2002 (11) TMI 355 - SC - Companies Law

Whether on account of section 458A of the Companies Act, which was inserted by the Companies (Amendment) Act, 1960, the period of limitation for filing any suit or application gets extended? Whether a claim which was barred on the date, the application for winding up was filed, stands revived on account of an order of the Court in the winding up proceedings? Held that - On a plain reading of the provisions contained in section 458A of the Companies Act, it is crystal clear that the aforesaid provisions merely exclude the period, during which a company was being wound up by the Court from the date of the commencement of the winding up till the order of winding up is made and an additional period of one year immediately following the date of the winding up. In other words, in respect of a legally enforceable claim, which claim could have been made by the company on the date on which the application for winding up is made, could be filed by the official liquidator by taking the benefit of section 458A of the Companies Act and getting the period of four years to be excluded from the period of three years, as provided under Article 137 of the Limitation Act. But by no stretch of imagination, the said provisions contained in section 458A can be construed to mean that even a barred date or a claim which was not enforceable on the date of the winding up, would stand revived, once a winding up application is filed and order is made by virtue of section 458A of the Companies Act. We, therefore, affirm the view taken by the Karnataka High Court under the impugned Judgment and dismiss these appeals.

Summary

Issues:
1. Interpretation of section 458A of the Companies Act regarding the extension of the period of limitation for filing suits or applications in winding up proceedings.

Analysis:
The Supreme Court addressed the issue raised against the Full Bench decision of the Karnataka High Court regarding the interpretation of section 458A of the Companies Act. The key question was whether the period of limitation for filing a suit or application gets extended due to section 458A and whether a barred claim stands revived upon the appointment of an official liquidator during winding up proceedings. The Karnataka High Court concluded that section 458A does not confer a fresh cause of action and does not revive a claim already barred under the Limitation Act. This view aligned with the Madras High Court's decision but differed from the Delhi and Kerala High Courts' decisions. The Supreme Court aimed to determine the correct interpretation by examining various High Courts' views and the relevant provisions of the Companies Act.

2. Commencement of winding up proceedings and jurisdiction of the winding up Court.

The Supreme Court explained that a winding up proceeding starts with the presentation of a petition under section 441 of the Companies Act. Once an official liquidator is appointed under section 446, all legal proceedings against the company require the Court's permission. The winding up Court gains jurisdiction over suits, proceedings, and claims involving the company. Section 458A of the Companies Act excludes time in computing the limitation period for any claim, as detailed in the judgment.

3. Application of limitation periods and starting point for claims under section 446(2) of the Companies Act.

The Supreme Court discussed previous judgments by the Delhi and Kerala High Courts regarding the limitation periods for claims under section 446(2) of the Companies Act. The starting point of limitation for such claims and the applicability of Article 137 of the Limitation Act were analyzed. The Court differentiated the issues raised in the present case from those addressed in previous judgments, emphasizing the enforceability of claims at the time of winding up.

4. Interpretation of section 458A and its purpose in protecting legally enforceable claims.

The Supreme Court clarified that section 458A of the Companies Act aims to protect legally enforceable claims that could have been made by the company at the time of winding up. The provision excludes specific periods to allow the official liquidator to file claims on behalf of the company without loss to the shareholders. However, the Court emphasized that section 458A does not revive claims that were already time-barred or unenforceable at the time of winding up. The judgment affirmed the Karnataka High Court's decision and dismissed the appeals, with no orders as to costs.