TMI Blog1962 (8) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... II of 1947). Raja Bahadur Brij Narain Singh was appointed the authorised Controller of the Company and certain agreements had been entered into with the Raja Bahadur in respect of the running of the Mills, but these expediencies do not appear to have yielded any spectacular results. 3. On the 10th November, 1953, a 'Controller' appears to have been appointed by the Central Government under the Industries Development Regulation Act of 1951. On the 21st May, 1954, however, the Central Government cancelled the aforementioned appointment- with the result that the management of the Mills reverted to the old hands. 4. Subsequently, by a notification dated July 16, 1954, Sri Mangtu Ram Jaipuria of Messrs. Jaipuria Brothers Limited of Kanpur was appointed a Controller under the provisions of the Essential Supplies (Temporary Powers) Act, 1946 (Act XXIV of 1946). The authorised Controller, Sri Mangtu Ram Jaipuria, however, ceased to function from the 8th October, 1955. The Mills in respect of which Controllers successively appear to have been appointed, were sold on the 10th November, 1955; so that thereafter there could be very little question of controlling the working and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to continue to be the Chairman for life of the Board of Directors of the Company. 9. On the 17th April, 1947, Raja Bahadur Brij Narain Singh, whom we shall hereafter refer to as the Raja Bahadur, is alleged to have executed a deed of nomination nominating Anrudh Pratap Narain Singh as his successor both as a partner and as Chairman of the partnership firm. On the 26th September, 1949, the Raja Bahadur died, and it appears that after his death disputes arose in regard to who was entitled to manage the affairs of the Mills. These disputes appear to have brought about the misfortunes of the Milts which subsequently led to Government taking action under the Industrial Development Regulation Act and thereafter under the Essential Supplies (Temporary Powers) Act, 1946, by appointing Sri Mangtu Earn Jaipuria as an authorised controller. 10. The appellant J. A. Dixit claimed to have been appointed General Manager by Raja Anrudh Pratap Narain Singh on the 22nd June, 1954, in exercise of the powers vested in him as Chairman of the firm of the Managing Agents. The appointment of the appellant J. A. Dixit was challenged on two grounds, first, that Raja Anrudh Pratap Narain Singh had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Partnership Deed under which the firm of Raja Bahadur Brij Narain Singh and Company was constituted, the Raja Bahadur, had the right to nominate his successor as a partner in the partnership firm. Under Clause 15 of the same Deed the Raja Bahadur was also entitled to nominate his successor to be the Chairman of the partnership firm. Therefore, under the Partnership Deed and the effect which this Deed had on the overall management of the Jagdish Sugar Mills Limited (in Liquidation) the Raja Bahadur could determine the future Chairman of the Managing Agency on his death, and it was the contention and claim of J. A. Dixit appellant that the Raja Bahadur had so exercised his right and that he had appointed Raja Anrudh Pratap Narain Singh to be his successor and to exercise all the rights that the Raja Bahadur could and did himself exercise. 13. The learned Company Judge directed his attention, as we have said earlier, pointedly, to deciding whether or not Raja Anrudh Pratap Narain Singh had been validly appointed by Raja Bahadur Brij Narain Singh his successor to fill the capacity of a partner and Chairman of the firm of Managing Agency. Raja Anrudh Pratap Narain Singh was examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the document aforementioned, stated that it did bear the signature of the Raja Bahadur, and the witnesses identified his signature. This document was accepted to be a deed of nomination and it bore, according to the testimony of the witnesses mentioned above, not only the signature of the Raja Bahadur but also the signatures of the witnesses, Sri Shyam Manohar Advocate stated that the Raja Bahadur did not know any English and therefore he had explained the contents of the deed to the Raja Bahadur and that the Raja Bahadur had signed the deed after it had been read over and explained to him. After we had the evidence of the document in Court and its proof by the two witnesses mentioned above, Sri R. P. Dikshit, the Official Liquidator, more or less gave up his contention in-respect of the proof of the deed of nomination: indeed, it was more or less conceded that the nomination of Raja Anrudh Pratap Narain Singh in fact could not be challenged, but even so it was contended that even if Raja Anrudh Pratap Natain Singh had been validly nominated as Chairman of the Board of Directors and the Managing Agency, he could not on his own individual authority appoint J. A. Dixit appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat that appointment clothed J, A. Dixit with the right to obtain all the remuneration that he claimed, for the entire period of his claim. 15. We have DOW to consider, in view of what we have said just above, first, whether the appointment of Dixit was a bona fide appointment, and secondly, whether Dixit acted or even could act in the capacity in which he was appointed under the circumstances in which Company of which he was appointed the General Manager was. We shall first take up the question of the bona fides of the appointment, and in this connection we have to recapitulate a few facts already noticed. 16. On the 10th November, 1953, a Controller was appointed by the Central Government under the Industries Development Regulation Act, 1951, even though that appointment was cancelled by a subsequent order of the Central Government made on the 21st May, 1954. Subsequently, however, by a notification of the 16th July, 1954, Sri Mangtu Ram Jaipuria of Messrs. Jaipuria Brothers, Kanpur, was appointed Controller of the Jagdish Sugar Mills Limited under the provisions of the Essential Sup-plies (Temporary Powers) Act, 1946. This authorised Controller continued to function from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixit to take over charge from Sri Mangtu Ram Jaipuria, the ex-Controller of the Mills (the words ex-Controller of the Mills' were used because of the earlier control of the Mills under the Industries Development Regulation) Act. It is interesting to note that even though Dixit was unable to get charge over the management from Sri Mangtu Ram Jaipuria, he does not appear to have sought the directions of Raja Anrudh Pratap Narain Singh in regard to this matter, nor does it appear that Raja Anrudh Pratap Narain Singh ever afterwards, when he knew that the person whom he had appointed General Manager of the Jagdish Sugar Mills Ltd., could not function in that capacity, indicated his intention to let appellant Dixit continue to be the General Manager, even though he could not function as such. All this leads to one and only one conclusion, namely, that Raja Anrudh Pratap Narain Singh made the appointment of Dixit as General Manager in the interregnum following the removal of the Controller, who had been appointed under the Industries Development Regulation Act, and the appointment of Sri Mangtu Rim Jaipuria under the Essential Supplies (Temporary Powers) Act, in an endeavour, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awfully claim any remuneration. The appointment was valid only in so far as Raja Anrudh Pratap Narain Singh, according to our findings above, had the right or the authority to appoint a General Manager but that fact alone, as we have said earlier, did not clothe the appellant with the right to claim the sums of money that he has laid claim to. The appointment proved abortive, at any rate, in regard to the functions which the appointee was to perform. Under such circumstances it would in our opinion, be highly unjust to entertain the appellant's claim. 20. THE Official Liquidator pleaded the bar of limitation against the claim and the learned Company Judge held that a claim for salary became due at the end of each calendar month and, therefore, all salary for the months tip to and including January, 1955. would be time-barred, when the winding up order was passed, namely, on 21-2-1958, since the period of limitation for wages and salary was only three years from the time when the same became due. In our opinion, the learned Company Judge was right in his view on the question of limitation but then we are not called upon to consider this aspect of the matter because, in our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four items of liability already mentioned by us, we need say no more than that these items were not pressed for acceptance on behalf of the appellants. The two matters in relation to the decision of the question of limitation that needed careful scrutiny were, first, what was the article of the Limitation Act that applied to the claim in question, and secondly, what was the starting point from which limitation was to be computed. 26. In order to determine as to which was to be the starting point of limitation one has to decide whether the starting point is to be the date on which the winding-up petition was presented or the date when the winding-up order was made. This question as to the point from which limitation is to be calculated became very material in the instant case because if the starting point of limitation was taken to be the making of the winding-up order then one result would follow, while quite another result would follow if the starting point was to be the date of the presentation of the winding-up petition. 27. It was contended on behalf of the appellants that the starting point should be the presentation of the winding-up petition and not the making of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be suspended from that date. This argument was founded on what was provided for in Section 168 of the Indian Companies Act, 1913. The section is in these words : A winding-up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding-up. From the words of the above section no one could, in our judgment, spell out a case of suspension of limitation from the time the application for winding-up was presented. Section 168 does not say that on the making of an 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. 31. Section 171 of the Companies Act, which provides for stay of suits and other legal proceedings against a company in liquidation, provides that the time from which the right of a person to proceed to recover his debts against the company in the ordinary course of procedure was to be suspended was from the time when the winding-up order had been made : the section did not provide for the suspension of the right of a claimant against a company from the date of the presentation of the winding-up pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 19 of the Limitation Act. The important ' things that have to be noticed in connection with applying the provisions of Section 19 of the Limitation Act are the following :- (1) That the alleged acknowledgment has been made before the expiration of the period of limitation. (2) That the acknowledgment is made in writing. (3) That the acknowledgment is signed by the party or his duly authorised agent against whom the acknowledgment is to be used for obtaining a fresh period of limitation. The section has added three Explanations to it and these Explanations have to be noticed since they are of significance in determining the question :ii hand. The first Explanation provides that an acknowledgment for the purposes of the section may be-sufficient even though the acknowledgment omitted to specify the exact nature of the right of property, or avers that the time for payment, delivery, performance or enjoyment had not yet come or was accompanied by a refusal to pay, deliver, perform or permit to enjoy or was coupled with a claim to a set-off or was addressed to a person other than the person entitled to the property or the right. The second Explanation was added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Company Judge looked at the evidence of Sheo Nath Singh with an amount of suspicion, as be says in his judgment, and therefore his evidence, inadequate as it was, could not render any assistance to the appellant to prove their case in regard to the letter. 36. We now come to consider the question as to whether the balance-sheets relied upon could provide adequate acknowledgment under the provisions of Section 19 of the Indian Limitation Act. Before a balance-sheet could be relied upon as an acknowledgment it had to be shown that the balance-sheet acknowledged a liability and that the liability had been acknowledged under the signature of a person who was a duly authorised agent of the Company. 37. The Official Liquidator conceded before the learned Company Judge that a balance-sheet signed by the authorised controller, whom the Government had put in charge of Jagdish Sugar Mills, could operate as an acknowledgment within the meaning of Section 19. He further conceded that a balance-sheet signed by the Manager of the Mills could also provide a valid acknowledgment under Section 19 provided it had been shown that the Manager had been specifically authorised to sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that question we should like to inform ourselves of the contents of a balance-sheet that the law requires, their effect and validity. Section 132 of the Companies Act provides for the contents of a balance-sheet and is in these words : (1) The balance-sheet shall contain a summary of the property and assets and of the capital and liabilities of the company giving such particulars as will disclose the genera] nature of those liabilities and assets and how the value of the fixed assets has been arrived at. (2) The balance-sheet shall be in the form marked F in the Third Schedule or as near thereto as circumstances admit; The words of this section closely follow the wording of Section 26 (3) of the then English Act, except that this section provided for a form which the English Act did not, 42. By Section 133 of the Companies Act provision was made for the authentication of the balance-sheet. That section reads thus : (i) Save as provided by Sub-section (2) the balance-sheet shall - (i) in the case of a banking company, be signed by the manager (if any) and, where there are more than three directors of the company, by at least three of those directors and, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany other than a banking company has to be signed by two directors, or when there are less than two directors, by the sole director and by the manager, if any, of the company. Therefore, under the aforequoted provision the balance-sheet in the instant case, in order to claim that it was a properly authenticated balance-sheet under the law, had to be not only signed by the Manager, if there was one, of the company but also by not less than two directors, or when there were less than two directors, by the sole director. The question, therefore, that arises is a composite question, namely, (a) whether the fact that the Jagdish Sugar Mills were under an authorised controller appointed under the powers conferred on the Central Government by the Essential Supplies (Temporary Powers) Act, 1946, absolved the controller of Ike responsibility cast on a director in order to properly authenticate a balance-sheet to sign it; and (b) whether under the powers conferred on the authorised controller by the relevant notification appointing him. authorised controller, the authorised controller could vest authority in the Manager to legally authenticate a balance-sheet? 45. Under the Essent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to directions to undertake any recurring liabilities, and the second was in regard to any non-recurring liabilities, but we are not concerned with those provisos in the instant case. An analysis of the powers conferred on the authorised controller, as noticed above, would show that all that the authorised controller was authorised to do was to issue directions. He was not vested as such with the powers of a director of a company. The fact that the authorised controller was authorised only to issue directions to persons having any functions of management in relation to the undertaking without doubt indicated that the control order contemplated the existence of persons having functions of management in regard to the undertaking, though after the promulgation of the control order their functions were subordinated to the directions issueable by the authorised controller. Keeping books of account, preparing statement of accounts and therefore preparing a balance-sheet may appropriately come under the functions of management in relation to an undertaking, but then the fact that the maintenance of account-books and the preparation of a balance-sheet were something in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that position in law. Therefore, in order that a balance-sheet, which was not authenticated in accordance with the provisions of the Indian Companies Act, could be treated as a proper acknowledgment under Section 19 of the Indian Limitation Act, it had to be shown that there was an acknowledgment of liability in writing and that the person who signed that acknowledgment was either the debtor himself or an agent duly authorised. Showing of an outstanding liability may amount to an acknowledgment of liability but that would not be enough for purposes of Section 19 of the Indian Limitation Act unless it was further shown that that liability was acknowledged by either the party to be bound by that acknowledgment or a person duly authorised by that party to make such an acknowledgment. In the normal course of things the only proper persons who could authorise another person to make an acknowledgment on behalf of a company would be the directors, but we may for the purposes of this case assume that because of the powers conferred on the authorised controller the authorised controller could give a direction to somebody to acknowledge a liability on behalf of the company, but then such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven above we are of the opinion that in this particular case the appellants were not entitled to seek an extension of the period of limitation under Section 19 of the Indian Limitation Act. Appeal No. 38 of 1961. 49. This appeal arises out of an application made by the Official Liquidator for the expunction of a claim made by 'the appellant against the Jagdish Sugar Mills Ltd., of ₹ 14,490.99 nP. which claim had actually been allowed by the Company Court on the 23rd October, 1959. The amount was claimed to have been due to the appellant as partner of Managing Agency firm which was running the Jagdish Sugar Mills. This claim was treated as within time with reference to the winding-up application which had been made on the 17th April, 1949. The Official Liquidator subsequent to the order of the learned Company Judge accepting the claim contended, when he applied for the expunction of the debt, that limitation in regard to the claim would have to be judged not in relation to the date of the winding-up application but in relation to the date of the winding-up order was the relevant date for determining the question of bar of limitation. The only point that remained for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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