1984 (10) TMI 194 - HC - Companies Law

Winding up - Company when deemed unable to pay its debts, Debts of all descriptions to be admitted to proof

Summary

Issues Involved:
1. Whether the claim was barred by limitation.
2. The material date for computing the limitation period.
3. The jurisdiction and restrictions imposed by the District Judge.

Issue-wise Detailed Analysis:

1. Whether the claim was barred by limitation
The claimant sought Rs. 1,17,948.49, which was initially denied by the joint official liquidator as time-barred. The District Judge, however, ruled that the claim was not barred by limitation, relying on precedents from Jwala Prasad v. Jwala Bank Ltd. and S. Abdul Muthalibu v. K. M. Mohammed Abdul Khader. The District Judge interpreted that the limitation period should be computed from the date of the winding-up petition, which was within three years of the loan advance. The High Court, however, disagreed, stating the correct view in law is that the claim must be within time at the date of the winding-up order. The court cited Halsbury's Laws of England and other legal texts to conclude that a debt time-barred at the date of the winding-up order cannot be entertained.

2. The material date for computing the limitation period
The High Court clarified that the material date for computing the limitation is the date of the winding-up order, not the date of the application for winding up. The court referred to multiple decisions, including J. A. Dixit v. Official Liquidator and Chandbali Steamer Service Co. Ltd., In re, to support this view. It was emphasized that the statute of limitations is suspended from the date of the winding-up order, not the date of the petition. The court found the District Judge's reliance on Jwala Prasad's case to be a misinterpretation, as the correct interpretation is that the claim must be within time at the date of the winding-up order.

3. The jurisdiction and restrictions imposed by the District Judge
The District Judge had allowed the claim subject to the condition that the claimant would not be found guilty of misconduct in the company's affairs. The High Court found that since the claim was barred by limitation, the restrictions imposed by the District Judge were irrelevant. The cross-objection filed by the claimant, challenging these restrictions, was dismissed as it became moot once the claim was found to be time-barred.

Conclusion:
The High Court allowed the appeal, setting aside the judgment and decree of the District Judge dated September 8, 1977. The cross-objection was dismissed, and the parties were directed to bear their own costs. The court concluded that the claim was barred by time, and the material date for computing limitation is the date of the winding-up order, not the date of the petition.