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TMI Blog1994 (9) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... application under section 446(2) of the Companies Act, 1956, praying for a direction to the appellant pay a sum of Rs. 39,561.92 plus interest of Rs. 9,428.57 totalling in all Rs. 48,990.49 with subsequent interest at 6 per cent. per annum from the date of application till the date of realisation. The report of the official liquidator filed in support of the application merely stated in paragraph 7 thereof that the claim was not barred by limitation in view of the provisions contained in section 458A of the Companies Act, 1956, and sections 18 and 19 of the Limitation Act, 1963. Apart from that sentence, the report did not contain any particulars as to how the claim was in time. In the counter filed by the appellant it was contended that the claim was barred by limitation and that the company was bound to give credit to certain payments made by the appellant and also to the value of certain articles returned by the appellant to the company. The learned single judge, who heard the application, passed an order on September 21, 1984, rejecting the plea of limitation. On the other plea, the learned judge found that there was no evidence regarding return of certain items to the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition that the starting point of limitation is the date of the order of winding up. After stating categorically that the period of limitation has to be reckoned from December 31, 1976, the learned judge stated as follows : "It is true that in Fabrimats ( Madras) Pvt. Ltd., In re [1982] 52 Comp. Cas. 501 (Mad.), I have held that the period of limitation in respect of any suit or application, not only in the name of, but also on behalf of, the company, is the usual period prescribed under the Limitation Act, 1963, plus an aggregate of the two periods mentioned in section 458A of the Companies Act, 1956. But, it is relevant to point out that the decision of the Delhi High Court Full Bench was not brought to my notice. I had an occasion to consider the said decision of the Full Bench of the Delhi High Court in C. A. No. 191 of 1983. On the strength of the Full Bench decision of the Delhi High Court, I have held that at first it has to be ascertained as to whether the debt was alive on the date of the presentation of the winding up order and that if the debt were to be alive then the period from the date of commencement of the winding up proceeding to the date on which the winding up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the winding-up proceedings to the date of the order of the winding-up ; and (ii) one year immediately following such date of order of winding-up, that shall be excluded in reckoning the period of limitation." After extracting the above passage, the Division Bench said : "The above in our view is the correct approach, which will permit addition of the period of the pendency of the proceedings as well as one year from the date of the winding up order thus making available to any applicant or plaintiff this additional period to be computed along with the period of limitation prescribed under the Limitation Act. No error has been committed by the court below in this behalf." When the present matter came up before the same Division Bench their decision in O.S.A. No. 34 of 1984, referred to above, was not brought to their notice. Without making any reference to the said judgment, the Bench passed the following order: "The sole but a question of far-reaching consequence in the instant appeal is as to what will be the reckoning date of the period of limitation of a claim under section 446(2)(b) of the Companies Act. There is no dispute that the period of limitation for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceable. Section 446(2)(b) only enables the liquidator to make the claim by way of an application in the company court. The question whether the claim is enforceable or not, is to be determined with reference to the provisions in the Limitation Act, and that could be decided only with reference to the cause of action and the date on which the suit or application is filed. As already stated, section 458A is only a computation provision for the purpose of limitation. Section 446 confers jurisdiction on the company court and enables the liquidator to file a suit or an application before the company court in respect of a money claim. No claim is wiped out except by payment and discharge. Only the enforceability of that claim for recovery may be barred. Whether the claim is barred or not, is only a question of limitation.' The restricted meaning given by the Bench in which the Full Bench judgment of the Delhi High Court cited above, was referred to, however, has not been fully endorsed by another Division Bench of this court in the case of V. Radhakrishnan v. P.R. Ramakrishnan [1993] 78 Comp. Cas. 694 . In this case, it is observed as follows (at page 719) : 'Learned counsel for the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) to section 446 shall operate, finally restricting the role which section 446(2) has been intended to play. The Bench deciding O.S.A. No. 210 of 1991, has gone in some detail into the scheme of section 446(1) and (2) and referred to various judgments on the subject to hold that the scope of an application under section 446(2) is different from that of any proceeding under sections 446(1) and 446(2)(b) and other clauses thereof of the legality and the jurisdiction of the company judge. We, however, are of the opinion that the Bench decision in Official Liquidator, Radel Services P. Ltd. v. Southern Screws P. Ltd. [1988] 63 Comp. Cas. 749 requires reconsideration. Accordingly, we refer the case to a Full Bench." We are told that the statement contained in the order of reference that there is no dispute that the period of limitation for purpose of the claim shall be as under article 137, Limitation Act, 1963, is erroneous, and that the said matter was very much in dispute. Learned counsel for the official liquidator agrees that the appellant disputed the applicability of article 137 of the Limitation Act. If there was no such dispute before the Bench, there would have been no nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation has to be decided. Section 446 of the Companies Act, 1956, is in the following terms : "(1)When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of winding-up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose. (2)The court which is winding-up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of-- (a)any suit or proceeding by or against the company ; (b)any claim made by or against the company (including claims by or against any of its branches in India) ; (c)any application made under section 391 by or in respect of the company ; (d)any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding-up of the company ; whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the court winding up the company which otherwise it may not have enjoyed. . . Sub-section (2) of section 446 confers jurisdiction on the court which is winding up the company to entertain and dispose of proceedings set out in clauses (a) to (d ). The expression 'court which is winding-up the company' will comprehend the court before which a winding-up petition is pending or which has made an order for winding-up of the company and further winding-up proceedings are continued under its directions. Undoubtedly, a look at the language of section 446(1) and (2) and its setting in Part VII, which deals with winding-up proceedings, would clearly show that the jurisdiction of the court to entertain and dispose of proceedings set out in sub-clauses (a) to ( d) of sub-section (2) can be invoked in the court which is winding up the company." There is no dispute before us that under section 446(2), the official liquidator can file an application before the company court for recovery of money due to the company in liquidation from their parties or in the alternative file a regular suit for recovery of the same either in the company court or in a civil court which has jurisdiction to deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y claim thereto. The only question which is argued before us related to the starting point of limitation for a claim which was not barred on the date of the filing of the petition for winding-up. Now, we shall advert to the provisions of section 458A of the Companies Act. The section is in the following terms : "Notwithstanding anything in the Indian Limitation Act, 1908 (9 of 1908), or in any other law for the time being in force, in computing the period of limitation prescribed for any suit or application in the name and on behalf of a company which is being wound-up by the court, the period from the date of commencement of the winding-up of the company to the date on which the winding-up order is made (both inclusive) and a period of one year immediately following the date of the winding-up order shall be excluded." It is obvious on a reading of the section that it does not prescribe a period of limitation. It is only a provision for computing the period of limitation which is prescribed elsewhere. There is no dispute that the Companies Act does not prescribe a period of limitation for a suit or application for recovery of a debt due to the company from a third party. The onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at even under the residuary article 120 of the Limitation Act, 1908, the application was barred. When the matter came before a single judge, he dismissed the application as barred by limitation. On this aspect of the matter, the learned judge referred to the various rulings of the English court and said : "This statement, he argued, gives the official liquidator a new right and that the right of action only accrues when he is appointed official liquidator or at any rate at the winding-up of the company. But, it has been pointed out in the cases to which I have referred that the corresponding section in the English Companies Act is merely one of procedure and gives no new right to the official liquidator. I think it must be clear that what the official liquidator has at his disposal is a summary method of enforcing such rights as the company could have enforced or shareholders could have enforced before winding-up of the company and no more. If proceedings had been taken against the directors before the winding-up by the shareholders or by some others of the directors, the right of action would have accrued to the company or those other persons, when the misfeasance took place, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion only and gives no new rights : See City Equitable Fire Insurance Co. Ltd., In re [1925] 1 Ch 407 at page 507. Sir Earnest Pollock M. R. says with reference to this section : 'I desire to say, though this is not the first time that it has been said, that that section deals only with procedure and does not give any new rights. It provides a summary mode of enforcing existing rights.' To the same effect is the judgment of Sargant L.J., at page 527. This ruling is decisive of the question, and has been regarded as conclusive of it by a Bench of the Lahore Court in Bhim Singh v. Basheshar Nath Goehla [1926] ILR 8 Lah. 167 ; AIR 1927 Lah. 433. In my opinion, therefore, it is impossible to hold that the liquidator acquired a new right from the winding-up order to enforce against the directors a claim which had already become time barred whether under article 36 or article 120 of the Limitation Act." The ruling of the Division Bench was followed and the reasoning was adopted with respect to an application under section 469 of the Companies Act, 1956, by a learned single judge of this court in Malabar Petroleum Co. v. Continental Oil Co. [1963] 33 Comp. Cas. 367 ; AIR 1963 Mad. 307. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der will have to be excluded. Therefore, we have to first find out that article of limitation under the Limitation Act applicable to the suit or proceeding and exclude, from the total period provided under that article, the periods contemplated under section 458A, and find out whether, on the date when the application or suit was filed, it was in time. Having regard to the conclusion, which we have already referred to, that concurrent jurisdiction has been conferred both on the civil court as also on the company court, and the option given to the liquidator to make the claim by way of an application or a suit in respect of money claims, and the need to treat this as a suit, though in the form an application, in view of the special provisions in the Companies Act, that when a claim is made it has to be decided whether it could have formed a claim in a regular suit and, if that is so, the limitation applicable to that proceeding will have to be applied. If such a claim could not be the subject-matter of a suit, but could be claimed by way of an application only, then the corresponding article applicable to such an application should be determined. In either case, in computing the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case, and not article 137. Again, we have to make it clear that in each case, the application of the liquidator will have to be considered with reference to the nature of the claim and not the article applicable in the Limitation Act and then only the computation could be done in order to find out whether the claim was in time or not. Two other decisions cited at the Bar now be noticed and they are, a decision of the Delhi High Court in Liberty Finance P. Ltd., In re [1979] 49 Comp. Cas. 287 and a decision of the Karnataka High Court in Unico Trading & Chit Funds (India) P. Ltd v. S.H. Lohati [1982] 52 Comp. Cas. 340 . Each of these decisions is by a single judge, and both have followed a Full Bench decision of the Delhi High Court in Faridabad Cold Storage & Allied Industry v. Ammonia Supplies Corporation P. Ltd. [1978] 48 Comp. Cas. 432, which decision, in turn, had referred to the Full Bench decision of the Delhi High Court in Jaimal Singh Makin's ( supra) and, therefore, those two decisions need not be discussed. In the result, therefore, we are of the view that article 137 of the Limitation Act is not the article applicable in all cases, but the relevant article will h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the Schedule to the Limitation Act, the residuary article 137 will be applicable. The expression 'when the right to apply accrues' has to be decided with reference to the right of the company and the nature of the claim. In other words, as to when the right to recover the claim accrued to the company, and not on the basis that the 'right to apply accrues only on the date the winding up order is passed or the official liquidator is appointed as provisional liquidator' as the liquidator enforces the claim of the company. In computing the period of limitation, for claims to be made under section 446(2)(b) of the Act, firstly the applicability of the relevant article with reference to the nature of the claim has to be decided and then the question as to whether such period of limitation had or had not expired on the date the petition for winding up was filed or the winding up proceeding commenced has to be determined. In the event it is found that as per the period of limitation prescribed by the relevant article applicable to the claim, the period of limitation had not expired on the date the winding up proceeding commenced, to that period of limitation, the two periods describe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r enforcement of such a right cannot become barred even before it accrues. For this purpose, reliance is placed on the following observation of a Division Bench of the Punjab and Haryana High Court in Maruti Ltd. v. Parry & Co. Ltd. [1989] 66 Comp. Cas. 309 , 314 : "It was observed in General Rolling Stoch Co., In re [1872] Ch. 646 that the effect of a winding up order is to stop the running of the statute of limitation in the company's favour. On a winding up order having been passed, the company's supervision vests in the court and all proceedings like a petition under section 446(2) stem from the winding up order. It has no independent existence. The company court's jurisdiction to determine the claim arises only on the passing of the winding up order. Thus, the remedy of claim arises only on the passing of the winding up order. If the construction to the cause of action is put as the last date of the transaction and the limitation is to commence from the said date, the remedy might become barred before it is available to the claimant resulting in the provisions of section 446(2) becoming redundant. The said interpretation would deprive the company of its right to prefer a cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing instituted by the official liquidator is in the form of an application, it can be said that in substance it is a suit and the provisions of the Limitation Act relating to suits will apply. The question has been considered by a learned single judge of the Calcutta High Court in Indian Iron & Steel Co. Ltd. v. Shish Ram [1979] 2 LLJ 94 ; [1980] 57 FJR 11, a case under the Workmen's Compensation Act. While holding that a claim petition under the Act would tantamount to a "suit" within the meaning of the Limitation Act, the learned judge said (at page 20 of 57 FJR) : "The word 'suit' has not been defined in the Code of Civil Procedure but in legal parlance it means any legal proceeding of a civil kind brought by one person against another. Under the code a suit is instituted when the plaint, which is nothing other than a statement of the claim, or recital of the cause of action, is presented in a court. In the case of a claim for workmen's compensation before the Commissioner, the claim has also to be presented before him. The form of lodging the claim, instead of being by a plaint, is to be made by an application in a statutory form. Since the proceeding commences on the lodging ..... X X X X Extracts X X X X X X X X Extracts X X X X
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