1992 (6) TMI 158 - HC - Companies Law

Winding up Exclusion of certain time in computing periods of limitation, Power of court to assess damages against delinquent, directors, etc.

Summary

Issues Involved:
1. Delay in filing Company Application No. 7 of 1989.
2. Applicability of Section 5 of the Limitation Act, 1963.
3. Exclusion of periods under Section 458A of the Companies Act, 1956.
4. Calculation of the period of limitation.

Detailed Analysis:

1. Delay in filing Company Application No. 7 of 1989:
The official liquidator filed Company Application No. 7 of 1989 on January 16, 1989, alleging misfeasance and breach of trust by the respondents. The application was delayed by 33 days, and the liquidator sought condonation of this delay under Section 5 of the Limitation Act, 1963. The respondents disputed the delay calculation, asserting that the delay was actually one year, ten months, and twenty-two days.

2. Applicability of Section 5 of the Limitation Act, 1963:
The court examined whether Section 5 of the Limitation Act could be invoked by the official liquidator. Section 29(2) of the Limitation Act was cited, which allows for the application of Sections 4 to 24 of the Limitation Act to special or local laws unless expressly excluded. The court found that the Companies Act, 1956, did not expressly exclude the application of Section 5, thus satisfying the requirements of Section 29(2). This view was supported by precedents from the Kerala High Court and the Gujarat High Court.

3. Exclusion of periods under Section 458A of the Companies Act, 1956:
The official liquidator argued for the exclusion of the period from the date of commencement of the winding-up to the date of the winding-up order, and an additional one year following the winding-up order, as per Section 458A. The respondents contested this, suggesting that only the period after the winding-up order should be excluded. The court referred to previous decisions, including Arkay Chit and Commercial Trading Co. P. Ltd., and Official Liquidator v. T.J. Swamy, which supported the exclusion of both periods. However, the court also considered a conflicting decision from the Kerala High Court, which questioned the exclusion of periods before the winding-up order.

4. Calculation of the period of limitation:
The court analyzed the language of Section 458A, emphasizing the exclusion of specific periods rather than an extension of time. The court concluded that the official liquidator's exclusion of one year, nine months, and twenty-five days was not entirely baseless, given the supporting decisions. Consequently, the court condoned the delay of one year, nine months, and twenty-five days under Section 5 of the Limitation Act. For the remaining 33 days, the court accepted the official liquidator's explanation of a bona fide miscalculation and noted the court's closure during the relevant period. The delay was thus condoned, citing the Supreme Court's liberal approach in condoning delays to ensure substantial justice.

Conclusion:
The court allowed the company application, condoning the total delay based on sufficient cause shown by the official liquidator. No costs were awarded.