1968 (6) TMI 25 - HC - Companies Law

Issues Involved:
1. Whether the application under section 235 of the Indian Companies Act, 1913, is barred by limitation.
2. Whether the respondent is guilty of misapplication of company funds.
3. Whether the averments in Applications Nos. 909 of 1957 and 595 of 1957 constitute an acknowledgment of liability.
4. Whether the amounts expended by the respondent should be deemed to be retained by him as on date, thus avoiding the limitation period.

Detailed Analysis:

1. Whether the application under section 235 of the Indian Companies Act, 1913, is barred by limitation:
The primary contention revolves around the interpretation of the limitation period under section 235 of the Indian Companies Act, 1913. The applicants argue that the limitation period should be calculated from April 1, 1959, the date when the court exercised its jurisdiction under section 221 and assumed supervision over the voluntary winding up. They emphasize the phrase "within three years from the date of the first appointment of a liquidator in the winding up" and argue that the winding up referred to should be the one under court supervision. Conversely, the respondent's counsel contends that the limitation period should be counted from the date of the voluntary appointment of the liquidator, which was September 28, 1952. The court agrees with the respondent, stating that the voluntary liquidation and the subsequent court supervision are part of a continuous process. The first liquidator appointed in the voluntary winding up remains the same under court supervision. Thus, the application filed in November 1959 is beyond the three-year limitation period from the first appointment of the liquidator.

2. Whether the respondent is guilty of misapplication of company funds:
The applicants allege that the respondent, as the voluntary liquidator, drew company funds twice for the same journeys, once as a member of the Madras Legislative Assembly and once as the voluntary liquidator, thus misapplying the company's funds. The respondent's counter affidavit admits to incurring expenses on behalf of the company and recouping them from the company's funds. However, the court does not delve into the merits of this allegation, focusing solely on the preliminary objection of limitation.

3. Whether the averments in Applications Nos. 909 of 1957 and 595 of 1957 constitute an acknowledgment of liability:
The applicants argue that the respondent's statements in Applications Nos. 909 of 1957 and 595 of 1957 should be considered as an acknowledgment of liability, thus keeping the application within the limitation period. The court disagrees, noting that these applications were not filed under section 235 or section 543 of the 1956 Act, and the averments do not constitute an acknowledgment of liability. The court emphasizes that the specific procedure prescribed by section 235 must be followed, and the mere references to expenses in other applications do not suffice to extend the limitation period.

4. Whether the amounts expended by the respondent should be deemed to be retained by him as on date, thus avoiding the limitation period:
The applicants argue that the amounts expended by the respondent should be deemed to be retained by him continuously, thus avoiding the limitation period. The court finds this argument attractive but ultimately rejects it, stating that the three-year limitation period should commence from the date when the funds were expended and retained. Accepting the applicants' argument would undermine the statutory limitation period and allow indefinite delays in filing applications under section 235.

Conclusion:
The court concludes that the application is barred by limitation, as it was not filed within three years from the date of the first appointment of the liquidator or from the date when the funds were expended and retained. Consequently, the application is dismissed without delving into the merits of the allegations. There will be no order as to costs.

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