2017 (4) TMI 1499 - HC - Companies Law

Stay on winding up petition - time limitation - HELD THAT - There is no doubt that for an acknowledgement within the meaning of Section 18 of the Limitation Act, 1963, as long as it is in writing, it would do. The writing need not be addressed to the creditor and may be a writing addressed to a third party wherein the acknowledgement is recorded but the identity of the creditor and the acknowledgement of the indebtedness, without even the quantum being specified, must be evident. In other words, for an acknowledgement to be held against a person, such person should acknowledge the debt due to another, such acknowledgement must be in writing and the acknowledgement need not specify the quantum of the debt. The company petition carried by this appellant to the Company Court was ex-facie barred by limitation save the assertion in paragraph 18 thereof that the company had acknowledged its liability in the balancesheets for the three relevant financial years. Copies of the balance-sheets appear to have been appended to the petition, but nothing from the balance-sheets identified the appellant as a creditor whose debt had been acknowledged to be due by the respondent company. The petitioner had no claim to carry before a Company Court for winding up the respondent - petition dismissed.

Summary

Issues:
1. Marginal delay in preferring the appeal
2. Petition for winding up the respondent company permanently stayed on the ground of limitation
3. Acknowledgement of debt in the company's financial statements
4. Interpretation of Section 41 of the Income Tax Act, 1961
5. Requirements for an acknowledgement within the meaning of Section 18 of the Limitation Act, 1963

Analysis:

1. The High Court of Calcutta condoned the marginal delay in preferring the appeal and allowed ACO No. 152 of 2016 without costs. The appeal was deemed frivolous and devoid of merit, stemming from an order permanently staying the petitioner's winding-up petition against the respondent company due to limitation.

2. The appellant's petition for winding up the respondent company was found to be time-barred as per the Limitation Act. Despite the appellant's claim that the respondent acknowledged the debt in its financial statements for three consecutive financial years, the court noted that the balance sheets did not identify the appellant as a creditor whose debt had been acknowledged by the respondent company.

3. The appellant relied on a judgment and Section 41 of the Income Tax Act, 1961, to argue that an acknowledgement of dues to creditors evident from a balance sheet would suffice for the purpose of the Limitation Act. However, the court clarified that the acknowledgement must clearly identify the creditor and the indebtedness, without necessarily specifying the quantum of the debt.

4. Section 41 of the Income Tax Act, 1961, was deemed irrelevant in the context of the case, as it pertains to recording amounts not paid to third parties as profit for income tax assessment. The court emphasized the importance of a valid acknowledgement within the meaning of the Limitation Act, which should be in writing and clearly acknowledge the debt due to another party.

5. Ultimately, the court upheld the order staying the winding-up petition, stating that the petitioner had no valid claim to bring before the Company Court. APO No. 147 of 2017 and ACO No. 153 of 2016 were dismissed with costs assessed at 200 GM to be paid to the respondent, concluding the judgment.