Orissa High Court
B. Pattnaik Mines (Pvt.) Ltd. vs Bijoyananda Pattnaik And Ors. on 20 December, 1991
Equivalent citations: [1994]80COMPCAS237(ORISSA)
JUDGMENT P.C. Misra, J.
1. On an application filed by respondent No. 8, the question of limitation was decided to be heard as a preliminary point.
2. M/s. B. Pattnaik Mines (Pvt.) Ltd. is a company which is under liquidation. The present application has been filed by the company represented by the official liquidator under Section 543 of the Companies Act, 1956, praying for making all necessary enquiries to be made and to assess the damages against the delinquent director of the company for whose misfeasance and breach of trust, the company lost its assets and was led to a situation for its liquidation.
3. The admitted facts are that the company was incorporated on March 19, 1956, when its head office was at Tulsipur, Cuttack. Subsequently, the office was shifted to other premises in the same locality. There was a proceeding for winding up of the company and the company was wound up with effect from April 9, 1975. This application under Section 543 of the Companies Act was filed on April 9, 1981. It has been contended by respondent No. 8 that this application is barred by limitation. In support of the aforesaid contention, it has been urged that the limitation for filing of an application under Section 543(1) of the Act is five years from the date of the order for winding up, or of the first appointment of the liquidator in winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer. In this application, all the acts of misfeasance complained of were much prior to the order of winding up which was passed on April 9, 1975. As argued by respondent No. 8, the period of five years, if calculated from the date of the order of winding up, would expire on May 9, 1980, and, therefore, the present application under Section 543(1) of the Act having been filed on April 9, 1981, is barred by limitation.
4. Learned counsel appearing for the applicant has contended that the application would be within the period of limitation as a further period of one year would be available under Section 458A of the Act. It is urged by learned counsel appearing for respondent No. 8 that the applicant is not entitled to the extended period of one year under Section 458A of the Act inasmuch as the basic conditions necessary for the application of the said Section are absent in this case. Thus, the only question which requires to be considered for the purpose of limitation is whether Section 458A of the Act can be taken advantage of by the petitioner.
5. An analysis of the scope of Section 543 of the Act would be necessary for examining whether the extended period of one year would be available to an official liquidator for an application under Section 543 of the Act. Section 543 of the Act is quoted below for ready reference :
"543. Power of court to assess damages against delinquent directors, etc.--(1) If in the course of winding up a company, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, manager, liquidator or officer of the company--
(a) has misapplied, or retained, or become liable or accountable for, any money or property of the company ; or
(b) has been guilty of any misfeasance or breach of trust in relation to the company ;
the court may, on the application of the official liquidator, or the liquidator, or of any creditor or contributory, made within the time specified in that behalf in Sub-section (2), examine into the conduct of the person, director, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the court thinks just or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the court thinks just.
(2) An application under Sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in winding-up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer.
(3) This Section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable."
6. Under the said section, the court is empowered to examine the conduct of the person, director, manager, liquidator or officer of the company and compel him to repay or restore the money or property or any part thereof with interest at such rate as the court thinks just or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the court thinks just. The court is not empowered to proceed suo motu against the aforesaid persons. Action under the said Section can be taken by the court only on the application of the official liquidator or the liquidator or of any creditor or contributory if made within the period of limitation specified in that behalf in Sub-section (2) of the said section. Sub-section (2) of Section 543 prescribes a period of five years for such an application from the date of the order for winding-up, or of the first appointment of the liquidator in winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer. The additional period of one year under Section 458A would be available for any suit or application in the name and on behalf of the company. It is, therefore, necessary to examine whether the application under Section 543 of the Act filed by the official liquidator is an application in the name and on behalf of the company which is being wound up by the court. In order that Section 458A would apply, both the conditions, i.e., the application in the name of the company and on behalf of the company, must be satisfied. In the decision in Official Liquidator, Palai Central Bank Ltd. (In liquidation) v. K. Joseph Augusti [1966] KLJ 246, their Lordships observed:
"I might also point out that when the liquidator, or a creditor, or a contributory makes an application under Section 543 he does not do so as representing the company but in his own independent right, although for the benefit of the company. His position, it seems to me, is analogous to that of a junior member suing in respect of joint family property. In making an application under Section 543, the liquidator is not exercising the power conferred by Section 457(1). He does not apply in the name and on behalf of the company, but as Forms Nos. 120 and 121 of the forms in the Companies (Court) Rules, 1959, rightly set out, in his own name. I would add that he applies in his own behalf although on the terms of Section 543, the order can only be for payment or restoration to the company."
7. This court, in Company Act Case No. 1 of 1982, where a similar question came up for consideration, relied on the reasonings given by the Kerala High Court and held as follows :
"Section 543 of the Act undoubtedly conferred a new remedial right on the official liquidator and others named in that Section for enforcement of some rights as the company itself would have enforced by way of suits, although the application is meant for the benefit of the company. In making an application under Section 543, the official liquidator has not exercised the powers conferred on him by Section 457, Sub- Section (1), but he exercised the powers which Section 543 itself confers on him. Rule 260 of the Companies (Court) Rules, 1959, under Sub-rule (1) requires summons of Section 543 to be issued in Form No. 121. In the said form the official liquidator of the company or a creditor or a contributor of the said company and not the company itself is set out to be the applicant. Thus, it is the official liquidator who is authorised under Section 543 to apply in his own behalf for the appropriate relief, though the ultimate order to be passed by the court is for the benefit of the company. This view is supported by a decision in Official Liquidator, Palai Central Bank Ltd. (In liquidation) v. K. Joseph Augusti [1966] KLJ 246.
The language of Section 458A is explicit and clear that it applies to only suits and applications in the name and on behalf of the company filed by the official liquidator. As has been discussed earlier, the present application filed by the official liquidator under Section 543 of the Act would not be construed as an application in the name and on behalf of the company. The extended period of limitation provided under Section 458A of the Act would not be available to be applied. I would, therefore, conclude that the present application is barred by limitation."
8. Learned counsel appearing for the applicant has argued that the official liquidator, while dealing with the liquidation proceeding, represents the company and, therefore, the application under Section 543 filed by the official liquidator must be taken to be an application in the name and on behalf of the company. Such an argument has been repelled by this court in the order passed in Company Act Case No. 1 of 1982, and the reasons given there need not be repeated in this case again, If every action of the official liquidator must be deemed to be in the name and on behalf of the company, the result would be that the official liquidator would be entitled to the additional period of one year limitation whereas any creditor or contributory would not be entitled to such benefit. Mr. Sinha, learned counsel appearing for the applicant, has relied on the provisions contained in Section 457 of the Act which defines the powers of the liquidator. But the general power vested with the official liquidator under the said Section is distinct from the special powers conferred on him by Section 543 of the Act. This aspect of the matter has also been dealt with in the order passed in Company Act Case No. 1 of 1982. A decision of the Calcutta High Court in Modi Vanaspati Manufacturing Company v. Katihar Jute Mills (Pvt.) Ltd., AIR 1969 Cal 496, which has been relied upon is of no relevance so far as the point under consideration is concerned. The legal proposition that a company continues to live until it is wound up and that the every action of the official liquidator is on behalf or for the benefit of the company is not in dispute. But, in order that the additional period of one year to extend the period of limitation can be taken advantage of the application must be one in conformity with the provisions of Section 458A of the Act.
9. Learned counsel appearing for the petitioner has filed an application under Order 6, Rule 17 of the Civil Procedure Code, to amend the description of the applicant in the cause title of the application. The original application under Section 543 of the Act was filed by M/s. B. Pattnaik Mines Pvt. Ltd. represented by the official liquidator, Orissa High Court, Cuttack. The same is required to be substituted as "the Official Liquidator of M/s. B. Pattnaik Mines (P) Ltd. in liquidation". I would allow the amendment as Section 543 empowers the official liquidator to make the application. But, by such an amendment, the case of the petitioner so far as the question of limitation is concerned would not improve.
10. In conclusion, I would hold that the application under Section 543 of the Act is barred by limitation and is, therefore, liable to be dismissed which I hereby do.