TMI Blog1993 (1) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts. 4. We have heard both sides. 5. Before we embark upon considering the question referred to us for opinion, it is necessary to notice sections 446 and 458A of the Companies Act, 1956 (hereinafter referred to as the Act ), as the answer to the question depends upon the interpretation to be placed on these sections. 6. Sections 446 and 458A of the Act read as follows : 446. Suits stayed on winding up order. - (1) When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceedings shall be commenced, or if pending at the date of the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in force; 2. Such prescription of the period of limitation must be in respect of any suit or application; and 3. Such suit or application is filed in the name and on behalf of a company which is being wound up by the court. 9. If these conditions are satisfied, - (a) the period from the date of commencement of the winding up of the company to the date on which winding up order is made (both inclusive), and (b) a period of one year immediately following the winding up order shall have to be excluded. Therefore, this section only provides for exclusion of the period from the date of commencement of the winding up proceeding of a company plus one year following the date of the winding up order. 10. In a case where a suit or application is not filed in the name and on behalf of the company or cannot in substance or in effect be construed or considered to have been filed for and on behalf of the company which is being wound up by the court, the provisions of this section are not attracted. Similarly, if on the date of commencement of the proceedings of winding up of the company, any claim of the company which can be made the subject of a suit or an application, was bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name and on behalf of the company and to sell properties - both movable and immovable - of the company and to realise the assets of the company. This was to be done for the purpose of distributing the assets of the company amongst the claimants. The Supreme Court further held as follows (at page 637) : Now at a stage when a winding up order is made, the company may as well have subsisting claims and to realise these claims the liquidator will have to file suits. To avoid this eventuality and to keep all incidental proceedings in winding up before the court which is winding up the company, its jurisdiction was enlarged to entertain a petition amongst others for recovering the claims of the company. In the absence of a provision like section 446(2) under the repealed Indian Companies Act, 1913, the official liquidator in order to realize and recover the claims subsisting debts owned to the company had the unenviable fate of filing suits. These suits as is not unknown, dragged on through the trial court and courts of appeal resulting not only in multiplicity of proceedings but in holding u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings as set out therein which had become barred by time on the date the winding up proceeding commenced. No doubt, in the case of money claim, the debt does not get extinguished merely because the enforcement and recovery of the debt through the process known to law is barred by time. If the creditor comes across the money of the debtor without any stipulation as to the manner of appropriating the same, it would still be open to the creditor to appropriate it towards the debt which has become time-barred. But, such a situation does not arise when it is sought to be recovered through the process of the court which is winding up the company. 15. Sections 446 and 458A, both appear in Chapter II Part VII of the Act. Part VII relates to winding up. It is divided into five chapters. Chapter I deals with preliminary matters. Chapter II deals with winding up by the court. Chapter III deals with voluntary winding up. Chapter IV deals with winding up subject to supervision of court and Chapter V contains the provisions applicable to every mode of winding up. Section 446 occurs in the context of consequences of winding up order. Section 458A provides for exclusion of certain time in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies (Amendment) Act, 1960. Thus, the jurisdiction conferred upon the court which is winding up the company under sub-section (2) of section 446 of the Act, becomes exercisable from the date the winding up order is passed, the covers the proceedings filed or commenced even before the order of winding up is passed, and fall within the clauses (a) to (d) as set out in sub-section (2) of section 446 of Act. As a consequence thereof, no suit or other legal proceeding pending against such company in any court other than the court which is winding up the company, shall be proceeded with and the same shall have to be transferred to the court which is winding up the company; and the same shall have to be disposed of by that court. Sub-section (3) of section 446 of the Act gives effect to this consequence and specifically provides for transfer of pending suits and other legal proceedings to the court which is winding up the company. However, the proceedings in appeal pending before the Supreme Court or a High Court are excluded from the purview of sub-section (1) and sub-section (3) of section 446 of the Act. Thus, the object of section 446 of the Act is to ensure that no suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Legislature which is that even before a winding up order is actually made, the court which is seized of the proceedings can and may in its discretion entertain or dispose of any claim made by or against the company. I, therefore, see no reason to read any ambiguity into the language of sub-section (2) of section 446 of the Act to construe it as acquiring jurisdiction only after the winding up order is made . 19. It is not possible to agree with the aforesaid view. Section 446 occurs under the heading Consequences of winding-up order. Under this heading sections 444 to 447 are found. Section 441 deals with the commencement of winding-up proceedings, and sections 442 and 443 deal with the powers of the court after the presentation of a winding-up petition. Section 441 provides that where, before the presentation of a petition for winding up of a company by the court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of passing of the resolution. In any other case, the winding up of a company by the court shall be deemed to commence on the date of presentation of the petition for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suits, applications or proceedings or claims etc., as set out in clauses (a) to (d) of sub-section (2) of section 446 of the Act is governed by the relevant provisions of the Limitation Act or the provisions of any other law prescribing the limitation for the same. Therefore, on a reading of section 446 and 458A in the context these sections occur, it is not possible to hold that the cause of action for any claim, suit or proceeding or application by or against the company to be instituted, will accrue only on the appointment of the official liquidator as provisional liquidator. It is relevant to notice that the official liquidator only enforces or recovers the enforceable claims of the company which is being wound up and collects the assets of the company and settles the liabilities. If, on the date of the commencement of the proceeding for winding up of the company, any claim by or against the company under the relevant provisions of the Limitation Act or any other law for the time being in force had become barred by time, the fact of passing of the winding-up order and appointment of a provisional liquidator does not result in, and cannot be held to result in, the creation or ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement of the winding up proceeding. Of course any claim of the company which becomes due on or after the commencement of the winding up proceeding, or had not become barred by time on or before the commencement of the winding up proceeding, he can enforce and recover the same by making an application under section 446(2)(b) of the Act within the period of limitation computed as per the period prescribed under the relevant article of the Limitation Act and on excluding the two periods mentioned in section 458A of the Act. Therefore, with great respect, we find it difficult to accept the reasoning in Faridabad Cold Storage's case that as the right to avail of the remedy provided under section 446(2)(b) of the Act, becomes available to the official liquidator only on the passing of the winding up order; therefore, the period of limitation to enforce the claim through the court winding up the company should be computed from the date on which the winding up order is passed. 25. The object of section 446 read with section 458A of the Act is not to make the claim of the company under winding up enforceable or revive it even though it had become barred by time before the commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer, Labour Court, Hubli, (1969)IILLJ651SC , have been relied upon. 29. In Kerala State Electricity Board's case [1977]1SCR996 , the respondent had filed a petition under sections 10 and 16(5) of the Indian Telegraph Act, 1885, read with section 51 of the Indian Electricity Act, 1910, claiming compensation against the appellant - Kerala State Electricity Board. The Electricity Board assessed the compensation at ₹ 1,619.90. The respondent filed a petition before the District Judge, Tellicherry, under section 16(3) of the Indian Telegraph Act, 1885, claiming enhanced compensation. Before the District Judge, a question arose as to whether the provisions of article 137 of the Limitation Act, 1963, were applicable to the petition filed under section 16(3) of the Indian Telegraph Act, 1885. The Supreme Court held that the District Judge acted judicially as a court. It was also held that where by statutes, matters are referred for determination by a court of record with no further provision, the necessary implication is that the court will determine the matters as a court (see National Telephone Co. Ltd. v. Postmaster General [1913] AC 546. In the present case, the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailed of even though there is another article in the Limitation Act which is relevant to the claim in question. Similarly, in Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubli, (1969)IILLJ651SC , also, no such proposition has been laid down. This is clear from para 11 of the judgment which is as follows (at page 1343) : The point in our opinion, may be looked at from another angle also. When this court earlier held that all the article in the third division to the Schedule, including article 181 of the Limitation Act of 1908, governed applications under the Code of Civil Procedure only, it clearly implied that the applications must be presented to a court governed by the Code of Civil Procedure. Even the applications under the Arbitration Act that were included within the third division by amendment of articles 158 and 178 were to be presented to courts whose proceedings were governed by the Code of Civil Procedure. At best the further amendment now made enlarges the scope of the third division of the Schedule so as also to include some applications presented to courts governed by the Code of Criminal Procedure. One factor at least remains constant and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. Chadha and Co., AIR1978Delhi167 [FB], the Full Bench of the Delhi High Court following the decisions of the Supreme Court in Kerala State Electricity Board [1977]1SCR996 and Town Municipal Council, Athani's case (1969)IILLJ651SC , has held that article 137 of the Limitation Act, 1963, is applicable to the applications filed by the official liquidator under section 446(2)(b) and section 543 of the Act, and the limitation was computed from the date the winding up order was passed on the ground that the right to apply accrued on the date the winding up order was passed. 35. Again, the same Full Bench of the Delhi High Court in Jaimal Singh Makin v. Official Liquidator of Majestic Financiers (P.) Ltd., AIR1978Delhi169 has taken a similar view. In this case, section 446(2)(b) of the Act has been referred to but the computation of the period of limitation and the applicability of article 137 of the Limitation Act has not been considered. 36. For the very same reasons on which we have found ourselves in disagreement with the view expressed in Faridabad Cold Storage's case, we find it difficult to agree with the view expressed in the aforesaid two decisions also AIR1978Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 446 was amended. The provision for filing any suit or proceeding by or against the company was already there before the amendment. The amendment introduced in clauses (b), (c) and (d) to sub-section (2) of section 446 was intended to confer a very comprehensive jurisdiction upon the company court to decide all claims by or against the company so that the winding up proceedings can be expedited. It is for a similar objective that section 45B had been added to the Banking Companies Act, 1949. The scope of section 45B of the Act was considered by the Supreme Court in Dhirendra Chandra Pal v. Associated Bank of Tripura Ltd. 1955CriLJ555 . The Supreme Court dealing with Part III-A of the Banking Companies Act, came to the conclusion that it was to avoid unnecessary delay and expense that the sections in Part III-A of the Act were brought in and the claims under section 45B are summary and are initiated by way of applications. 39. In Dhirendra Chandra Pal v. Associated Bank of Tripura Ltd. [1955] 25 Comp Cas 19 (SC), the Supreme Court has not held that section 45B of the Banking Companies Act, 1949, covered claims which were barred by time on the date section 45B came int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question as to the manner in which the period of limitation has to be computed did not arise. In this decision, regarding section 458A of the Act it was held that the provision was intended to extend the limitation period for the benefit of the company (in liquidation) and the official liquidator appointed to carry on its winding-up process by collecting the assets and distributing the same among those entitled to the same. It was further held that the underlying object in extending the limitation obviously is to enable the liquidator to take charge of the company's affairs, to examine the records, account books, study the statements, decide against whom to proceed and in what manner. The proceedings so initiated by him whether by way of suit or judge's summons for enforcement of the recovery of debts cannot but be on behalf of the company having regard to his source of authority, viz., the provisions of the Companies Act and the statutory obligation in discharge of which he has to act in that behalf. Therefore, even this decision cannot be of any assistance to the stand taken by the official liquidator that as he is entitled to make an application only on and from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be seen from this provision that in computing the period of limitation the time during which the company petition for liquidation was pending, as also a period of one year from the date of the winding up order 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, the concurrent jurisdiction has been conferred both on the civil court as also on the company court, and 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 form an application, in view of the special provision 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 the proceeding will have to be applied. If such a claim could not be the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. Therefore, whether the claim was barred or was enforceable has to be determined with reference to the cause of action arising and the date of the filing only and all the other provisions will only enable the computation of the period. We are, therefore, of the view that though the application is filed in exercise of the option provided to the liquidator, if the claim has to be considered as in the nature of a suit, the provisions in the Limitation Act for such suits only would govern 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. 45. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judge has followed this decision reported in in the two subsequent decisions rendered by him in Galaxy Trading and Chit Funds (P.) Ltd. (In Liquidation) v. S. Bashanudien and Unico Trading and Chit Funds (India) Pvt. Ltd. (In Liquidation) v. Zahoor Hassan. 49. No doubt in Galaxy Trading and Chit Funds (P.) Ltd.'s case, the following observation was made (at page 485) : If on April 1, 1979, the claim against the first respondent could not be enforced on account of the bar of limitation, considering the transaction as a chit transaction and no more, then notwithstanding the fact that by virtue of the provisions contained in section 458A of the Companies Act and applying article 137 of the Limitation Act, an application under section 446(2)(b) of the Companies Act not being a suit, there was no legally enforceable claim on the date the petition for winding up was presented. If this view is applicable, then the claim against the first respondent to compel him to pay the balance of the subscription together with the interest accrued was not maintainable under that section. 50. The aforesaid underlined observation is quite inconsistent with the following observation made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly after the winding up order is made, therefore, he has three years time. It is not possible to accept the latter statement as correct. These two propositions do not go together. If the claim was not enforceable on the date the winding up petition was filed as having been barred by time, it is not possible to hold how the order of winding up would revive or give rise to a fresh cause of action or a fresh starting point of limitation. The official liquidator only enforces the claims of the company. Therefore, there is no question of starting a fresh period of limitation. If the cause of action had arisen prior to the filing of the petition for winding up and the period of limitation for enforcing the claim had not expired on the date of the petition for winding up, no doubt the official liquidator can enforce such a claim within the time allowed by law. But if the claim of the company had become barred by time on the date the petition for winding up was filed, it is not possible to hold by any interpretation of law that the official liquidator would have a fresh period of limitation from the date the winding up order is passed. Thus the basis or the two decisions of the learned sin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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