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TMI Blog1958 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... essrs. J.C. Bhalla Co.; and (6)Messrs. Ram Chand Puri and Sons. Shri A.K. Bhalla claimed an amount of Rs. 55,133-15-0. The official liquidator allowed the claim to the extent of Rs. 17,161-2-9 and did not admit the claim for the balance, i.e., Rs. 37,972-12-3, and the reason urged was that the claim was time-barred and unproved. The claim of Shrimati Yash Kumari Bhalla was for Rs. 11,081-15-0 and it was rejected in entirety on the ground that it was barred by limitation. The total claim of Shri Bhagwan Das was for Rs. 68,500. The official liquidator allowed the claim to the extent of Rs. 9,616-10-9 and rejected the claim to the extent of Rs. 58,883-5-3, on the ground-that it was time-barred and unproved. Dr. Tara Chand claimed an amount of Rs. 7,588-6-0 and this claim was rejected for want of proof. Messrs. J.C. Bhalla and Company claimed a sum of Rs. 1,666 on account of audit fee and this claim was rejected to the extent of Rs. 1,631 on the grounds that it was time-barred and unproved. Messrs. Ram Chand Puri and Sons claimed a sum of Rs. 2,359-7-9 and it was also rejected on the grounds that it was time-barred and unproved. In the case of the first five claiman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), "in the case of a winding up by or subject to the supervision of the court, every disposition of the property (including actionable claims) of the company, and every transfer of shares, or alteration in the status of its members, made after the commencement of the winding up shall, unless the court otherwise orders, be void." The raison-detre of these provisions is to prevent disposition of the property of the company made after presentation of the petition for compulsory winding up, without permission of the court, with a view to avoid fraudulent preferences and to prevent other abuses attendant on transfer of assets of the company in contemplation of its liquidation. The question before me is, whether the principle under section 168 as to relating back, can be extended to the period of limitation prescribed for filing suits, appeals, etc. On behalf of the creditors of the company it is contended that section 168 affects the running of the period of limitation so that, even in those cases where the period of limitation has run out, after the presentation of the petition, but before the passing of the winding up order, the claim must be deemed to be within limitation. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is a statutory bar against commencement or proceeding with a suit or other legal proceedings. The two provisions, i.e., sections 169 and 171, clearly demarcate the line separating the two stages. It is true that under section 168, winding up of a company by the court is deemed to commence at the time of the presentation of the petition for winding up, though that is not the date of making of the winding up order. The retrospective commencement of winding up and the making of winding up order are separate and distinct matters. At the time of the presentation of the petition for winding up there is no bar against the presentation of a plaint or institution of other proceedings against the company, though in the event of the passing of the winding up order, the winding up is deemed to have commenced from the earlier date. The terminus a quo for purposes of a statutory bar under section 171 against commencing and continuing legal proceedings dates from the winding up order. A creditor can take legal proceedings against a company after the petition is presented, and if the petition is dismissed and no winding up order is made, then the suit or other legal proceedings will go o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal proceedings shall be proceeded with or commenced against the company, when a winding up order has been made or a provisional liquidator has been appointed, except by leave of the court. For purposes of this case the material time for staying suits, etc., is the winding up order. I cannot read in the words "when a winding up order has been made" the words "when a petition for winding up is made." The principle governing limitation as embodied in section 9 of the Indian Limitation Act is that when once limitation has commenced to run it will continue to do so unless it is stopped by virtue of any express statutory provisions. When once the period of limitation has begun to run there can be no suspension of time except under the provisions specifically recognising exclusion or deduction. There is no principle of law outside the Limitation Act under which limitation can be suspended and exemptions, which are not provided by the statute, cannot be assumed either on grounds of hardship or of reasonableness. The plaintiffs in a case like the present suffer from no disability or the want of legal qualification to sue so long as the winding up order under section 171 of the Indian Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be carried further than we are compelled to carry it." In Magandas Bhukandas v. Bhalchandra Ramrao ILR [1954] Bom. 840, the words "the date of the order of adjudication" occurring in section 78(2) of the Provincial Insolvency Act, 1920, came up for interpretation with reference to section 38(7). Gajendragadkar J. thought that it would be unreasonable to give effect to the legal fiction introduced by section 28(7) in considering the question of exclusion of time under section 78(2). It was observed: "In dealing with this question, it is necessary to remember that sub-section (7) of section 28 introduces a legal fiction and gives effect to the order of adjudication in a somewhat artificial manner. Indeed, the marginal note of section 28 shows that the section deals with the effect of an order of adjudication. Undoubtedly, when an order of adjudication has been made, for several purposes mentioned in the Provincial Insolvency Act the order must be deemed to relate back and must be held to take effect from the date of presentation of the petition on which it is made. But the question which we have to decide is whether this same doctrine of relation back must necessarily be invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve arose under insolvency law and not under the law pertaining to companies, but the similarity in the relative provisions cannot be overlooked. Section 28(7) of the Provincial Insolvency Act is similar to section 168 of the Indian Companies Act and section 28(2) of the former Act embodies the same principle as is contained in section 171 of the latter Act. Section 229 of the Indian Companies Act makes it abundantly clear that in winding up of an insolvent company, same rules prevail as are in force for the time being under the law of insolvency. The rulings cited above which enunciate the restricted scope of the applicability of the doctrine of relation back vis-a-vis the law of limitation are in pari materia and applicable to a case like this under the Indian Companies Act. In re General Rolling Stock Company [1927] ILR 49 All 520; AIR 1927 All. 161 is an authority for the proposition that the law of limitation ceases to run as from the winding up order. So that a creditor, whose claim is not then barred, will not be barred by subsequent delay. Reference may also be made to In re Fleetwood and District Electric Light and Power Syndicate [1872] 7 Ch App 646. The English ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of the problem arising in this case. He also cited an authority of the Privy Council reported in Hansraj Gupta v. N.P. Asthana [1932] 2 Comp Cas 548, which was a judgment from Allahabad High Court. Their Lordships referred to the following passage from the judgment under appeal before them: "If any claim happens to be within limitation when the winding up commenced, there would be no further application of the rule of limitation." From the judgment it does not appear whether the 29th of January, 1926, which was the date of commencement of the winding up in that case, was the date of winding up petition or of the winding up order. The use of the words "commencement of the winding up" does not necessarily mean the period starting from the date of the presentation of the petition. In the absence of any details of facts of that case, it is not possible for me to hold that the proposition, which is being contended for by the learned counsel for the respondents, was in fact before their Lordships of the Privy Council and whether that was upheld. The doctrine of relation back is restricted in scope and cannot be extended for all purposes. In particular, it will not be correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablished to be due to Mr. A.K. Bhalla, and in view of the acknowledgment in the balance sheet this claim is also found to be within time. Mr. Bhagirath Das has admitted in court that the sum of Rs. 50,606-7-6 is thus proved to be due to Shri A.K. Bhalla. I, therefore, allow the objection of Shri A.K. Bhalla and hold that, besides the amount of Rs. 17,161-2-9 already allowed by the official liquidator, Shri A.K. Bhalla has proved that a further sum of Rs. 33,445-4-9 is validly due to him. Shrimati Yash Kumari Bhalla, wife of Shri A.K. Bhalla, had claimed a sum of Rs. 11,081-15-0 which was rejected by the official liquidator in entirety on the ground that it was time-barred. In the balance-sheet of the company for the year ending 31st December, 1950, it is stated that a sum of Rs. 1,22,099-10-9 is due from the company on account of unsecured loans. This amount undeniably includes the sum of Rs. 9,340-4-0 due to Shrimati Yash Kumari Bhalla. Adding a sum of Rs. 760-4-0 on account of interest due to her up to 21st of April, 1952, the date of the petition for winding up, she is entitled to Rs. 10,100-8-0. Mr. Bhagirath Das has admitted before me the correctness and the legality of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umari Bhalla and Dr. Tara Chand, vide Exhibit P.1. All these entries constitute an acknowledgment of the debts due to the claimants within the meaning of section 19 of the Indian Limitation Act. Debts due to creditors not mentioned by name but included in the item relating to " loans (unsecured) " or as due to "sundry creditors" mentioned in the balance-sheet amount to an acknowledgment within the provisions of section 19 of the Indian Limitation Act, so as to extend the period of limitation with effect from the date of the signing of the acknowledgment. For this proposition, reference may be made to Rajah of Vizianagaram v. Official Liquidator, Vizianagaram Mining Company, Limited [1952] 22 Comp Cas 1 , and Jones v. Bellegrove Properties, Limited [1949] 1 All ER 49a . The facts of the last case were that in 1936 the plaintiff had lent a sum of 1,807 to the defendant company in which he was a shareholder. At the annual general meeting of the company in December, 1946, the plaintiff was handed by a director the accounts of the company, signed by the accountants and two directors, which included the balance-sheets for the years 1939 to 1945, in each of which was the entry ..... X X X X Extracts X X X X X X X X Extracts X X X X
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