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The Limitation Act, 1963
The Companies Act, 1956
Article 137 in The Constitution Of India 1949
Article 181 in The Constitution Of India 1949
Section 458A in The Companies Act, 1956

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Andhra High Court
Official Liquidator, High Court ... vs Andhra Pradesh State Financial ... on 1 March, 2001
Equivalent citations: 2001 (3) ALD 19, 2001 (3) ALT 334
Bench: J Chelameswar

ORDER

1. The present application is filed by the Official Liquidator with the prayer as follows:

" i. direct the learned Court of Subordinate Judge, Adoni to transfer the amount of Rs.1,68,260-60 ps. deposited by the Andhra Pradesh State Financial Corporation along with interest accrued and or credited, to the account of Official Liquidator, High Court of Andhra Pradesh, Hyderabad subject to the right of mortgages if any;

ii. order the costs of this application to come out of the assets of the company; and

pass such further or other order or orders as this Hon'ble Court may be deemed fit and proper in the circumstances of the case".

2. By an order dated 10-8-1994, this Court directed the winding up of the company in liquidation and appointed the official liquidator to be the liquidator of the company. It appears that the assets of the company now in liquidation were sold by the State Financial Corporation some time in the year 1980, obviously in exercise of the power conferred under Section 29 of the Slate Financial Corporations Act. Thereupon, the Official Liquidator addressed a letter to the Stale Financial Corporation to furnish the details of the amounts due to them and remit the amount realised by them on the sale of the assets which were not the subject-matter of the hypothecation to the assets. As the State Financial Corporation did not respond to the letter of the Official Liquidator, the Official Liquidator filed CA No.184 of 1991. This Court by an order dated 21-3-1992 directed the State Financial Corporation to furnish the necessary information to the Official Liquidator. Subsequently, the State Financial Corporation by its letter dated 15-5-1992 informed the Official Liquidator that the assets of the company now in liquidation were sold to M/s. Rajani Enterprises, Bombay for a consideration of Rs.10,01,000/-, out of which an amount of Rs.1,68,260-60 ps., which was surplus i.e., the balance amount after satisfying the claim of the State Financial Corporation, remitted to the Sub-Judge, Adoni. Thereafter, the present CA No.384 of 1998 came to be filed.

3. From an earlier order of this Court dated 16-8-1999, the following facts emerge:

That one Khemji Poonja Ginning and Pressing Factory Private Limited, Adorn obtained a money decree in OS No.46 of 1979 on 31-12-1979 against the company now in liquidation. Thereafter, the decree-holder filed EP No.8 of 1984 for attachment of the property belonging to the company now in liquidation. The decree holder also filed EA No.220 of 1985 for issuance of a cheque for Rs.30,000/- out of the abovementioned amount of Rs.1,68,260-60 ps. lying with the State Financial Corporation. It appears, in obedience to the directions of the executing Court the State Financial Corporation sent Rs.30,000/- to the executing Court to be paid to the decree holder. Similarly, another body known as Thoban Devji & Co., filed OS No.47 of 1979 and obtained an ex parte decree dated 31-12-1979. Consequentially, EP No.9 of 1984 was filed for recovery of an amount of Rs.l,13,915-15 ps. Attachment was ordered. Then, EA No.2I7 of 1985 was filed for issuance of a cheque. In obedience to the directions of the executing Court, the State Financial Corporation issued a cheque for an amount of Rs.87,860-66 ps. to be paid to the abovementioned decree holder and it is recorded by this Court in its order dated 16-8-1999 that the said amount was paid to the abovementioned decree holder on 19-6-1985.

4. The Official Liquidator in his application stated that even the abovementioned amounts ought not to have paid to the decree holder and should have been remitted to the Official Liquidator.

5. This Court in its order dated 16-8-1999 directed that notices be issued to the abovementioned decree holders and also the State Financial Corporation calling upon them to deposit the various amounts mentioned above with the Official Liquidator with interest at 12% per annum from the date of receipt of the sale proceeds of the assets of the company now in liquidation.

6. Accordingly notices were issued. Counters are filed by the A.P. State Financial Corporation and M/s. Khemji Poonja Ginning and Pressing Factory Pvt. Limited. However, the other decree holder i.e., M/s. Thoban Devji & Co., though was served with the notice of this Court as per the directions of this Court dated 16-8-1999 did not choose to appear and contest the matter.

7. On behalf of M/s. Khemji Poonja Ginning and Pressing Factory Pvt. Limited, a counter-affidavit is filed stating that pursuant to the decree obtained by them, an EP was filed and in the execution proceedings they filed an EA for issuance of cheque for Rs.30,000/- and accordingly the cheque was issued and the EP was terminated. The substantial objection raised is that the application filed by the Official Liquidator is barred by time. It is also submitted that the decree was obtained even prior to the filing of the CP No.14 of 1982. Therefore, there was no necessity for the decree holder to seek leave of the Court and consequently the present application is not maintainable.

8. From the record it appears that both the decrees referred to earlier were dated 31-12-1979 i.e., long before the CP No.14 of 1982 came to be instituted in this Court though the actual payment was received by the decree holders from the Court some time subsequent to the order of the winding up of the company now in liquidation i.e., 10-8-1984.

9. In view of the abovementioned undisputed facts, it has to be examined whether the leave of this Court is required to be taken by either of the decree holders mentioned above at any point of time and secondly, assuming that such a leave is required to be obtained, whether the present application is not barred by limitation?

10. The requirement of obtaining the leave of the company Court insofar as it pertains to the facts of the present case could arise either under Section 446 or Section 573 of the Companies Act. Section 446 stipulates that after passing of the winding up order or where a provisional liquidator is appointed with reference to the affairs of the company before the order of winding up is actually passed, no suit or other legal proceedings shall be commenced. Secondly, such a suit or legal proceedings, if pending on the date of winding up order, shall be proceeded with against such company except by the leave of the Court and subject to such terms as the Court may impose.

11. As already noticed, both the decrees are dated 31-12-1979. Therefore, it cannot be said that any suit was pending on the date of the winding up order of the company now in liquidation, as the winding up order came to be passed on 10-8-1984.

12. The further question is whether the execution proceedings are the proceedings contemplated within the meaning of the expression 'other legal proceedings' employed under Section 446?

13. Normally, the expression 'other legal proceedings' is wide enough to include the execution proceedings. But, in view of the specific provision under Section 537 of the Companies Act, such a construction must be ruled out for the reason that the specific always excludes the general and Section 537 contains a specific prescription with regard to the execution proceedings. Section 537 of the Companies Act reads as follows:

"537. (1) Where any company is being wound up by or subject to the supervision of the Court-

(a) any attachment, distress or execution put in force, without leave of the

Court, against the estate or effects of the company, after the commencement of the winding up; or

(b) any sale held, without leave of the Court, of any of the properties or effects of the company after such commencement;

shall be void".

14. It can be seen from the language of Section 537 that an execution put in force without the leave of the company Court during the pendency of the winding up proceedings is void. In the case of both the decree holders mentioned earlier, the execution proceedings were initiated in the year 1984 i.e., after the commencement of the proceedings for the winding up of the company now in liquidation, as by virtue of a declaration under Section 441(2) of the Companies Act, the winding up of a company shall be deemed to commence at the time of presentation of the petition for the winding up, notwithstanding the fact the actual winding up order is passed much later.

15. In the present case, though the winding up order was passed on 10-8-1984, the company petition was filed sometime in the year 1982, obviously before the EPs were filed. Therefore, the company now in liquidation must be held as 'being wound up' during that period and therefore the execution proceedings taken by the decree holders admittedly without the leave of this Court are hit by Section 537 of the Companies Act.

16. Then the question remains whether the present application by the Official Liquidator is barred by limitation or not?

17. Learned Counsel for the Official Liquidator, placing reliance on a judgment of the Gujarat High Court reported in Rajaratna Naranbhai Mills v. New Quality

Bobbin Works, 1973 Vol. 43 Company Cases 131, argued that the provisions of the Limitation Act have no application for maintaining the application such as the present one.

18. Whereas, the learned Counsel for the respondent Sri P. V. Rama Raju, placing reliance on the judgments in M. Thankamani v. Official Liquidator, and Kerala S.E. Board, T.P, Kwihaliumma, , argued that the present application is barred by limitation.

19. In view of the conflict of judicial opinion and the seriousness of the question, this Court sought the assistance of Sri S. Ravi, learned advocate of this Court.

20. In the judgment cited (1) supra, a learned single Judge of the Gujarat High Court how dealing was with an application made by the Official Liquidator praying that the decree holder against the company in liquidation, who secured the payment of the decretal amount by the process of execution, be directed to repay the amount to the Official Liquidator. The learned Judge had to deal with the question whether such an application was barred by limitation. After examining the issue from various angles, the learned Judge came to the conclusion in the following words:

"Having examined the contention of limitation from all possible angles, it may be answered from both the angles. First answer is that Article 137 of the Limitation Act, 1963, would not apply to the present application and there is no other provision prescribing limitation for such an application and, as there is no period of limitation, the plea of limitation must fail. Assuming that Article 137 applies and simultaneously Section 458-A of the Companies Act applies, the extended period of limitation would be available to the liquidator and if it is available, the present application, as

pointed out earlier by me, is within time and, therefore, the plea of limitation must fail".

In reading the conclusion the learned Judge relied on Sha Mulchand and Co., Ltd. v. Jawahar Mills Ltd., and held:

"..... the Supreme Court in Sha

Mulchand and Co. Ltd. v. Jawahar Mills Ltd. Proceedings commenced upon a summons taken out by the Official Liquidator for rectification of the register of the company. It was contended that the application is barred by limitation and it was urged that application would be by Article 181 and the period of limitation would be three years. Negativing this contention, the Court observed as under:

"That Article (181) has, in a long series of decisions of most, if not all, of the High Courts, been held to govern only applications under the Code of Civil Procedure. It may be that there may be divergence of opinion even within the same High Court but the prepondering view undoubtedly is that the article applies only to applications under the Code".

That was the construction placed upon Article 181 of the Limitation Act of 1908. The decision is an authority for the proposition that application by the liquidator in course of winding-up proceedings for decision of any question that would arise in winding-up proceedings for decision of any question that would arise in winding up would not be governed by Article 181 and there would be no period of limitation for such an application."

21. Whereas, the Bombay High Court in the judgment cited (supra), dealt with a slightly different issue, that is the scope of

Section 458-A of the Companies Act, which reads as follows:

"458-A. Notwithstanding anything in the Indian Limitation Act, 1908 (9 of 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 (both inclusive) and a period of one year immediately following the date of the winding up order shall be excluded."

22. The Division Bench of the Bombay High Court held that Section 446 of the Companies Act did not create any right in favour of the Official Liquidator to file a suit or an application but the cause of action accrued in favour of the company that is being wound up enured in favour of the Official Liquidator and therefore the Official Liquidator did not get a fresh lease of the period of limitation by virtue of Section 458-A of the Companies Act. Section 458-A only provides an additional period that should be excluded while computing the period of limitation. In other words, the Bombay High Court declared that if the claim of the company is already time barred by the date of appointment of the Official Liquidator, the Official Liquidator will not be entitled to claim any further time by virtue of the fact that the company went into liquidation and the liquidator was appointed. According to Bombay High Court, all that is provided under Section 458 is that a particular claim of the company is not time barred by the date of winding up order; for the purpose of determining the last date of limitation the periods mentioned under Section 458-A are required to be excluded along with such other periods that are required to be

excluded under the various other provisions of the Limitation Act, depending on the facts and circumstances of that particular case.

23. Therefore, in my view, the Bombay High Court never directly decided the issue whether the provisions of the Limitation Act, 1963 are in fact applicable to the proceedings taken by the Official Liquidator. The judgment proceeded on the assumption that the provisions of the Limitation Act apply. The only issue, in my view, decided by the Bombay High Court was that on the assumption that the provisions of the Limitation Act apply what is the legal effect of Section 458-A of the Companies Act.

24. Coming to the judgment cited (supra), the respondent before the Supreme Court filed an application under the Indian Telegraph Act, 1885 claiming compensation against the appellant before the District Court, Tellicherry. The question arose whether such an application was barred by time under Article 137 of the Limitation Act. The District Judge held that the provisions of the Limitation Act, 1963 more particularly Article 137 of the Act apply to the proceedings before him and therefore the application was time barred. Dealing with the issue, the Supreme Court held at paragraph 18 of the judgment as follows:

"The words "any other application" under Article 137 cannot be said on the principle of edjusdem genet-is to be applications under the Civil Procedure Code other than those mentioned in Part I of the third division. Any other application under Article 137 would be petition or any application under any Act. But it has to be an application to a Court for the reason that Sections 4 and 5 of the 1963 Limitation Act speak of expiry of prescribed period when Court is closed and extension of prescribed period if applicant or the appellant

satisfies the Court that he had sufficient cause for not preferring the appeal or making the application during such period."

25. In fact, while coming to the above-mentioned conclusion, the Supreme Court also considered the earlier judgment of the Supreme Court in Sha Mulhand v. Jawahar Mills Ltd., and held at paras 17 and 18:

"17. This Court in Sha Mulchaml & Co. Ltd. v. Jawahar Mills Ltd, held that the construction put upon Article 181 of the Limitation Act, 1908 is that the long catena of decisions under Article 181 may well be said to have, as it were, added the words "under the Code" in the first column of that Article.

18. The alteration of the division as well as the change in the collocation of words in Article 137 of the Limitation Act, 1963 compared with Article 181 of the 1908 Limitation Act shows that applications contemplated under Article 137 are not applications confined to the Code of Civil Procedure. In the 1908 Limitation Act there was no division between applications in specified cases and other application as in the 1963 Limitation Act....."

26. In the circumstances, in my view, the law laid down by the Gujarat High Court is no more good law.

27. The judgment of the Supreme Court cited (supra), which declared that the period of limitation prescribed under Article 137 of the Limitation Act applies not only to applications contemplated under the Code of Civil Procedure but to any other application under any other enactment so long as they are made to a Court, in my view, leaves no scope for the doubt that the provisions of the Limitation Act apply

even to the proceedings taken out by the Official Liquidator under Section 446 of the Companies Act.

28. Applying the law to the facts of the present case, the present application is filed more than a decade after the cause of action arose and therefore beyond the period of limitation prescribed under Article 137 of the Limitation Act, the application must be held to be barred by limitation. The application is dismissed.