1968 (11) TMI 62 - HC - Companies Law

Winding up - Exclusion of certain time in computing periods of limitation and Power of court to assess damages against delinquent, directors, etc.

Summary

Issues Involved:
1. Applicability of Section 5 of the Limitation Act, 1963.
2. Period of limitation under Section 543 of the Companies Act, 1956, and Section 45H of the Banking Regulation Act, 1949.
3. Interpretation of "period of limitation" and its exclusions.
4. Sufficient cause for condonation of delay under Section 5 of the Limitation Act, 1963.
5. Misapplication of Section 458A of the Companies Act by the liquidator.

Detailed Analysis:

1. Applicability of Section 5 of the Limitation Act, 1963:
The court affirmed that Section 5 of the Limitation Act, 1963, applies to the case at hand. The judgment noted, "I have little doubt that section 5 of the Limitation Act, 1963, applies in a case like this." However, the court was not satisfied that there was "sufficient cause" to condone the delay, leading to the dismissal of the application.

2. Period of Limitation under Section 543 of the Companies Act, 1956, and Section 45H of the Banking Regulation Act, 1949:
The application was filed under Section 543 of the Companies Act, 1956, read with Section 45H of the Banking Regulation Act, 1949. The court highlighted that the period of limitation for directors is prescribed by sub-section (2) of Section 45-O of the Banking Regulation Act, and for other officers, by sub-section (2) of Section 543 of the Companies Act. The relevant periods are:
- For directors: "twelve years from the date of the accrual of such claims or five years from the date of the first appointment of the liquidator, whichever is longer."
- For other officers: "five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer."

3. Interpretation of "Period of Limitation" and its Exclusions:
The court discussed the interpretation of the "period of limitation" and emphasized that the Limitation Act, 1963, has a residuary provision (Article 137) that applies to all applications for which no specific period is prescribed. The judgment referenced the case of Manager, P. K. Porwall v. Labour Court, which elaborated on the applicability of Article 137 to all applications. The court concluded that the provisions for limitation in the Companies Act and the Banking Regulation Act are special laws, and Section 5 of the Limitation Act, 1963, is applicable in this case.

4. Sufficient Cause for Condonation of Delay under Section 5 of the Limitation Act, 1963:
The court examined whether there was "sufficient cause" for the delay in filing the application. The liquidator's justification was based on a mistaken belief that Section 458A of the Companies Act allowed for the exclusion of certain periods, thus extending the time limit. The court found this reasoning flawed, stating, "How anybody could have thought that the exclusion of a period anterior to the starting point for limitation...could have the effect of postponing the date within which a proceeding has to be instituted, I am quite unable to understand." The court concluded that the liquidator's mistake was a mistake of law and that he did not act with "due care and attention."

5. Misapplication of Section 458A of the Companies Act by the Liquidator:
The liquidator claimed that the periods referred to in Section 458A of the Companies Act could be excluded, extending the time for filing the application. The court rejected this argument, noting that the period from the commencement of the winding up to the date of the winding up order could not be excluded to extend the limitation period. The court also pointed out that the liquidator did not seek legal advice before forming his mistaken belief, which further weakened his case for condonation of delay.

Conclusion:
The application was dismissed due to the lack of sufficient cause for the delay. The court emphasized that a mistake of law, especially one made without seeking legal advice, does not constitute sufficient cause under Section 5 of the Limitation Act, 1963. The judgment concluded with, "I dismiss this application, but make no order as to costs."