1976 (7) TMI 109 - HC - Companies Law

Winding up - Powers of liquidator, Exclusion of certain time in computing periods of limitation

Summary

Issues Involved:
1. Entitlement of the liquidator to recover book debts on behalf of the State Bank of India.
2. Application of Section 458A of the Companies Act, 1956, to extend the limitation period.
3. Validity of the respondent's set-off claim.

Detailed Analysis:

1. Entitlement of the Liquidator to Recover Book Debts on Behalf of the State Bank of India:
The official liquidator sought a direction for Killick Nixon Ltd. to pay Rs. 28,295.41 with interest, claiming this amount as book debts payable to Alcock Ashdown & Company Ltd. The liquidator was authorized by the court to recover these debts on behalf of the State Bank of India, a secured creditor. The liquidator argued that the arrangement with the State Bank of India entitled him to 10% of net recoveries, asserting that the recovery was for the benefit of the company. However, the court held that the liquidator was acting on behalf of the State Bank of India, not the company, as evidenced by the terms of the arrangement and the court's sanction. The liquidator's actions were considered outside the scope of his statutory duties under the Companies Act, which are intended to benefit unsecured creditors. The court concluded that the liquidator could not claim to be acting on behalf of the company when recovering debts for a secured creditor.

2. Application of Section 458A of the Companies Act, 1956:
Section 458A provides for the extension of the limitation period for proceedings initiated by the liquidator on behalf of the company. The liquidator argued that this section applied, thereby extending the limitation period for recovering the book debts. However, the court found that the proceedings were not on behalf of the company but on behalf of the State Bank of India. The court emphasized that the protection under Section 458A is only available for proceedings in the name and on behalf of the company. Since the liquidator was acting for the State Bank of India, the claim was barred by limitation as the debts arose on or before January 21, 1971, and the winding-up petition was presented on April 24, 1971.

3. Validity of the Respondent's Set-off Claim:
The respondent, Killick Nixon Ltd., contended that they were entitled to a set-off amounting to Rs. 26,658.56. The court acknowledged the respondent's set-off claim but stated that it could be proved before the liquidator in the winding-up proceedings. The existence of a valid set-off was not considered a defense against the liquidator's claim in the judge's summons. However, since the liquidator's claim was barred by limitation, the issue of set-off did not affect the outcome of the case.

Conclusion:
The court dismissed the judge's summons, holding that the liquidator was not entitled to the benefit of Section 458A of the Companies Act, and the claim was barred by limitation. The liquidator's actions were deemed to be on behalf of the State Bank of India, a secured creditor, rather than the company in liquidation. Consequently, the liquidator could not recover the time-barred debts using the extended limitation period provided under Section 458A.