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1962 DIGILAW 7 (MAD)

S Abdul Muthalibu v. K M Mohammed Abdul Khader

1962-01-05

S.RAMACHANDRA.IYER, VENKATARAMANA RAO

body1962
Judgment :- VENKATARAMAN, J. This appeal cam up for hearing in the first intense before Rajgopalan J. and he referred the matter to a bend since so far there is no authoritative pronouncement of this court on the question involved. The question involved is one of limitation in respect of a claim up in bay the appellate, Muthalibu, in the windingup proceedings of the Pioneer Board Mills Ltd., Dindigul, He advanced a sum of Rs. 375 on January 12, 1952. The application for worn-down up was preferred on November 22, 1954. The company was ordered tone would up on October 14, 1955. Reckoing the period of three years from the dates of the debts the claim was barred by the limitation on October 14, 1955, but no on November 22, 1954. The learned Dstrict Judges held that the claim was barred by limitation on October 14, 1955, but no on November 22, 1954. The learned District Judges held that the claim was barred by limitation and the appellant preferred this appeal. Ragagopal J. referred thtr matter for decision to a bench as stated The claim itself was put in on March 26, , 1956. The matter has to e decided with reference to the Indian Companies Act (VII of 1913) which was the act in force on that date though there is no real difference weather that act is applicable or the act now in force (the 1956 act) is applied. Hence it will be sufficient if we refer to the provision of the 1913 Act. indicating within brackets the corresponding provision of the present Act. By the word "Act" in the rest of this judgement we mean the 1913 Act The company in question is an insolvent company and section229 is the section whcib direcltu applies. We shall quote both section 228 and section 229 (section 528 and 529 of the 1956 Act) "228. indicating within brackets the corresponding provision of the present Act. By the word "Act" in the rest of this judgement we mean the 1913 Act The company in question is an insolvent company and section229 is the section whcib direcltu applies. We shall quote both section 228 and section 229 (section 528 and 529 of the 1956 Act) "228. In every winding up (subject inthe case of insolvent companies to the application in accordance without provision of this Act of the law of insolvency) all debts payable on a contingency, and all claims against the company present or future certain or cotangent shall be admissible to proof against the company, a just estimate being made so far as possible of the value of such debts or claims as may be subject to any contingency or for some other reason do t bear a certain value229. In the winding up of an insolvent company the same rules shall prevail and be observed with ragged to the respective rights of secured and unsecured credotprs and to debts provable and tothe valuation of annuity and future and contingent liability as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case would be entitled to prove for for and receive dividends out of the asset of the company may come in under th winding up and make such claims against the company as they respectively are entitled to by virtue of this section." * It will be seen that under action 229 the provision of the Provincial Insolvency ACt (v of 1920) are made automatically applicable in the matter of proofs. Section 34(2) of the Provincial Insolvency Act reads "Save as provided b sub-section (I) al;l; debts and liabilities, present or future certain or coating which the debtor is subject when he is adjudged an insolvent to to which he may become subject before his discharge by reason of any obligation incurred before the date of such adjudication, shall be deemed to be debts provable under this Act." * This provision read by itself would permit proof only of debts not barred at the date of the adjudication. BUt this has to be read along with section 28 (7) of the Provincial Insolvency Act which reads "An order of adjudication shall relate back to and take effect from, the date of the presentation of the petition on which it is made." * In fact it is settle law under the Provincial Insolvency act that we can admit proof of a claim which is not time barred on the date of the presentation of the petition of adjudication even though the claim may become barred nt he actual date of adjudication. So far as this court is conceded it is enough to refer to Subramania and Stamping co., dined bythe leared advocate for the appellant. Refines may also be made to tee decision of the Bombay High Court in Byramji Bomanji Talati v. Official Assignee, BombayCorresponding to section 28 (7) of the Provincial Insolvency ACt there is a provision i section 168 in the nda companies ACt, 1913. which says "A winding up of a company by the court shall be deemed to commence at he time of the presentation of the petition for the winding up" * (section 441 (2) of the 1956 Act) It seems to us in these circumstances that the principle laid down inthe cases decided under the Provincial Insolvency ACt will apply equally tot e case before us and the claim would therefore be in time., This position emerges from a natural and normal interpretation of the provision of the provincial Insolvency ACt ad likewise the companies ACt Sri. A R Krishnaswami, learned counsel for the respondent m however countdowns that the Explanation to section 3 of the Limitation Act creators a difficulty. A R Krishnaswami, learned counsel for the respondent m however countdowns that the Explanation to section 3 of the Limitation Act creators a difficulty. Section 3 of the Limitation Act runs "Subject to the provision contained ins section 4 to 25 (inclusive), every suit instituted , appeal preferred and application made after the paired of limitation prescrimed therefor bythe first schedule shall be dismissed, although limitation has not been set up as a defense Explanation- A suit is instituted, in ordinary cases when the plaint is presented to the proper officer; in the case of a pauper, when his application for leave to sue as a pauper is made; and in the case of a claim against a company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator." * The arguments is that ans a result of the Explanation in the case of a claim such as th present limitation all start from 26th March, 1956, the date when the claim was sent in to the official liquidator. At the same time, Mr.A R Krishnaswami was prepared to concede that so long as the claim of the creditor is within time on the date of the order of winding up it is immaterial ven if it happens to ge time barred on the date when the actually sends in the claim though their concession would not fit in with the poviion into Explanation to section 3 of the Limitation Act. The truth of the matter is that the provision in question in the Limitation At has nothing to do with the matter we are now conceded with. that relates to a suit which has been nstitutyd inthe regular civil court where previous to the institution of the suit the plaintiff has put in a claim against the company to the official liquidator. In such a case he can avail himself of the provision in the Explanation to section 3 of the Limitation Act and reckon the date of this sending in the claim to the official liquidator as the date of the institution of the suit, As point to by the Privy Council in Hansraj Gupta v. Official Liquidators of the Dehra Dun Mussourie Electric Tramway Co. Ltd. (though in dealing with a different arguments) "The ordinary rule is stated bythe Explanation to be that the suit is instituted when the plaint is presented bat to this two exception are prescribed, viz., (I) in the case f a suit by a pause, the time at which that suit is (for purposes of section 3) instituted is to be taken as an earlier date .viz., the date when the application for leave to sue as a pauper was made; and (2) inthe case of a suit against a company which is being wound up by the court the institution of the suit is (for the purposes of section3) advanced also to an earlier date, viz., the date when the claim was first sent in to the official liquidators." * In this connection section 171 of the companies Act, 1913 (section 446 of the 1956 Act) may be referred to. It runs "When a winding up order has been made or a provisnal liquidator has been epode no suit or other legal proceeding shall be proceeded with or commecn against the company except by leave of the court and subject to such terms as th court may impose." * This shows that a suit ca be filed even when a winding up order has been made if leave of the court s obtained. In such a case if a creditor institutes the suit after getting such leave, he can avail himself of the benefit of the Explanation to section 3 of the Limitation Act. The two exception to the normal rule of limitation when a suit is instituted which have been enacted inthe Explanation to section 3, are meant in favor of the plaintiff and not to his dormant. The two exception to the normal rule of limitation when a suit is instituted which have been enacted inthe Explanation to section 3, are meant in favor of the plaintiff and not to his dormant. We may also observe that a company court should remember that before referring a creditor to a suit in a complicated matter, the creditor can only have the benefit of the Explanation to section 3 of the Limitation ACt but not the benefit of te statutory provisions in sections 168, 228, and 229 of the companies Act, 1913, which he would be having if his claim is decided inthe company court itself, In other words, it , may happen that the date on which the creditor sends in te claim is decided in the company court itself, In other words, it may happen that the date won which the creditor sends inthe claims is beyond th period of three years from he date of the det and if the creditor sends in the claim is beyond the period of three years from the date of the det and if the credits is relegated tp a suit, the suit would be time barred, but it may not betime barred if the claim is investi investigated inthe company court itself on account of the fact that the presettion of the petition for winding up was within three years fro the date off the debt, In this view, therefore there is no conflict between the view which we are taking under the provision of the companies Act read win the provisions of the Provincial Insolvency Act and the Explanation to section of the Limitation At relied on by the leared counsel for the respondentWe have so far indicated that the view we have taken is what naturally follows if full effect is to be given to the principles of retrospective operation contained incision 168 of the companies act which is in absolute terms and is not qualified beanie exception. We may point out that this view is all what convenience and commonsense would dictate, . the fats of the present case itself can be taken to illustrate out points. Here the creditrom the appellate knew that the application for winding up was presented on November 22, 1954 and he high have entertained a reasonab;e belief that inthe normal course the company would be wound up. the fats of the present case itself can be taken to illustrate out points. Here the creditrom the appellate knew that the application for winding up was presented on November 22, 1954 and he high have entertained a reasonab;e belief that inthe normal course the company would be wound up. But natjally it takes some time for the court to order the windingup. the view praised upon us by the respondent which is contrary to the view we are inclined to take would demand that in order to save limitation the appellate should have instituted a suit before January 12, 1955 (three years from the date ofthe first debt), though it would normally be merely waste of money. One the other hand the view which we are taking would permit him to wait without institution a suit and avail himself of the distribution of the dividends in due course which is all that he could reasonably hope to get. Of course itmay true out in some cases that the petition for windin up was frivolous and is eventually dismissed, In such a case he bidet of advance the date of the claim to the date of presentation of th petition for winding up will not be available. In sub a case the creditor must obviously file a suit time. But there is no runaway in a can where the winding up order is made the creditor should not be allowed to wait and should beforced to file a sub wasting money, In fact it may happen that even if he files and obtains a decree he may not be able to execute it in view of them terms of section 171 of the companies Act, 1913 (section 446) It is needless to add that the creditor cannot file any clam in the windin up proceeding till after the winding up order is made ad if retrospective effect is not given to the claim the usefulness s of the winding up proceeding would be considerly lost. These aspects of the matter have also been pointed out in Byramji Bomanji Talati v. Official Assignee, Bombay (a case under the provincial insolvecu Act) and the decision of the Punjab HIgh court in Ram Chand PUri v, Lahore enamelling and stamping Co. These aspects of the matter have also been pointed out in Byramji Bomanji Talati v. Official Assignee, Bombay (a case under the provincial insolvecu Act) and the decision of the Punjab HIgh court in Ram Chand PUri v, Lahore enamelling and stamping Co. The decision of the High Court is in fact a direct decision onthe question whichwe are considering and the leared judges took the sea view s we are taking but no reference is made therein to the Explanation to section 3 of the Limitation ACtIn the result we hold that the claim was with time and since this is the only point which has been raised before use the claim must be admitted The appeal is allowed the appellate all get his costs from the company. The respondent will bear his own costs.