TMI Blog1967 (12) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... to give evidence, if necessary, in proof of the debt. The official liquidator asked the creditor to satisfy him that the claim was within limitation, and Radheyshyam Khandelwal thereupon produced a letter of the company dated March 8, 1958, acknowledging the amount of Rs. 11,800 as due from the company on December 25, 1957. He asked for further time to, produce more evidence and recorded his statement on July 7, 1966. On a consideration of the evidence before him, the official liquidator reached the conclusion that the letter dated March 8, 1958, was not genuine and that the balance-sheet dated December 31, 1956, on which also reliance was placed by the creditor in proof of his debt, could not be considered as an acknowledgment and did not save the limitation. He also held that the claim was already time-barred on the date of the balance-sheet, that is, before December 31, 1956. In this view of the matter, he held that the claim had not been proved, and dismissed it by his order dated July 22, 1966. It is against this decision that the present appeal has been filed. Mr. L. R. Bhansali, learned counsel for the appellant, found it difficult, for obvious reasons, to assail the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditor is dissatisfied with the decision of the liquidator in respect of his proof, he may, not later than 21 days from the date of service of the notice upon him of the decision of the liquidator, appeal to the court against the decision. Then the rule provides the mode of filing the appeal, and goes on to say that, in deciding it, the court shall have "all the powers of an appellate court under the Code". When, therefore, the provision of sub-section (6) of section 460 of the Act is read with rule 164, it becomes quite clear that there is justification for the argument that the appeal is really by way of an application for the scrutiny, by the court, of the decision complained against. There is no requirement that this right or opportunity is subject to any rigid rules of procedure for, while rule 164 provides that, on the presentation of an appeal, the court shall have all the powers of an appellate court under the Code of Civil Procedure it does not go on to provide further that the rigid rules of procedure contained in the Code in respect of an appeal shall be applicable to such appeals also. I am, therefore, persuaded to take the view that, while considering an appeal agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y it in any way it thinks necessary in the light of the evidence before the court. The court must approach the question de novo and determine to what extent the claimants ought to be allowed to rank as a proving creditor". Buckley J., therefore, reviewed the evidence before the court and admitted the proof. That decision has been approved in In re Trepca Mines Ltd. [1960] 1 WLR 1273 and appears to take the correct view of the matter. I am quite satisfied that it is open to this court, in the present appeal, to consider all the evidence of the creditor and to decide the proof afresh. It may, however, be pointed out that the appellant does not really seek to tender additional evidence of a nature different from that relied on by him before the official liquidator, or of which the genuineness may be said to be in dispute, for he has merely relied on the balance-sheets and the account books of the company. In his letter dated November 12, 1965, the appellant had already informed the official liquidator that his debt had been credited in the company's books of account and had been confirmed by the company from time to time. A request was also made to the official liquidator to v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shapoor Fredoom Mazda v. Durga Prosad Chamaria AIR 1961 SC 1236 , what section 19 requires is that the words used in the acknowledgment must indicate the existence of "journal relationship between the parties such as that of debtor and creditor" and the courts lean in favour of a liberal construction of such a statement unless it is shown that it was made clearly without intending to admit existence of such relationship. With all respect to the learned judges who decided Kashinath Shankarappa's case ( supra ), do not, therefore, find it possible to follow the view expressed in it. Besides, that case is distinguishable on the ground that the balance-sheet was not made or signed by a duly authorised agent of the company. The decision was specifically considered in Bengal Silk Mills Co. v. Ismail Golum Hossain Ariff AIR. 1962 Cal. 115 and it was held that, although there was a compulsion upon the managing agents to prepare the balance sheet, the admissions made in it did not cease to be an acknowledgment of liability merely on the ground that it was made in discharge of a statutory duty. It was, therefore, held that such an admission would fall within the purview of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, also provided that the balance-sheet should be signed by two directors or, when there were less than two directors, by the sole director and by the manager or managing. agent (if any) of the company. Without such authentication, an admission of liability in a balance-sheet will not be authorised and will not amount to an acknowledgment of liability within the meaning of section 19 of the Limitation Act, 1908. It is not disputed, and is in fact admitted, that the balance-sheet (annexure "III-A/2") of the company as on October 29, 1953, and the balance-sheet (annexure "III-B/2") as on October 23, 1954, have been authenticated by all the four directors of the company. The balance-sheet (annexure "III-C/2") as on November 5, 1955, has been authenticated by three of the directors including Radheyshyam Khandelwal, and the balance-sheet, as on December 31, 1956, has been authenticated by two directors other than Radheyshyam Khandelwal. Ex facie, therefore, the balance sheets have been shown to be properly authenticated. But the more important question is whether this authentication has been vitiated on account of any fiduciary relationship between the directors, or any of their, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet was sent in the usual way, that would have amounted to a sufficient acknowledgment within the authorities. The difficulty, however, was that the promise, if any, was a promise made by the directors, as a board acting on behalf of the company, to pay to themselves the amount of the directors' fees. His Lordship held that this was not, in the circumstances, a promise to pay on behalf of the company having regard to the position which a director, as the agent of the company, necessarily occupies in relation to the company. If I may say so with all respect, this view of Maugham J. brings out, the correct position of the law. Maugham J. has not taken the view that if an acknowledgment is not found to be vitiated for any justifiable reason, it will not save the limitation for the person in whose favour it has been made, and the decision cannot, therefore, benefit the company. The decision in In re Transplanters (Holding Company) Ltd. [1958] 2 All. ER 711 ; [1958] 1 WLR 822 was also based on the peculiar circumstances of the case. There the applicant sought to prove for money lent to the company by him, but the liquidator rejected his proof on the ground that the debt was statute- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts, as shown in the balance-sheet, were unauthorised as they were not passed at the general meeting of the company, and that was sufficient to discredit the alleged acknowledgment. It was, however, held that even if the board of directors had expressly acknowledged the debt in writing signed by them, that would nevertheless not operate as an acknowledgment to save time, because, in effect, it would be an acknowledgment made by a director of a debt due to himself. It was further observed that while it was true that the petitioner was not a party to the proceedings of the board of directors, that in itself made no difference to the application of the principle. With all respect, I regret my inability to follow this view. Firstly, it was not necessary to go to the extent of making these observations because it had been found that even on the assumption that the proceedings at the meeting of the board of directors amounted to an acknowledgment of the debt, it was barred when the application was filed for winding up the company. Secondly, the learned judge referred to the decisions In re Coliseum (Barrow) Lid. [1930] 2 Ch. 44 and In re Transplanters (Holding Company) Ltd. [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion whether a particular acknowledgment in an authenticated balance-sheet is valid, is therefore a question which has to be decided on the facts and circumstances of each case. As I have pointed out earlier, the appellant has relied on the four balance-sheets which state the assets and the liabilities of the company for the period October 29, 1953, to December 31, 1956. So even if it is assumed that Radheyshyam Khandelwal stood in a fiduciary relationship because of his father's interest in the debt owed by the company, each one of those balance-sheets having been signed by not less than two other directors who, it is admitted, were not in any way interested in the acknowledgment of the liability in favour of the appellant, there is no reason why they should not be held to be valid acknowledgments of the liabilities within the meaning of section 19 of the Limitation Act, 1908. But it still remains to consider whether the balance-sheets referred to above relate to the appellant's proof and really extend the period of limitation. The debt is of March 21, 1949, and Mr Bhansali has placed reliance on agreement exhibit 1 dated June 25, 1951, which purports to have been signed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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