TMI Blog1967 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... sfy 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 ₹ 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. 2. Mr. L. R. Bhansali learned counsel for the appellant found it difficult, for obvious reasons, to assail the order of the Official Liquidator on the scanty evidence on which it was based and he has therefore argued w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 against the rejection of a creditor's proof, the Court is at liberty to consider any additional evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 Trepea 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. 5. 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 verify the claim from the Company's account books, and in his statement dated July 7, 1966 Radheyshayam Khandelwal had stated that the liability had been acknowledged by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the existence of such relationship. With all respect to the learned Judges who decided Kashinath Shankarappa's case. AIR 1951 Nag 255. I 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 Golam 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 19 of the Limitation Act. I am in respectful agreement with this view Reference may also be made to the decisions in Rajah of Vizianagaram v. The Official Liquidator, Vizianagaram Mining Co. Ltd. AIR 1952 Mad 136, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. But the more important question is whether this authentication has been vitiated on account of any fiduciary relationship between the directors, or any of them, and the Company, or for some other similar reason?. 14. Mr. Lodha has argued that as the liability was owed to M/s. Babulal Rukmanand, of which Rukmanand, father of Radheyshyam Khandelwal (one of the directors of the Company) was a partner, the authentication has been vitiated because of that fiduciary relationship inasmuch as Radheyshyam secured the acknowledgments in the balance sheets in his own interest and to his own advantage. For this submission, the learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 17. The decision in (1958) 2 All ER 711 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-barred. The applicant relied on two balance sheets of the company as acknowledgments of the company's indebtedness within Section 23 (4) of the Limitation Act. It was however found that at all material times the applicant was one of the two directors of the company, and the balance sheets were signed by the two directors. It was held that as the applicant had himself signed the balance sheets, his signature being necessary in order to comply with Section 155 (1) of the Companies Act, 1948 it was not open to him in his fiduciary capacity as director, to give such an acknowledgment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t my inability to follow this view. Firstly, it was not necessary to go 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 the decisions in (1930) 2 Ch 44 and (1958) 2 All ER 711 but as I have already pointed out, those cases do not support the extreme view taken in Krishnaswami's case. AIR 1964 Mad 191. So also, the facts in P. S. Thirumali Iyengar v. Official Liquidator, Sri-nivasa Mills Ltd., AIR 1962 Mad 253 which is the only other case cited by the learned Judge, were also quite different. 19. Wherever it has been found as a fact that the authentication of a balance sheet acknowledging the liability is regular and reliable and has not been shown to be vitiated, it has always been upheld, and I shall rest content by making a reference once again to (1947) 1 All ER 749: (1949) 1 All ER 198 ; AIR 1952 Mad 136 : AIR 1958 Punj 341 and AIR 1962 Call 15. In the Ledingham case (1947) 1 All ER 749 it so happened that certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e five partners of the Bharat Oil Mills. Bharatpur, in pursuance of their unanimous resolution dated June 19, 1951. It is claimed that under the agreement it was acknowledged that the firm was indebted to M/s Babulal Rukmanand for the sum which has been claimed in the liquidation proceedings. Then Mr. Bhansali has further submitted that on its incorporation, the respondent Company took over that liability by making a specific provision to that effect in paragraph 3(1) of its Memorandum of Association Then it is alleged that the four balance sheets referred to above made further acknowledgments of the liability so as to carry it up to December 31, 1956. As the period of limitation ceased to run with effect from November 25, 1958 when the winding up order became operative, it has been urged that the appellant's claim is well within limitation. 22. It however appears to me that I should agree with Mr. Lodha that as the genuineness of the alleged agreement (Ex 1) has still to be proved, and as it has also not been established that the amount of the loan acknowledged in the aforesaid four balance sheets includes the Company's liability to the appellant, it will not be proper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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