Companies Act Case Law Karnataka Steel & Wire Products & Ors Vs Kohinoor Rolling Shutters & Eng.Works & Ors.

CASE NO.:
Appeal (civil) 9464-9467 of 1995

PETITIONER:
Karnataka Steel & Wire Products & Ors.

RESPONDENT:
Kohinoor Rolling Shutters & Eng.Works & Ors.

DATE OF JUDGMENT: 12/11/2002

BENCH:
CJI. & S.B. SINHA.

JUDGMENT:
JUDGMENT
PATTANAIK, CJI.
These appeals, directed against the Full Bench decision
of the Karnataka High Court, raise a common question as to
whether on account of Section 458A of the Companies Act,
which was inserted by the Companies (Amendment) Act,
1960, the period of limitation for filing any suit or application
gets extended, and if so, whether a claim which was barred
on the date, the application for winding up was filed, stands
revived on account of an order of the Court in the winding up
proceedings. In the impugned judgment, the Full Bench of
the Karnataka High Court has recorded its conclusion that the
provisions contained in Section 458A of the Companies Act
does not confer a fresh cause of action and, therefore, if the
time for the claim is already barred under the relevant
provisions of the Limitation Act, then the appointment of
official liquidator on an application being filed for winding
up of the company, would not revive the barred date. It
appears that the aforesaid view of the Karnataka High Court
is in agreement with the decision of the Madras High Court
in 63 Company Cases 749 and is in variance with the two
Full Bench decisions, one of Delhi High Court in AIR 1978
Delhi 158 and the other of Kerala High Court in AIR 1989
Kerala 41. In the absence of any authoritative
pronouncement of this Court on the question, it would,
therefore, be necessary to examine the different views
expressed by different High Courts as well as the relevant
provisions of the Companies Act, and to find out which view
is correct.

Under the provisions of the Companies Act, a winding
up proceeding commences by presentation of a petition as
provided under sub-section (1) of Section 441 of the said Act
and at any time, after the presentation of a winding up
petition, the Court may appoint the official liquidator. Under
Section 446 of the Act, once an official liquidator is
appointed, then all legal proceedings against the company
can be proceeded with only with the leave of the Company
Judge and subject to such terms as the Company Court
imposes. Under sub-section (2) of Section 446, it is the
winding up Court which gets the jurisdiction to entertain any
suit or proceeding by or against the company as well as any
claim made by or against the company. Section 458A merely
excludes the time in computing the period of limitation for
any claim. The aforesaid section is extracted herein-below in
extenso for better appreciation of point in issue:

“Sec. 458A. 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.”

In the case of Faridabad Cold Storage & Allied Industry vs.
Official Liquidator of Ammonia Supplies Corpn. (P) Ltd.,
AIR 1978 Delhi 158, the question for consideration was as
to what is the period of limitation for a claim filed under
Section 446(2) of the Companies Act and what is the starting
point of the said period of limitation. It was held by the Full
Bench of Delhi High Court that any such application in
respect of a claim filed under Section 446(2) of the
Companies Act is covered by the residuary article under
Article 137 of the Limitation Act and the period of limitation
is three years from the date when the right to apply accrues.
The Court further held that the right to file a claim petition
under Section 446(2) in respect of a claim enforceable at law
on the date of the winding up order, arises on the date the
winding up order is passed. The period of limitation of three
years would, therefore, be from the date of the winding up
order, after giving full effect to the provisions of, and the
benefit of Section 458A of the Companies Act. The point in
issue in case in hand is something different than the point that
arose for consideration and was decided by the Delhi High
Court. The other Judgment of the Delhi High Court in the
case of R.C. Abrol & Co. Pvt. Ltd. vs. A.R. Chaddha & Co.,
AIR 1978 Delhi 167, the question for consideration was
whether for an application under Section 446(2)(b) of the
Companies Act, the provisions of Article 137 of the
Limitation Act would apply or not and the High Court
answered the same in the affirmative. That is not the dispute
in the case in hand inasmuch as there is no dispute about the
applicability of Article 137 of the Limitation Act to an
application filed for enforcement under Section 446(2)(b) of
the Companies Act. So far as the Judgment of Kerala High
Court is concerned, in the case of K.P. Ulahannan and
Others vs. The Wandoor Jupiter Chits (P) Ltd., the question
for consideration was whether the time prescribed under
Section 458A of the Companies Act would be excluded for
computing the period of limitation for a claim petition being
filed under Section 446(2)(b) of the Companies Act read
with Article 137 of the Limitation Act. In the aforesaid case,
the Full Bench of Kerala High Court came to hold that the
starting point of limitation for claim under Section 446(2)(b)
is the date on which the winding up order is passed or a
provisional liquidator is appointed and Article 137 of the
Limitation Act applies to such proceedings. It further held
that the effect of Section 458A of the Companies Act is that
the period from the date of commencement of winding up of
the company to the date on which the winding up order is
made and a further period of one year are to be excluded in
computing the period of limitation. But where a claim
which was barred on the date and winding up petition is filed,
would revive on account of Section 458A of the Companies
Act was never raised or considered in the aforesaid case. In
a latter decision of the Delhi High Court however in the case
Liberty Finance Pvt. Ltd.(In liquidation) vs. Pandit Radha
Mohan & Ors., 1979 Co. cases Vol.49 287, Ranganathan J,
as he then was, considered the question, which is the subject
matter of consideration in the case in hand and held that the
expression “any claim” occurring in Section 446(2)(b) of the
Companies Act means, a claim which is legally enforceable
and, therefore, a claim which had become time barred on the
date of presentation of the winding up petition cannot be
described as a legally enforceable claim and the provisions of
Section 446(2)(b) do not enable the official liquidator to file
or receive claims which had been quietened by the lapse of
time. Where there is an enforceable claim as on the date of
the winding up petition, the official liquidator can make an
application under Section 446(2) and such an application will
attract the provisions of Article 137 of the Limitation Act. It
was further held that reading Section 458A of the Companies
Act and Article 137 of the Limitation Act together, such an
application by the official liquidator should be filed within a
period of four years from the date of the winding up order.
To the same effect is the Judgment of the Punjab and
Haryana High Court in the case of Maruti Limited (In
Liquidation) and Anr. vs. Parry and Company Ltd., 1989
Company Cases Vol. 66 309.

On a plain reading of the provisions contained in
Section 458A of the Companies Act, it is crystal clear that
the aforesaid provision merely excludes the period, during
which a company was being wound up by the Court from the
date of the commencement of the winding up till the order of
winding up is made and an additional period of one year
immediately following the date of the winding up. In other
words, in respect of a legally enforceable claim, which claim
could have been made by the company on the date on which
the application for winding up is made, could be filed by the
official liquidator by taking the benefit of Section 458A of
the Companies Act and getting the period of four years to be
excluded from the period of three years, as provided under
Article 137 of the Limitation Act. The Legislature, by way
of an amendment, brought into force the provisions of
Section 458A, so that an official liquidator, who is supposed
to be in custody of the assets and liability of the company,
would be able to file a claim on behalf of the company,
which was legally enforceable on the date of the winding up,
after excluding the period, indicating under Section 458A of
the Companies Act, so that the company or its shareholders
will not suffer any loss. But by no stretch of imagination, the
said provisions contained in Section 458A can be construed
to mean that even a barred date or a claim which was not
enforceable on the date of the winding up, would stand
revived, once a winding up application is filed and order is
made by virtue of Section 458A of the Companies Act. We,
therefore, affirm the view taken by the Karnataka High Court
under the impugned Judgment and dismiss these appeals.
There will be no orders as to costs.

 

 

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