Research › Browse › Judgment

Allahabad High Court · body

1965 DIGILAW 25 (ALL)

Mukund Nath v. Official Liquidator

1965-01-12

D.D.SETH, V.G.OAK

body1965
JUDGMENT V.G. Oak, J. - These three connected Special Appeals raise the question of scope of rule 176 of the Company Court Rules, 1959. Since the three appeals raise similar questions of fact and law, it will be sufficient to refer to the facts of one appeal. We refer to the facts in Special Appeal No. 13 of 1965. In this appeal, Mohan Lal is the appellant. 2. The Dawn Match Company - Limited, Allahabad, is in liquidation. Creditors came forward to prove their debts. One such claim was made by Mohan Lal, appellant. He claims to have advanced Rs. 3,490 to the Company on 31st December, 1944. On the first scrutiny, the Official Liquidator admitted the claim for Rs. 2,780-86. That was in the report, dated 1st February, 1962. But subsequently he applied under rule 176 of the Company Court Rules for the expunging of the entry from the list of debts. ` The application was opposed by Mohan Lal, creditor. The learned Company Judge overruled the objection, By this order, dated 19th November, 1964, the learned Judge allowed the Official Liquidator's application, and directed that the proof of the claim be expunged in toto. The appeal by Mohan Lal is directed against this order of the learned Company Judge. 3. The order under appeal was passed under rule 176 of the Company Court Rules, 1959. Rule 176 provides for expunging of proof, and runs thus : "(1) If after the admission of a proof,-, the Liquidator has reason to think that the proof has been improperly admitted or admitted by a mistake, he may apply to the Court upon notice to the creditor who made the proof, to expunge the proof or reduce its amount, as the case may be. (2) Any creditor or contributory may also apply to the Court to expunge a proof or reduce the amount thereof, if the Liquidator declines to move in the matter, and on such application, the Court may pass such orders as it may think just. " 4. The main contention of Mr. M. N. Shukla, appearing for the appellants, is that, revision of the list of debts was barred by the principle of res judicata. He drew our attention to several cases dealing with the general principle of res judicata and constructive res judicata. " 4. The main contention of Mr. M. N. Shukla, appearing for the appellants, is that, revision of the list of debts was barred by the principle of res judicata. He drew our attention to several cases dealing with the general principle of res judicata and constructive res judicata. Those principles would have no doubt precluded revision of the list of debts, but for the existence of rule 176. Rule 176 expressly empowers the Court to expunge an entry relating to proof of a debt. The power conferred by rule 176 is analogous to the power of review. When a Court exercises the power of review, no considerations relating to res judicata will arise. 5. Mr. Shukla further contended that action under rule 176 ought to be confined to mistakes due to inadvertence. rule 176 should not be extended to a case, where the Official Receiver raises the question of limitation for the first time upon an application under rule 176. The material words in rule 176 are : " the proof has been improperly admitted or admitted by mistake". These words are comprehensive enough to cover mistakes of fact and law. Rule 176 will also apply where the Official Liquidator failed on the initial occasion to consider the question of limitation, but came to consider that point subsequently. 6. Mr. Shukla further contended that rule 176 ought to be confined to those cases where the earlier proceeding has terminated with the report or action by the Official Liquidator. The rule will not cover a case where a decision by the Liquidator has merged in a decision by the Court. Mr. Shukla informs us that in the present case, although the Official Liquidator was prepared to admit the debt in 1962, he was not prepared to allow compound interest to the creditor. The learned Company Judge disallowed compound interest. That decision was confirmed in appeal by a Division Bench of this Court. Mr. Shukla, therefore, contended that, the decision of the Official Liquidator having merged in the decision by the Court, there was no room for applying rule 176. We are unable to agree. No such limitation is to be found in rule 176. Rule 176 empowers the Court to expunge the proof of a debt on being satisfied that on the previous occasion the proof was improperly admitted or admitted by mistake. We are unable to agree. No such limitation is to be found in rule 176. Rule 176 empowers the Court to expunge the proof of a debt on being satisfied that on the previous occasion the proof was improperly admitted or admitted by mistake. The fact that the decision of the Official Liquidator merged into the decision of the Court would not take the case outside the scope of Rule 176. 7. As regards merits, the loan in question was advanced as long ago as 1944. The petition for winding up was presented on 19th January, 1959. That was a good deal more than three years from the date of the loan. By that time, the debt was barred by time. 8. Mr. Shukla put forward two considerations for saving limitation. It was pointed out that a sum of Rs. 1,500 was repaid by the Company on 30th July, 1959. Apparently the appellant wishes to rely upon section 20 of the Limitation Act. But under section 20 of the Limitation Act, payment has to be made before the expiry of the period of limitation. The sum of Rs. 1,500 was paid by the Company long after the expiry of the period of limitation. So, period of limitation is not extended under section 20 of the Limitation Act. 9. It was suggested before us that there are entries in the books of the Company acknowledging the debt in question. The order under appeal makes no reference to any such entries in the books of the Company. We understand that the entries in question were made in the year 1953 and previous years. Assuming that limitation was extended up to 1953, the claim was barred by time by the year 1959. The learned Company Judge rightly held that the claim was barred by time in the year 1959. The matter having been brought to the notice of the Court, the learned Judge was justified in expunging the entry relating to the appellant's debt from the list of debts outstanding against the Company. The same remarks applies to the alleged debts due to the other two appellants. 10. All the, three connected Special Appeals are, therefore, dismissed.