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Issues Involved
1. Winding Up Petition Under Companies Act 2. Allegations of Non-Allotment of Shares 3. Company's Defense and Alleged Fraud 4. Limitation Period for Filing Suit 5. Applicability of Limitation Act Provisions 6. Enforceability of Time-Barred Debt 7. Right to Debt vs. Remedy to Enforce Detailed Analysis 1. Winding Up Petition Under Companies Act The appellants initiated winding up proceedings under sections 433, 434, and 439 of the Companies Act, 1956, against Eastern Mining and Allied Industries Ltd. The petitioners alleged that despite depositing Rs. 4,87,200 for the company's rights issue in 1993, the company did not allot the shares or refund the amount. 2. Allegations of Non-Allotment of Shares The petitioners claimed they deposited Rs. 4,87,200 by cheques dated 24-3-1993, which were encashed by the company. Despite several communications and personal visits, the company did not allot the shares. Partial payments totaling Rs. 1,90,400 were made to four petitioners in 1996, with assurances of settling the remaining amount, which never materialized. 3. Company's Defense and Alleged Fraud The company, in its defense, denied liability, claiming the amount was deposited in an unauthorized Current Account No. 63, opened fraudulently by sub-brokers in connivance with bank officials. The company had filed Civil Suit No. 3879 of 1995 in the Bombay High Court for relief against those involved in the fraudulent account. It was also argued that the partial payment was made from the personal account of the chairman, not on behalf of the company. 4. Limitation Period for Filing Suit The learned single Judge focused on the question of limitation, holding that the debt was time-barred under Article 24 of the Limitation Act, 1963, which provides a three-year limitation period from the date the money is received. The judge concluded that the limitation period expired on 24-3-1996, and the partial payment in 1996 did not constitute a valid acknowledgment to extend the limitation period. 5. Applicability of Limitation Act Provisions The court considered whether Article 24 or Article 47 of the Limitation Act applied. Article 24 pertains to money received for the plaintiff's use, while Article 47 relates to money paid upon an existing consideration that fails. The court concluded that Article 47 was applicable, as the money was paid for the issuance of rights shares, which the company failed to deliver. The limitation period thus commenced from 24-6-1993, expiring on 24-6-1996. 6. Enforceability of Time-Barred Debt The court examined whether a winding up petition could be filed for a time-barred debt. It held that while the debt remains due, the remedy to enforce it through the court is barred by limitation. The court emphasized that the machinery for winding up should not be used to recover time-barred debts, as it would constitute an abuse of the process. 7. Right to Debt vs. Remedy to Enforce The court cited several precedents, including the Supreme Court's ruling in Punjab National Bank v. Surendra Prasad Sinha, which stated that while the right to a debt continues to exist, the remedy to enforce it through the court is barred by limitation. The court concluded that the appellants could not file a winding up petition to recover a time-barred debt, as the debt was not enforceable in a court of law. Conclusion The appeal was dismissed, with the court affirming that the debt was time-barred and not enforceable through a winding up petition. The court reiterated that the right to debt continues to exist, but the remedy to enforce it through the court is barred by limitation. The petitioners were not considered creditors entitled to file a winding up petition under the Companies Act for a time-barred debt.
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