• Usurpation of the funds of the company by the managing director

I have filed a petition before the Company Law Board, Chennai, giging fears that the Managing Director was siphing the funds and rend it in bankrupt.

The Company Law Board did not consider any urgent and immediate interim mesure to appoint an independant inspector ( one year back ).

Having received last days the financials of the company, the fear is confirmed. He has created a loss by increasing the expenses only.

I also suspect that he is deviating the business.

What  is the immediate and appropriate action against the Directors to stop them ?
Asked 2 years ago in Business Law from France
The company itself can bring a claim against the erring director if it can show that it has suffered some loss. If the director has made some personal profit, they can be required to surrender the gain to the company.
Also  the company may  also seek:
an injunction to stop the director from carrying out or continuing with the breach;
damages by way of compensation where the director has been negligent;
restoration of the company’s property;
the rescinding of a contract in which the director had an undisclosed interest.

Claims by a company are often retrospective, brought by members of the existing board against their predecessors.Errant directors can also face claims against them when a company is sold. The new owners may appoint new directors and, if things go wrong, they may cast around for past breaches of duty and the opportunity to hold the old directors to account.
A director owes their duties direct to the company, and only the company can complain of any breach. Shareholders have no right to claim against a director for any loss they believe they may have suffered as a result of breach of duty. However much their shares have dropped in price, they cannot recover that loss of value from the directors they hold responsible.
T Kalaiselvan
Advocate, Vellore
35575 Answers
385 Consultations

5.0 on 5.0

1)you have not mentioned the nature of petition filed by you ,  reliefs  claimed by you and the contents of orders passed by CLB 

2)please clarify whether  the accounts of the company  have been audited by the auditors . 

3)  you can make a misc application to the CLB that all the loss to the company on account of financial
irregularities  be ascertained by an appointment of an independent
auditor who may conduct the audit of the company with effect from
_____ until the date of the petition to find out the exact loss caused
to the Company on account of misdeeds committed by the MD

4)also seek orders that  the newly
appointed auditor shall also enquire into the loss, if any, caused to
the company by any of the Directors 
and such loss will be recovered from the party (ies) whosoever is
found responsible from his/their personal resources and the amount
so recovered will be paid to the company. 
Ajay Sethi
Advocate, Mumbai
45421 Answers
2668 Consultations

5.0 on 5.0

You can file fresh application for injunction restraining him for continuing his duty as MD.
It is permissible. If still no injunction is granted you can prefer an appeal.
Devajyoti Barman
Advocate, Kolkata
12800 Answers
165 Consultations

5.0 on 5.0

You should have immediately gone on a 10F appeal to the High Court against the CLBs rejection of prayer for reciever. The best option for you now will be to make a fresh application for appointment of receiver.

then pray for the buy out of one side by the other
Saptarshi Banerjee
Advocate, Kolkata
220 Answers
4 Consultations

4.5 on 5.0

1. Since the CLB refused to grant you any immediate relief you could immediately move the High Court against the decision of CLB.

2. Except to move the HC there is no other feasible remedy.
Ashish Davessar
Advocate, Jaipur
22977 Answers
634 Consultations

5.0 on 5.0

1. File a petition before the CLB for immediate hearing in to he matter and pass interim order as prayed for,

2. In fact you should have taken this step earlier,

3. If your prayer is rejected, you should file an appeal before the High Court challenging the order passed by the CLB and praying for relief.
Krishna Kishore Ganguly
Advocate, Kolkata
18406 Answers
447 Consultations

5.0 on 5.0

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