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Issues Involved:
1. Are the claim applications barred by time? 2. Is the first respondent entitled to the protection of the Karnataka Debt Relief (KDR) Act? 3. If respondents are liable to pay the claim, in what sums are they due? Issue-Wise Detailed Analysis: 1. Are the claim applications barred by time? The respondents contended that the claims were filed beyond three years from the dates of the promissory notes, thus barred by time. However, the court rejected this argument, referencing the case of *Unico Trading & Chit Funds India (P.) Ltd. v. S.H. Lohati*, where it was held that an application under section 446(2)(b) of the Companies Act for recovering amounts due to a company in liquidation is not a suit and thus not covered by the relevant entry in the Limitation Act governing the filing of suits in civil courts. The proper article to be applied is the residuary article 137 of the Limitation Act, giving the official liquidator four years from the date of the winding-up order to present an application. Therefore, the plea of the respondents was rejected. 2. Is the first respondent entitled to the protection of the KDR Act? The first respondent claimed protection under the KDR Act, stating he had no income or properties and was dependent on his brother. According to section 3 of the KDR Act, every debt incurred by a debtor is wiped out from the commencement date of the Act, barring civil courts from entertaining any suit against the debtor. The court noted that the official liquidator did not discredit the first respondent's statement. However, the court found two difficulties in granting this protection: a. A company court is not a civil court as defined in the CPC, and the bar under section 3(b) of the KDR Act applies to civil courts, not to company courts. b. Section 10(e) of the KDR Act excludes liabilities arising under any chit with registered bye-laws. The court interpreted "bye-laws" to include the memorandum and articles of association of a company, thus excluding the chit transactions from the KDR Act's purview. Additionally, the court referenced judgments from the Andhra Pradesh and Kerala High Courts, which held that a chit fund transaction does not create a debtor-creditor relationship. Therefore, the plea for protection under the KDR Act was rejected. 3. If respondents are liable to pay the claim, in what sums are they due? The respondents admitted the transactions but denied liability for interest and other charges. The court found that claims for bank charges, managing director's visit expenses, registered notice, lawyer notice, and certain interest charges were neither pleaded by the official liquidator nor proved, thus rejecting these claims amounting to Rs. 844.95 in C.A. No. 172 of 1980 and Rs. 450 in C.A. No. 44 of 1980. However, the respondents were liable to pay interest at the contracted rate of 18% per annum from the date of last default until the winding-up order and 6% per annum thereafter until realization. The court directed fresh calculation of interest from May 21, 1975, till the winding-up order on January 6, 1978, and at 6% per annum from January 6, 1978, to April 5, 1980, for C.A. No. 172 of 1980. Similarly, in C.A. No. 44 of 1980, interest was to be calculated from the date of default until the winding-up order at 18% per annum and at 6% per annum thereafter. Conclusion: The respondents were held jointly and severally liable to pay the claims as recalculated, without any order as to costs. The applications were allowed accordingly.
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