9911796707
TMI Blog1984 (10) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the directors including the claimant, under section 235 of the Companies Act, and, as such, the claimant was not entitled to any payment until the claim of the official liquidator had been fully satisfied. The claimant being dissatisfied with the report of the liquidator filed an objection before the Dist. Judge. The official liquidator submitted a reply in the form of a written statement. Papers were filed by the claimant in support of the claim. The official liquidator submitted his supplementary report. Learned District Judge framed two issues. On the first issue he held that the subject-matter of the claim was advanced as loan to the company. This necessitated enquiring into the other issue, viz ., whether the claim was barred by limitation. The District Judge held that the claim was not barred by limitation. The court below relied on a Division Bench decision of our court in the case of Jwala Prasad v. Jwala Bank Ltd. [1957] 27 Comp. Cas. 310 (All) and a Division Bench decision of the Madras High Court in the case of S. Abdul Muthalibu v. K. M. Mohammed Abdul Khader [1962] 32 Comp. Cas. 1102 (Mad.). It was observed by the court below in its judgment that, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two decisions was not applicable was erroneous. Learned counsel further contended that although the decision in the case of Lahore Enamelling and Stamping Co. Ltd. [1958] 28 Comp. Cas. 216 (Punj.) had been overruled in Ram Chand Puri v. Lahore Enamelling and Stamping Co. Ltd. [1960] 30 Comp. Cas. 515 (Punj.), the view taken therein was based on a misconstruction of the decision in Jwala Prasad's case [1957] 27 Comp. Cas. 310 (All.). Learned counsel also cited a decision of a single judge of the Calcutta High Court in Chandbali Steamer Service Co. Ltd., In re [1960] 30 Comp. Cas. 61 (Cal.). To sum up, his argument was that the material date was the date of the winding-up order and not the date of the making of application for winding up. We are satisfied that the contention of the learned counsel is correct and the view taken by the learned District Judge is unsustainable in law and must be set aside. We proceed to give our reasons now. In the present case, the winding-up petition was filed on May 13, 1954. The winding-up order was made on May 4, 1955. It is not disputed that the advance was given on July 9, 1951. In the normal course, a suit for recovery of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndbali Steamer Service Co. Ltd., In re [1960] 30 Comp. Cas. 61 (Cal.). It was observed therein (at page 290 of AIR 1963 All) : "...that a claim which was already barred by limitation at the date of the winding-up order could not be entertained by the liquidator or the court but the claim that was not so barred at the date of the winding-up order but became barred after the date of the winding-up order could be entertained and admitted. An argument was raised on behalf of the appellants that since the winding up order related back to the date of the presentation of the petition for winding up, limitation must be held to be suspended from that date. This argument was founded on what was provided for in section 168 of the Indian Companies Act, 1913." Their Lordships rejected the argument by saying that "section 168 does not say that on the making of the order of winding up, it shall be deemed to relate back to the date of the presentation of the petition for winding up, as was the case under the Insolvency Act." Reference was also made to a decision of the Punjab High Court in the case of Lahore Enamelling and Stamping Co. Ltd. [1958] 28 Comp. Cas. 216 (Punj.) to urge that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also allowed his salary for May, 1950, which he had by mistake not claimed but which was found due to him as also the travelling expenses between May 1, 1950, and October 31, 1950, at the rate of Rs. 300 per mensem. Rest of the claim was not allowed. Aggrieved, Jwala Prasad filed an appeal under section 183(5) of the Indian Companies Act before the learned company judge. The learned company judge allowed the claim for travelling expenses from June 1, 1950, to October 31, 1950. The rest of the claim was rejected. In the special appeal, the claim was made for past salary from July 1, 1939, to June 30, 1946, at the rate of Rs. 2,000 per mensem, further salary from November 1, 1950, to June 30, 1958, at the same rate and the price of the goodwill at Rs. 5 lakhs. The special appeal was heard by a Bench consisting of Agrawal and Upadhya JJ. They gave separate opinions as there was difference of opinion. The matter was referred to a third judge, R. N. Gurtu J. The question as to whether any part of the claim was barred or not was dealt with by Agarwala J. His observation is contained in paragraph 5 of the report and it will be relevant to quote the same to indicate whether the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "The date of the winding-up would be treated as August 1, 1949." It is to be noticed at once that his Lordship did not use the expression "winding-up order" in this sentence. Reference may be made to section 162 of the Indian Companies Act, 1913. That section reads as follows: "A winding-up of a company by the court shall be deemed to commence at the time of the presentation of petition for the winding-up." It appears to us that Agarwala J. had the provisions of section 168 of the Indian Companies Act in mind. August 1, 1949, was the date when the application for winding-up had been made. There is no provision in the Companies Act which states that the date of the winding-up order would relate back to the date of the making of the application for winding-up. Consequently, the court could not have taken the view that the winding-up order when passed would take effect from the date of the making of the winding-up petition. There is nothing in the Act which indicates that the right of a claimant against a company is suspended from the date of the presentation of the winding-up petition. A creditor has a right to proceed to recover his debt from the company even when his winding- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim for past salary from July 1, 1939, to June 30, 1943, would be barred by limitation even if the period of limitation be considered as six years under article 116 of the Limitation Act. It may be recalled that application for winding-up was filed on August 1, 1949. Six years from June 30, 1943, would take it to June 30, 1949. Thus, even this claim was barred on August 1, 1949. The other matter which was before the court was for future salary from November 1, 1950, to June 30, 1958. Agarwala J. held that this amount was payable because of the contract between Jwala Prasad and Jwala Bank and this contract subsisted. His Lordship held that the appellant's debt had to be evaluated as at the date of the winding-up order under section 228 of the Companies Act after making a deduction for the fact that he was now free to do any business or to seek employment of his choice. His Lordship deducted half the amount. It is, therefore, obvious from the above that the judgment of Agarwala J. was of no support to the appellant and the learned District Judge erred in taking the view that he has taken in his judgment. The learned District Judge took the view that the single judge decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57] 27 Comp. Cas. 310 (All.). This is what the learned judges have said in their judgment (at p. 519 of 30 Comp. Cas.): "In Jwala Prasad v. Jwala Bank Ltd. [1957] 27 Comp. Cas. 310 (All.), which came before the Allahabad High Court, the point for consideration was similar to the one before us. The learned judges observed that the date of the filing of the application for winding up was the relevant date for computing limitation. The question in that case related to the claim for the recovery of the salary of the managing director. That part of the claim in respect of the salary, which was within limitation on the date the application for winding up was filed, was held to be provable." Paragraph 5 of the judgment in Jwala Prasad's case [1957] 27 Comp. Cas. 310 (All) was quoted. The Division Bench of the Punjab High Court held that the facts and law were in all fours and were similar to the case before them. The Division Bench observed (at p. 520 of 30 Comp. Cas.): "......the Allahabad High Court held that for the purposes of limitation, the date when the application for winding up is made is to be considered the date when the order for winding up is made. This is, in ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A cross-objection has been filed by the claimant. A perusal of the grounds of the cross-objection shows that the claimant disputed the jurisdiction of the learned District Judge to impose restrictions having the effect of withholding its implementation. The impugned order was being challenged to the extent the restrictions had been imposed. The learned District Judge had in the order indicated that the claimant would be entitled to get the amount of the claim provided she was not found guilty of misconduct in the affairs of the company which misconduct led to the winiding up of the company. We are of the view that the cross-objection has no legs to stand once the court comes to the conclusion that the claim is barred by time and not maintainable. Restrictions imposed would automatically fall on disallowing the claim. In this view of the matter, the cross-objection has no merits and must fail. In the result, therefore, the appeal succeeds and is allowed. The judgment and decree of the learned District Judge dated September 8, 1977, are set aside. The cross-objection is dismissed. However, in the circumstances of the case, we direct the parties to bear their own costs. - - Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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