1977 (4) TMI 126 - HC - Companies Law

Winding up Suits stayed on winding-up order, Exclusion of certain time in computing periods of limitation, Liability for fraudulent conduct of business , Power of court to assess damages against delinquent, directors, etc.

Summary

Issues Involved:
1. Applicability of the Limitation Act, 1963 to proceedings under the Companies Act, 1956.
2. Interpretation of the term "claim" in section 446(2)(b) of the Companies Act, 1956.
3. Applicability of time-barred claims under sections 542 and 543 of the Companies Act, 1956.
4. Accrual of the right to apply under sections 446(2)(b) and 542 of the Companies Act, 1956.

Detailed Analysis:

Issue 1: Applicability of the Limitation Act, 1963
The court held that the Limitation Act, 1963, governs proceedings under the Companies Act, 1956, by virtue of Article 137 of its Schedule. The judgment referenced several cases to support this conclusion, including:
- Sha Mulchand & Co. Ltd. v. Jawahar Mills Ltd.: Held that the Indian Limitation Act of 1908 did not apply to proceedings under the Companies Act.
- Kerala State Electricity Board v. Kunhaliumma: The Supreme Court ruled that Article 137 of the Limitation Act, 1963, applies to any petition or application filed under any Act to a civil court.

Thus, applications and petitions under the Companies Act are governed by the Limitation Act, 1963, except where the Companies Act itself provides specific limitation periods, such as in section 543.

Issue 2: Interpretation of "Claim" in Section 446(2)(b)
The court affirmed that the term "claim" in section 446(2)(b) refers to claims enforceable at law, excluding those barred by time before the commencement of winding up. The judgment cited a series of decisions:
- Sri Narain v. Liquidator, Union Bank of India: Held that a time-barred debt could not be enforced under a summary order.
- Hansraj Gupta v. Dehra Dun Mussourie Electric Tramway Co. Ltd.: Confirmed that "any money due" must be recoverable in a suit by the company.
- New Delhi Municipal Committee v. Kalu Ram: The Supreme Court held that "legally recoverable" amounts are those not barred by the law of limitation.

The court concluded that section 446(2)(b) does not create new rights but provides a summary procedure for enforcing existing enforceable rights and liabilities.

Issue 3: Applicability of Time-Barred Claims under Sections 542 and 543
The court provided different answers for sections 542 and 543:
- Section 542: Claims that had become barred by time before the commencement of winding up could still be the subject of an application under section 542, provided they meet the requirements of Article 137 of the Limitation Act, 1963. The court referenced its own earlier decision in C.P. No. 17-D of 1965, stating that the right to apply under section 542 accrues when the winding-up order is made and continues as disclosures are made during the winding up.
- Section 543: The specific provision in sub-section (2) of section 543, which allows applications to be made within five years from the date of the winding-up order, overrides the general law of limitation. Therefore, the bar of limitation under the ordinary law does not affect the right to apply under section 543.

Issue 4: Accrual of the Right to Apply under Sections 446(2)(b) and 542
- Section 446(2)(b): The right to apply accrues when the winding-up order is made, as the court with jurisdiction to entertain such claims is the one winding up the company. The winding up is deemed to commence at the presentation of the petition, but the right to apply arises only after the winding-up order is made.
- Section 542: The right to apply arises when the winding-up order is made and continues as disclosures are made during the winding up, such as the filing of the statement of affairs or the submission of the preliminary report by the official liquidator.

Conclusion:
The court overruled the objection regarding limitation in the present application under section 446(2)(b). It concluded that the claim was enforceable as the period from the date of the winding-up petition to the winding-up order and a year thereafter should be excluded under section 458A of the Companies Act. Thus, the application was filed within the permissible period under Article 137 of the Limitation Act, 1963.