1985 (5) TMI 207 - HC - Companies Law

Summary

Issues:
- Whether a claim that became barred by time during the pendency of a winding-up petition can be a legitimate basis for winding-up proceedings.
- Whether a creditor can seek a winding-up order based on a company's deemed inability to pay a debt that is barred by time.

Analysis:
The judgment addresses multiple winding-up petitions filed by different creditors against companies, all raising a common question regarding the legitimacy of using time-barred claims as a basis for winding-up proceedings. The court clarifies the distinction between the right and the remedy to enforce a claim, emphasizing that even if a claim becomes time-barred, the claimant remains a creditor of the company and can seek a winding-up order if there is a legitimate basis for it. The court highlights that a claim becoming time-barred extinguishes the remedy but not the right of the creditor.

The court rules that a creditor cannot seek a winding-up order solely based on a debt that is barred by time, as the debt must be both "due" and recoverable to be a valid basis for the petition. The court rejects the argument that the claims were within time when the petitions were filed, emphasizing that the company's liability to be wound up is determined when the winding-up order is made, regardless of the timing of the petition filing. The court also dismisses the application of the principle of "relation back" to winding-up petitions, stating that they are not equivalent to the filing of a suit under the Limitation Act.

Furthermore, the court denounces the misuse of winding-up petitions based on time-barred claims, labeling it as an abuse of the court's jurisdiction and a misuse of the Companies Act's provisions. The judgment criticizes the practice of using winding-up proceedings for claims of doubtful validity and highlights the importance of ensuring the proper use of legal remedies in corporate matters.

In conclusion, the court dismisses the winding-up petitions that relied on time-barred claims, emphasizing that such petitions are an abuse of the court's process and the Companies Act's provisions. The parties are directed to bear their respective costs, and the judgment serves as a caution against misusing winding-up proceedings for claims that are barred by time.