1960 (7) TMI 44 - HC - Companies Law

Winding up Power of court to assess damages against delinquent directors etc. and Savings of pending proceedings for winding up

Issues Involved:
1. Application of sections 216 and 235 of the Indian Companies Act, 1913.
2. Limitation period for filing the application.
3. Applicability of section 543 of the Companies Act, 1956.
4. Discretionary powers of the court under section 235 of the Indian Companies Act, 1913.
5. Terminus a quo for the limitation period.
6. Applicability of section 235 of the Indian Companies Act, 1913, to the facts of the case.

Detailed Analysis:

1. Application of sections 216 and 235 of the Indian Companies Act, 1913:
The appeal was directed against an order dismissing the application of Bharat Nidhi Ltd. under sections 216 and 235 of the Indian Companies Act, 1913, as barred by limitation. The Trade and Industries Corporation Ltd. had a current account with Bharat Bank Ltd., and certain bills totaling Rs. 10,620 were wrongly credited to this account in 1947. The mistake was discovered in July 1952, and the application was filed on October 26, 1953.

2. Limitation period for filing the application:
The District Judge concluded that the application under section 235 should have been made within three years from the date of the first appointment of a liquidator or the misapplication, retainer, misfeasance, or breach of trust, whichever is longer. Since the liquidator was appointed before 1949, the application filed in 1953 was barred by limitation. The appellant's argument that the retainer should be considered from July 1952, when the mistake was discovered, was rejected.

3. Applicability of section 543 of the Companies Act, 1956:
The appellant contended that the appeal being a re-hearing, the court should apply section 543 of the Companies Act, 1956, and hold the application within limitation. However, the court noted that there was no precedent or principle supporting the revival of a barred claim through an amendment in the law of limitation unless the amendment explicitly stated retrospective operation. The court cited various cases to support this principle, including Mathukumalli Ramayya v. Uppalapati Lakshmayya and Sarkar Dutt Roy & Co. v. Shree Bank Ltd.

4. Discretionary powers of the court under section 235 of the Indian Companies Act, 1913:
The appellant argued that the language of section 235 was discretionary, allowing the court to entertain a petition even if filed beyond the prescribed period. The court rejected this argument, stating that the discretion referred to in Benares Bank Ltd. v. Shri Prakasha only allowed the court to refuse relief even if the application was within time, but not to entertain an application filed after the limitation period.

5. Terminus a quo for the limitation period:
The appellant contended that the limitation period should start from the date the mistake was discovered. The court rejected this argument, stating that section 24 of the Limitation Act, which deals with suits for compensation for acts not actionable without specific injury, was not applicable. The court emphasized that the limitation period should be computed from the date of the misapplication or the appointment of the liquidator, whichever was longer.

6. Applicability of section 235 of the Indian Companies Act, 1913, to the facts of the case:
The court expressed doubt whether section 235 was applicable to the appellant's application. The directors of the Trade and Industries Corporation Ltd. could not be considered guilty of misfeasance or breach of trust in relation to their own company for withdrawing an amount from their current account with Bharat Bank Ltd. The court suggested that there might be other legal remedies available for the wrongful withdrawal but not under section 235.

Conclusion:
The court dismissed the appeal, upholding the District Judge's decision that the application was barred by limitation. The court found no merit in the appellant's contentions regarding the applicability of section 543 of the Companies Act, 1956, the discretionary powers under section 235 of the Indian Companies Act, 1913, or the terminus a quo for the limitation period. The appeal was dismissed with costs.

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