TMI Blog1983 (4) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... tter was required to be brought up on April 15, 1980. It was again adjourned to April 18, 1980, and on that date the company application was disposed of by an order made by me by which certain directions were given and a commissioner was appointed to make a report after verification of stocks, etc ., belonging to the company. At that time, it was also argued that the newspaper advertisement of the petition should be deferred as such advertisement would result in incalculable harm to the company and the matter was likely to be settled out of court. Thereafter, by the request of one or the other of the parties, the petition together with other company petitions connected with this company petition came to be adjourned from time to time. It is only late in the year 1982 that the bank pressed for further progress in the petition. In the meanwhile, as directed, on May 29, 1980, the company had filed its objections to the petition. A brief reference will be made hereafter to the objections of the company. After the filing of the petition in this court, the bank has filed three suits in the city civil court for recovery of the loans advanced to the company by the bank. Those three suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the mode of endorsing in favour of the bank, the promissory notes executed by the company in favour of the directors above named, thus making the bank holder in due course of the promissory notes executed by the company. It suffices to state that there appears to have been some dispute between the bank and the company in regard to the manner in which the loans were disbursed and also the manner in which the loans were adjusted towards unpaid interest on earlier loans. The bank persistently demanded repayment of the loans. But the company did not make any arrangements to repay the loans. On the other hand, the company began to have its banking transactions with another bank contrary to the terms and conditions of the loans sanctioned by the bank to the company. It is, in these circumstances, a legal notice was served on the company on March 10, 1980, demanding payment of Rs. 2,90,01,748.99 inclusive of interest as on February 29, 1980, representing the totality of the claim as on that date. The company sent a reply to that notice seeking 45 days' time for sending a detailed reply on the sole ground that the chairman and managing director of the company were confined to bed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered in respect of the various pronotes relating to the loans in question, the last series of them being dated December 5, 1978, while one of the promissory notes itself was dated January 25, 1978. Thus, on the date of filing the petition, that is, April 11, 1980, all the debts in question were alive and enforceable. It is further asserted that filing of the suits for recovery of some of the debts could not be a bar to pursue the remedy under the Act as the reliefs prayed for in the proceedings and the suits in the civil court are vitally different and distinct. It is also asserted that the balance-sheet of the company, year after year, had disclosed its liability to the bank and that constituted sufficient acknowledgment of the debts in writing satisfying the requirements of section 18 of the Limitation Act, 1963 (corresponding to section 19 of the Indian Limitation Act of 1908). It is in the light of these rival contentions that the company court has to decide whether to dismiss the petition, with liberty to approach this court after the suits in question are disposed of finally or allow it to stand over till such disposal or to continue these proceedings and order advert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the sum of Rs. 14,33,642.99 together with current interest at 15 per cent per annum with quarterly rests from date of suit till date of payment. That claim relates to promissory note dated May 4, 1977, for Rs. 18,00,000 against the pledge of machinery, item No. 3 in the cash credit account extracted earlier in the course of this order. The suit is not admittedly barred by limitation, as the last date for filing the suit in the ordinary course would have been May 3, 1980, which date happened to fall during the summer vacation of the courts and, therefore, was presented on May 26, 1980, the date of reopening. In the written statement filed in O.S. No. 7303 of 1980, the company, first defendant therein, has stated that the loan agreement relating thereto was only a part of the single agreement for the total loan between the plaintiff-bank and the first defendant which comprise seven credit loan accounts. But, however, there is the plea that the loans were not disbursed faithfully, truly and punctually causing unnecessary delays to the company, as a result of which the company suffered sufficient loss and damage by incurring penalties, demurrages and various other losses in failin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Shyla S. Hegde, there is an admission of debts as due to the bank in the sum of Rs. 2,54,50,857 which includes the loan claim in the suit. The sum and substance of the written statement is again the same as in this petition with the additional plea that all the seven loans being one single transaction, the plaintiff-bank was not entitled to a decree as prayed for in the second suit, as in the earlier suit filed on April 5, 1980, the recovery sought was confined to Rs. 14,33,642.99 and, therefore, the suit was barred under Order 2, rule 2, of the Civil Procedure Code. Similarly, the plea of bar of limitation is specifically taken in para 2 of the written statement. There is yet another plea of misjoinder of cause of action, as the suit is based on a pronote executed on January 14, 1976, for Rs. 25 lakhs and also a promissory note executed for Rs. 20 lakhs on January 25, 1978. It is unnecessary for me to refer to the other grounds urged by the defendant-company to support its prayer for dismissal of the suit. Similarly, in the third suit, O. S. No. 2233 of 1982, filed on July 9, 1982, the prayer is for a judgment and decree against the defendants for the sum of Rs. 62,17,778'58 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g regard to the totality of the conduct of the company and its directors, namely, Shankar Hegde and Shyla S. Hegde, who are the other defendants in the suits. I am unable to find substance in the first contention that the defence is not vague but substantial and that the defence is bona fide. I have already expressed that this is not a final adjudication of the suits. That is for the appropriate court to decide. But, I have come to the above conclusion for the limited purpose of testing whether the defence put forward in this petition is such that the company court should countenance it as valid and tenable defence and bona fide in character and no more. The company court, therefore, can proceed with the winding up proceedings once it has come to the conclusion that there has not been a case made out of bona fide and tenable defence. This is the well-settled law in England as well as in India and the authorities are too many to be recited here. One should not overlook the fact that in regard to the first of the suits Mr. Sen did concede that the company would certainly be owing quite a large amount even if the counter-claim was allowed but only pleaded that having regard to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in execution for various other reasons. Whereas in the case of a winding up order being made in proceedings under the Act, the creditor is in a position to prove his debt and stand in line for such amount as he may realise. Therefore, he contends that it is not a bar for maintaining both a civil suit for recovery of debt and also a claim for a winding-up order in separate proceedings. I think this argument should be upheld. Next is the plea of limitation. Mr. Sen has definitely argued that prima facie all the claims are barred by time except the one to which I have already made a reference. It has been his argument that the suits filed being suits on pronotes, the cause of action should necessarily be from the date of the respective pronotes and not any other date. It is also his contention that the unilateral adjustment of payment of interest by the bank by adjusting their accounts cannot amount to part payment to give a fresh lease to a time-barred debt. He also contended that the revival letters, regarding which there is no dispute, in themselves do not give the right to the bank to claim the fresh lease as those revival letters were signed by Mr. Shankar Hegde and Shyla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditor. All the above three Indian cases relied upon the judgment of Lord Birkett J. in the case of Jones v. Bellegrove Properties Ltd. [1949] 1 All ER 498 (KB). It would be useful to briefly state the facts in Jones' case. Jones was a shareholder of the company in question. He was also a creditor. He had advanced certain sums amounting to about 750 pounds between certain dates. The dates in themselves if taken note of would have precluded him from enforcing his right as a creditor in regard to those advances. But the company in the balance-sheet of subsequent years had shown certain sums as due to sundry creditors. Jones attended the general meeting at which the balance-sheet was adopted. He led parol evidence to prove that he was one of the sundry creditors. On those facts, Lord Birkett J. held that the balance-sheet did constitute an acknowledgment in writing of the debt and, therefore, satisfied the requirements of law under sections 23 and 24 of the Limitation Act, 1939, of England. But, Mr. Sen has disputed the correctness of the Indian decisions in following Lord Birkett's judgment in Jones' case [1949] 1 All ER 498 (KB). He drew my attention to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been an effective acknowledgment as at December 31, 1965, of the liability of the company so as to take the matter out of the statute, if the acknowledgment had not been made by the directors in favour of one of themselves". Brightman J. has explained each of the cases and laid down the above law. The Indian judges had correctly understood the law regarding balance-sheet being an acknowledgment in writing of a debt if it was so shown therein. I am, therefore, compelled to fall in line with the foreign decisions and the Indian decisions and prima facie come to the conclusion that the present petition which undisputedly was presented within time was to enforce a liability of the company which it had acknowledged in the last balance-sheet as on June 30, 1979. In fact, Mr. Sundara Swamy has drawn my attention to the subsequent balance-sheets as on June 30, 1980, and June 30, 1981, wherein the acknowledgment continues in so far as it relates to the bank but with a note to the effect that it is in dispute. The earlier balance-sheets do not contain such a note. I am, therefore, of the view that the bank has established, prima facie, that the debts are not barred by time. The comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company nor was any material placed to support such a contention. I must, therefore, reject this limited argument of the respondent-company and hold that signing of the pronotes, the letters of revival and the balance-sheets do not invalidate their character as acknowledgment in writing under section 18 of the Limitation Act, 1963, as they are not creditors of the company nor do they have any fiduciary relationship with the creditor in their individual capacity. Mr. Sen has argued that the date of presentation of the petition is not relevant for purposes of examining the bar of limitation, but the court must see whether on the date the relief is to be granted, the debts in question are barred by time or not. Mr. Sundara Swamy for the bank has asserted the contrary and relied upon the decision of the Supreme Court in the case of Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao [1956] 26 Comp. Cas. 91 (SC); AIR 1956 SC 213. In the said case, the Supreme Court has ruled that the validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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