One of the plant site location of PS Steel Ltd., is lying idle for some time and the company have no plan to use that site. Earlier on this site, the company was planning to set up a mini steel plant, but due to its non-

Answer 6(b) In J.K. Paliwal and Shri B.K. Paliwal v. Paliwal Steel Ltd. and Others , The Principal Bench of the Company Law Board had found that a property of the company had been sold without any authorization by the Board of Directors or shareholders to sell have not been complied with and in addition the consideration was also inadequate. Further, it was observed that the transaction was sham and the sale consideration was deposited in the bank and was withdrawn on the same day. On these facts, in the above case, the Company Law Board held that the respondents have breached their fiduciary duties as directors. The Company Law Board held that on the role of Directors, the law is well settled. In some respects, Directors resemble trustees. Equity prohibits a trustee from making any profit by his management, directly or indirectly. It is objectionable to use such power simply or solely for the benefit of directors or merely for an extraneous purpose like maintenance or acquisition of control over the affairs of the company. Directors are required to act on behalf of a company in a fiduciary capacity and their acts and deeds have to be exercised for the benefit of the company. The fiduciary capacity within which Directors have to act enjoins upon them a duty to act on behalf of a company with utmost good faith, utmost care and skill and due diligence and in the interest of the company they represent. They have duty to make full and honest disclosure to the shareholders regarding all important matters relating to the company. In this case without getting the approval of the shareholders as required under the provisions of the Companies Act, the directors sold the properties of the company and shared the proceeds among themselves. This act is ultra vires and they are bound to return the proceeds to the company failing which they can be penalised under the provisions of the Companies Act.