Judgment:
1. This application is filed by the Official Liquidator under Order 6 Rule 17 CPC read with Rule 6 and 7 of Companies (Court) Rules 1959s whereunder the O.L seeks for the following reliefs:-
1) to delete para Nos 9 (a), (b), (d), (e), and (f) in the points of the claims in C.A.No.130/2010;
2) to delete para Nos.10, 11 and 12 in the points of claims in C.A.No.130/2010;
3) to delete para Nos.3, 5, 6, 7 and 8 in the prayer column in C.A.No.130/2010;
4) to insert the following paragraphs in the prayer column after prayer (8) in C.A.No.130/2010 as :-
9) to direct the Ex-directors to make good the amount of Rs.1,55,000/- jointly or severally as described in para 9(g) above to the Official Liquidator together with interest @ 18% p.a or any other rate as this Honourable Court may fix with effect from the date of winding up;
10) to direct the Ex-directors to make good the amount of Rs.32,66,631/- jointly or severally as described in para 9(g) above to the Official Liquidator together with interest @ 18% p.a or any other rate as this Honourable Court may fix with effect from the date of winding up;
11) to direct the Ex-directors to make good the amount of Rs.18,53,116/- jointly or severally as described in para 9(i) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable Court may fix with effect from the date of winding up;
12) to direct the Ex-directors to make good the amount of Rs.2,83,674/- jointly or severally as described in para 9(j) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable Court may fix with effect from the date of winding up;
13) to direct the Ex-directors to make good the amount of Rs.7,58,175/- jointly or severally as described in para 9(k) above to the Official Liquidator together with interest @ 18% p.a. or any other rate as this Honourable Court may fix with effect from the date of winding up;
3. Objections to the said application has been filed and it is contended that O.L is seeking to incorporate the amendment by way of adding additional prayers in C.A.No.130/2010 which are barred by limitation and therefore such amendment is impermissible.
4. Heard the learned Advocates appearing for the parties, namely, Sri K.S.Mahadevan, counsel for the O.L and Sri G.Krishna Murthy, learned counsel for the respondents.
5. It is the contention of Mr.Krishna Murthy that provision of Section 543(2) of Companies Act 1956 (hereinafter referred to as ‘the Act’) is a self-contained Code whereunder limitation has been prescribed for filing an application for misfeasance or breach of trust, which can be filed not only by the creditor or the O.L but also by a contributory of the company in liquidation and as such he would contend that provisions of Section 458-A of the Act cannot be red into for the purpose of the application being considered under Section 543(2) of the Act and the exclusion clause found in Section 458-A cannot be made applicable to a proceeding initiated by the O.L or by such of those persons as is enumerated under Section 543 of the Act to contend that one year period can be excluded for the purpose of computation of period of limitation of five years prescribed under sub-section (2) of Section 543 of the Act. He would elaborate his submission by contending that words used in Section 458-A, which has a non-obstante clause, is referable only to the provisions of Limitation Act or limitation prescribed in any other law which is in force namely when a suit or application is filed on behalf the company and if the Parliament in its wisdom was desirous of including the provisions of Section 543 under this exclusion clause, it would have said so in clear terms and on account of the words “notwithstanding anything contained in any of the provisions of this Act” being conspicuously absent in Section 458-A, said provision cannot be made applicable to the application in question and as such he contends that one year period cannot be excluded for the purpose of computation of limitation. He would also contend that provisions of Section 446 of the Act is to be read in conjunction to Section 458-A and to that extent only the exclusion clause is to be made applicable and not to a proceeding under Section 543 of the Act. He would also draw the attention of the Court to Rule 16 of Companies (Court) Rules to contend that it is a special provision whereunder specific period of limitation has been prescribed and as such exclusion clause cannot be pressed into service for the purpose of computation of period of limitation.
6. Per contra, Sri K.S.Mahadevan, learned counsel appearing for the O.L would submit that Section 458-A is to be read along with Section 543 and he contends that Section 543(2) prescribes the period of limitation and Section 458-A prescribes the exclusion period and thus the exclusion period of one year provided under Section 458-A would also extend to an application filed by the O.L under Section 543(2). He would submit that words used in Section 458-A is with reference to the proceedings to be initiated in the name and on behalf of the company which is being wound-up and it is only on the winding-up order that would be passed which would give cause of action for the O.LO to file an application under Section 543(1) and the word “application” used in Section 458-A is referable to an application filed under Section 543(1) of the Act also and as such he would contend that period of one year is to be excluded for the purpose of computation of period of limitation. He would also contend that period of one year from the date of passing of the order is to be excluded as contemplated under Section 458-A for the purpose of reckoning the period of limitation of five years prescribed under Section 543(2) of the Act. In support of his submissions, he relies upon the following judgments:- 1) (2002) 112 Company Cases P.606
(KARNATAKA STEEL AND WIRE PRODUCTS AND OTHERS vs KOHINOOR ROLLING SHUTTERS AND ENGINEERING WORKS AND OTHERS)
2) (2008) 144 Company Cases P.609 (SC)
(AJAY G.PODAR vs OFFICIAL LIQUIDATOR, JAIPUR SPINNING AND WEAVING MILLS)
7. Having heard the learned Advocates appearing for both parties and also on perusal of the material on record, the only issue which requires to be considered by this Court for the purpose of disposal of the application in question would be:
Whether the application filed has become time barred by virtue of Section 543(2) of the Act and the O.L would not be entitled to invoice Section 458-A of the Act or not?
8. In order to evaluate the rival contentions raised by the parties, it would be benefit to extract Sections 446, 458-A and 543(1) and (2) of the Act which reads as under:-
“446. Suits stayed on winding up order:- (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose.
(2) Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of –
a) any suit or proceeding by or against the company;
b) any claim made by or against the company (including claims by or against any of its branches in India);
c) any application made under Section 391 by or in respect of the company;
d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or rise in course of the winding up of the company,
whether such suit or proceeding has been instituted or is instituted or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960).”
458A. Exclusion of certain time in computing periods of limitation:- Notwithstanding anything in the Indian Limitation Act, 1908 (9 of 1`908) 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 Tribunal, 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.
543. Power of Tribunal to assess damages against delinquent directors, etc:- (1) If in the course of winding up of a company, it appears that any person who has taken pat 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 Tribunal 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 Tribunal thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retained, misfeasance or breach of trust, as the Tribunal 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 the winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer”.
9. Section 543 of the Act confers power upon the Tribunal (Court) to assess damages against delinquent directors, Manager etc,. on an application made by O.L, or Liquidator or of any creditor or contributory to examine into the conduct of the person, director, manger etc., aforesaid and compel him to repay and restore the money or property or any part thereof, or to contribute such sum by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust within the time specified in sub-section (2). A period of five period of limitation in provided under sub-section (2) of Section 543 to file such application and this period would commence form the date of winding-up order or the first appointment of the liquidator in the winding up or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer. 10. The object of enactment of Section 458A has been re-stated by the Hon’ble Apex Court in Karnataka Steel and Wire Products case referred to supra, wherein it has been held that Section 458A merely excludes the period from the date of commencement of winding up till the order of winding up is made and additional period of one year immediately following the date of winding up. By an amendment, the Legislature has enacted and inserted Section 458A in the Act so that O.L who is the custodian of the assets and liabilities of the Company (in liquidation) would be able to file or lodge claim on behalf of the company which was legally enforceable on the date of winding-up, after excluding the period indicated in Section 458A and thereby the company or its share holders who may have stake their claim, if any, for being adjudicated and would not suffer any loss on such account. It is held by the Hon’ble Apex Court in the said decision as under:-
“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 in made, could he 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, byway 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 debt 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”. It is no doubt true that Section 543(2) of the Act provides for a period of five years from the date of winding up or the appointment of liquidator to assess the damages against the delinquent director, manager, etc., enumerated thereunder. A combined reading of Section 543(2) and Section 458-A of the Act which starts with non-abstante clause, the expression “not withstanding anything in the Limitation Act 1908 or any other law for the time being in force” ends with the expression “whichever is longer” would clearly indicate that period of limitation will commence form the date of commencement of winding-up of he company till the date of winding-up order (both inclusive) and additional period of one year immediately following the date of winding-up order shall be excluded and thereby Section 458-A is applicable to applications filed under Section 543(1) for exclusion of time in computing the period of limitation.
11. In the instant case, O.L has commenced the proceedings by filing an application under Section 543(1) of the Act on behalf of the company in liquidation on 1-3-2010. The winding-up order was passed on 7-3-2005. Thus, it is within the period of five years as provided under Section 543(2) read with Section 458-A of the Act. At this juncture, it would be relevance to extract the judgment of Hon’ble Supreme Court in Ajay P.Podar’s case referred to supra, wherein it has been held as under:- “12. In our view, there is no merit in the contention advanced on behalf of the appellant that by virtue of Section 458A the period of limitation is extended by one year. Part III of the Limitation Act excludes certain circumstances mentioned in Sections 12 to 24 for computation of the period of limitation. Similarly, Section 458A provides for an additional circumstance which is not there in the Limitation Act which is required to be taken into account as an item of exclusion in the matter of computation of the period of limitation of five years prescribed by Section 543(2). That circumstance is a period spent between the date of commencement of winding up of the company and the date on which the winding up order is passed plus one year therefrom. If this period of limitation is to stand excluded it is only by virtue of Section 458A which circumstances is not contemplated by Sections 12 to 24 of the Limitation Act. Just as a different period of limitation is prescribed for misfeasance proceedings vide section 543(2) so also vide Section 458A a special circumstance is indicated as an item of exclusion of certain time in computing the period of limitation. Therefore, there is no conflict between Section 458A and Section 543(2) of the Companies Act. If so read, there is no extension of the period of limitation of five years as contended on behalf of the appellant. In our view, Section 458A excludes the period between the date of commencement of winding up of the company and the date on which the winding up order is passed plus one year therefrom. Therefore, it is a case of exclusion and not extension of the period of limitation of five yeas prescribed under Section 543(2) of the Companies Act.
Xx
15. One of the contentions advanced on behalf of the appellant is that Section 458A is not applicable to misfeasance proceedings instituted by the official liquidator as such proceedings are not in the name and on behalf of a company which is being wound up by the Court. In this connection, reliance is placed on Section 458A which prescribes the mode of computation of the period of limitation for any suit or an application in the name and on behalf of a company which is being wound up by the Court. Therefore, it is sought to be argued that misfeasance proceedings instituted by the official liquidator is neither a suit nor an application in the name and on behalf of a company which is being wound up by the Court; We find no merit in this argument. If book-debt is assigned by the company to a bank which fails to file a suit for recovery of money within the time prescribed under the Limitation Act, it would not be open to the official liquidator to institute the suit under Section 458A because in that event the official liquidator is said to have filed a suit not on behalf of the company but on behalf of the Bank. It is to such cases that Section 458A will not apply. In the present case, the official liquidator was authorized to take steps to recover assets both financial and other asses by the company Court under the winding up order. It is pursuant to that authority that the official liquidator has instituted the misfeasance proceedings for recovery on December 1, 1989. The said proceedings have been initiated in the name of the company and on behalf of the company to be wound up. The name of the applicant, indicated at page No.27 of the appeal paper book, shows that the official liquidator has filed misfeasance proceedings in the name of the company and on behalf of the company. Therefore, in our view. Section 458A is squarely applicable to misfeasance proceedings instituted by the official liquidator in the name of the company and on behalf of the company in liquidator in the name of the company and on behalf of the company in liquidation. Once an application is made in the name and on behalf of the company, Section 458A would become applicable. On this aspect more provision needs to be mentioned. Section 457 deals with powers of liquidator. Under Section 457(1) the liquidator, in a winding up by the Court, has the power with the sanction of the Court to institute any suit prosecution or legal proceedings in the name and on behalf of the company. In the present case the winding up order indicates that the company court had granted such a sanction and the misfeasance proceedings have been instituted by the official liquidator in terms of Section 457(1)(a) of the Companies Act. The claim on behalf of a company (in liquidation) filed by the official liquidator is in the form of application though it is really a plaint and hence it cannot be stated that the misfeasance proceedings are proceedings instituted by the official liquidator in his own independent right. Once it is held that the said application is in the nature of a plaint then Section 457 of the Companies Act would apply. Section 458A of the Companies Act would apply. Section 458A of the Companies Act is intended to extend the limitation period for the benefit of the company (in liquidation) and the official liquidator appointed to carry on its winding up process by collecting the asses and distributing the same among those entitled to the same. The underlying object in extending the limitation is to enable the official liquidator to take charge of the affairs of the company, to examine the records, account books, to study the annual statements and accordingly proceed to recover and collect the assets. He has also to find resources for conduction the proceedings. The proceedings initiated by him by way of Judge’s summons or suit for enforcement of the recoveries, cannot but be on behalf of the company having regard to his source of authority, viz., the provisions of the Companies Act and the statutory obligation in discharge of which he has to act in this behalf. The said Act does not contemplate his acting in the matter of recoveries excepting as the official liquidator and excepting on behalf of the company.” 12. In the instant case, applying the period of limitation as prescribed under sub-section (2) of Section 543, the O.L was required to file the application within five years from the date of winding-up order, namely 7-3-2005 and it has been filed in C.A.No.130/2010 on 1-3-2010. The present application seeking amendment has been presented by the O.L for raising certain additional points based on the Chartered Accountant’s report dated 17-9-2010. Time commenced between commencement of winding-up and the date of winding-up order, i.e., 22-7-2002 to 7-3-2005, which would be two years and 8 months, of which this court is not concerned with in this application. The application which has been filed on 17-9-2010 is to be held as filed within the period of limitation since the benefit of exclusion provided under Section 458-A, as held by the Hon’ble Apex Court in Podar’s case referred to supra would be applicable, whereunder at paragraph 15 (which is extracted supra) it has been held that provisions of Section 458-A would be applicable to proceeding of misfeasance instituted by the O.L. Thus, applying the provisions of Section 458-A and sub-section (2) of Section 543 of the Act and the dicta laid down by Hon’ble Apex Court in Podar’s case referred to supra, the one and only conclusion that can be drawn in the instant case would be that application field by the O.L for amendments within the period of limitation and as such deserves to be allowed.
14. Accordingly, the following order is passed:-ORDER
(1) C.A.No.782/2010 is hereby allowed;
(2) The O.L shall make necessary endorsement in the original application C.A.130/2010 for having amended the application by filing amended application.
(3) Respondents are at liberty to file additional written statement to the amended application.