Bombay High Court
M. Thankamani And Others (Appeal No. 64 ... vs Official Liquidator And Another on 9 June, 1994
Equivalent citations: 1995(1)BOMCR529, [1996]85COMPCAS318(BOM), 1995(1)MHLJ769
JUDGMENT N.D. Vyas, J.
1. Appeal No. 64 of 1991 is filed impugning the judgment of the learned single judge dated February 15, 1990, making the judge's summons absolute. As far as Company Application No. 1248 of 1983 is concerned, the same has been referred to the Division Bench in view of the decision impugned in Appeal No. 64 of 1991.
2. The question which requires to be considered in both these matters being common, both the matters are being disposed of by a common judgment. The short question that requires consideration in the present appeal is as to how time for filing a suit or an application for recovery of a claim on behalf of a company which is ordered to be wound up in to be calculated in view of the provisions of section 458A of the Companies Act, 1956.
3. As far as the facts of both the matters are concerned, there is hardly any dispute. It would suffice to mention the brief facts of the appeal, which are as follows :
A promissory note was executed on January 16, 1976. On July 7, 1978, a petition for winding up of the company, being Petition No. 497 of 1978 was filed. On January 19, 1979, the winding up order of the company was passed. On June 14, 1983, Company Application No. 657 of 1983 was filed by the official liquidator praying that the respondents be ordered and decreed to pay to the applicant a sum of Rs. 11,995.02 with further interest in which the judgment appealed from was delivered.
4. Before the learned single judge, it was the contention of the appellants that the claim was time barred. The learned single judge, following the decision of this court in the matter of Ch. S. Rao v. Prabhudas S. Budhwani [1978] 80 Bom LR 685, rejected the said contention and made the judge's summons absolute. Hence the present appeal by the original respondents Nos. 1 to 3. As far as section 458A is concerned, it provides for exclusion of certain time in computing the period of limitation. It provides that notwithstanding anything contained in the Indian Limitation Act, 1908, or in any other law for the time being in force, in computing the period of limitation prescribed for any suit or application in the name and on behalf of a company which is being wound up by the court, the period from the date of commencement of the winding up of the company to the date on which the winding up order is made and a period of one year immediately following the date of the winding up order shall be excluded. The learned single judge has followed the decision of this court in the case of Ch. S. Rao v. Prabhudas S. Budhwani [1978] 80 Bom LR 685. It was, inter alia, held in the case of Ch. S. Rao [1978] 80 Bom LR 685 that as far as the official liquidator was concerned, he got a right under section 446(2)(d) of the Companies Act to recover the claim by the company for the first time when the winding up order is made, and that any application made by him for this purpose was governed by article 137 of the Limitation Act, 1963, under which the period of limitation is three years for applications not otherwise provided for from the date when the right to sue accrues. The learned single judge in the case of Ch. S. Rao v. Prabhudas S. Budhwani [1978] 80 Bom LR 685, relied on a Full Bench decision of the Delhi High Court in Faridabad Cold Storage and Allied Industry v. Official Liquidator of Ammonia Supplies Corporation (P.) Ltd., . As against these decisions, a Division Bench of the Madras High Court has in the case of Official Liquidator, Radel Services P. Ltd. v. Southern Screws P. Ltd. [1988] 63 Comp Cas 749, inter alia, held that section 446 of the Companies Act 1956, does not prohibit or oust the civil court's jurisdiction for commencement of a suit or legal proceeding against a company in liquidation nor continuance of pending suits or legal proceedings, but only provides that leave of the company court will have to be obtained for commencement or proceeding further with the pending matters and that at the same time sub-section (3) of section 446 confers concurrent jurisdiction on the company court to entertain or dispose of any suit or legal proceeding which had already been instituted on being transferred to it. As far as computation of limitation for filing a suit or an application in the name and on behalf of a company which is being would up is concerned, it was held that the provisions of sections 4 to 24 of the Limitation Act will have to be taken into account and the period computed and that further, in the case of an application under section 446(2), the provisions of section 458A of the Companies Act also will have to be taken note of. According to the Division Bench of the Madras High Court, 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.
5. From a plain reading of the provisions of section 458A of the Companies Act, it appears that the said provision excludes certain time in computing the period of limitation for filing any suit or application in the name and on behalf of the company. It specifically mentions "... in computing the period of limitation prescribed for any suit or application... ". The Limitation Act, 1963, prescribes the period of limitation for filing of suits or applications and further provides under several of its sections the period which can be excluded while computing the period of limitation. In our opinion, section 458A of the Companies Act provides for a further exclusion of periods and it contains a non-obstante clause. Thus, from the language of the said provision it is obvious that it does not provide for a period of limitation or even for that matter, a fresh period of limitation, but provides for exclusion of the time from the date of filing of the winding up petition to the date of the winding up order and further a period of one year thereafter. Thus, in respect of a cause of action accruing in favour of the company being wound up after the date of the filing of the petition for winding up, the time would start running only after a period of one year from the date of the winding up order. As far as a cause of action which has accrued prior to the filing of the petition for winding up is concerned, the period of limitation which has started running would remain suspended for the period excluded, i.e., the period from the date of the winding up petition to the date of the order for winding up and one year thereafter, and would start running again after the excluded period. Let us see whether, in the light of the above, the application filed by the official liquidator is barred by limitation or not.
6. Before the date of the filing of Company Application No. 657 of 1983, the time had already begun to run from January 16, 1976, being the date of the promissory note. From July 7, 1978, which is the date on which the winding up petition was filed, it remained suspended up to the date of the winding up order and one year thereafter and got revived thereafter. Thus, on the date of the filing of the petition for winding up of the company, out of three years available under article 35 of the Limitation Act in respect of a suit on a promissory note, two years five months and 20 days had elapsed. Time stopped running from July 7, 1978, up to January 18, 1980, the period to be excluded under section 458A of the Companies Act and started running again, and the time remaining available was six months and ten days. The same expired on July 28, 1980. The company application was, however, was filed on June 14, 1983, and was thus hopelessly time-barred. We fail to agree with the view taken by the learned single judge in the case of Ch. S. Rao v. Prabhudas S. Budhwani [1978] 80 Bom LR 685. In our view, there is no question of the official liquidator acquiring any right to file a suit or an application. The cause of action accrued in favour of the company being wound up, prior to the filing of the petition for winding up, enured in favour of the official liquidator and, therefore, there is no question of a fresh period of limitation in his favour. Section 458A does not all contemplate such a thing. At the same time there is no question of the official liquidator availing of a further period of three years under article 137 of the Limitation Act. Section 446(2) of the Companies Act provides for a forum. The official liquidator has an option of filing a suit in a court competent to entertain the same or prefer an application in the court winding up the company. It cannot be that the official liquidator when adopting the latter course gets an additional time under article 137 of the Limitation Act. The period of limitation, subject to permissible exclusions, attaches to the cause of action and not to the person who prosecutes the action. The official liquidator therefore, does not acquire a fresh cause of action.
7. A Division Bench of this court in the case of Gleitlargor (India) P. Ltd. and H. S. Kamlani, Official Liquidator v. Mazagaon Dock Ltd. [1985] 57 Comp Cas 742 was also concerned with the interpretation of section 458A of the Companies Act. However, the short question that arose for its consideration was whether the recovery of the dues from certain parties by the judges summonses taken out by the official liquidator under some understanding arrived by him with a bank which was a secured creditor could be said to be "in the name and on behalf of the company" as contemplated by section 458A of the Companies Act. The parties before the Division Bench were ad idem that but for the provisions of section 458A of the Companies Act, the claim would be time-barred. The Division Bench, inter alia, held (at pages 746, 748) :
"This section (section 458A of the Companies Act) thus provides for longer periods of limitation for the suits or claims instituted 'in the name and on behalf of the company (under liquidation)'. The period from the commencement of the winding up to the date on which winding up order is made and a further period of one year thereafter, is liable to be added to the ordinary period of limitation applicable under the Limitation Act. It is not disputed that the claim would be within time on the date of judge's summons if limitation is computed by adding this period.
Section 458A is clearly 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 between those entitled to the same. 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. He has also to find resources for initiating and conducting the proceedings. The proceedings so initiated by him, whether by way of suit or judge's summons, for enforcement of the recoveries of debts cannot but be on behalf of the company having regard to his source of authority of the provisions of the Companies Act and the statutory obligation in discharge of which he has to act in this behalf. The Act does not contemplate his acting in the matter of such recoveries excepting as such official liquidator and excepting on behalf of the company."
8. We are in complete agreement with the above view. To us it appears that the line of reasoning adopted by the learned single judge in Ch. S. Rao's case [1978] 80 Bom LR 685 is erroneous. Therein the learned single judge followed the decision in Faridabad Cold Storage and Allied Industry v. Official Liquidator of Ammonia Supplies Corporation (P) Ltd., .
9. In our view, the view taken by the Division Bench of the Madras High Court and the learned single judge (Suresh J., as he then was) in Company Application No. 1248 of 1983 is the correct view. In our opinion, under section 458A, no new cause of action arises in favour of the official liquidator. The cause of action accrued in favour of the company enures for the benefit of the official liquidator. Section 458A of the Companies Act on its plain reading shows how and to what extent the period is to be excluded and that the period is only from the commencement of the winding up proceedings to the passing of the winding up order and one year thereafter. It nowhere provides that the limitation once started would come to an end forever. The limitation started under the Limitation Act would continue subject to the exclusion of the period mentioned under section 458A. In these circumstances, the view taken by the learned single judge in Company Application No. 657 of 1983, relying on the decision of another single judge of this court in the matter of Ch. S. Rao v. Prabhudas S. Budhwani, [1978] 80 Bom LR 685, in our view is not the correct view. The decision in Ch. S. Rao's case is overruled.
10. In the result, the appeal has to be allowed and is accordingly allowed. The judgment and order dated February 15, 1990, in Company Application No. 657 of 1983, is set aside.
11. As far as Company Application No. 1248 of 1983 is concerned, for the reasons mentioned hereinabove, the claim appears to be time-barred and the same is dismissed. No order as to costs.