE barrels, it is submitted that the security deposit was adjusted by the supplier.

16. It is further to be noticed that there is an Arbitration Award in the case of M/s.Manipal Finance Corporation Ltd., and a copy of the Arbitration Award would reveal that the respondent Company (M/s.Vaishal International Ltd.,) has suffered an arbitral award and are required to pay a sum of Rs.82,868.50 to the petitioner M/s.Manipal Finance Corporation Ltd., with future interest at 3% p.a. on Rs.59,972.15 from 01.01.2000 till the date of realisation within one year by equal monthly installments with single default clause.

17. Ex.D11 is the letter by M/s.Polyene General Industries Pvt. Ltd. to the petitioner whereby the respondent Company after reconciling the accounts had called upon the respondent Managing Director to send the Demand Draft for Rs.62,253/- to settle the accounts. It further comes out in the reconciliation of accounts that a sum of Rs.1,20,000/- was adjusted.

18. It must be noted that in the proceedings such as misfeasance, mere negligence on behalf of the Directors may not be sufficient, but something more needs to be established to reflect dishonesty on the part of the Directors.

19. It is further to be noticed that the nature of proceedings are such that it has a flavour of penal proceedings and any order passed would reflect as an indictment of the Directors which requires to be established by cogent evidence placed by the Official Liquidator.

20. It is also to be noticed that the assertions in the application pointing out the discrepancies would by itself not be sufficient unless the same are established through evidence. In the present case, there has been explanation by the respondents with respect to each of the item of query. The explanation that there has been business loss resulting in the eventual closure of the Company as made out by the respondents which has led to the present state- of-affairs, has been placed as an explanation by way of evidence.

21. After perusal of the entire material on record, what comes out is that there is no dishonest intention as such by the Directors. The respondents have putforth their explanation as regards each of the discrepancies pointed out by the Official Liquidator. The explanation, if taken note of would be sufficient to establish the defence and a positive direction to the respondents to make good the deficiencies as alleged and as asserted by the Official Liquidator is not called for.

C.A.No.305/2007 is accordingly rejected.