Bharat Nidhi Ltd. Vs. Trade and Industries Corporation Ltd. and ors. - Court Judgment

(1) This appeal has been directed against an order of Mr. S. B. Kapoor, District Judge, Delhi, holding the application of Bharat Nidhi Ltd. under Section 216 and 235 of the Indian Companies Act, VII of 1913, to be barred by limitation.

(2) It appears that the Trade and Industries Corporation Ltd. had a current account with the Bharat Bank Ltd. which, it may be stated, was a predecessor-in-interest of the Bharat Nidhi Limited. Another constituent of the Bharat Bank Ltd. was the Trade and Industries Corporation Ltd., on various occasions in 1947 deposited certain bills for collection totaling about Rs. 10620/-. These bills appears to have been wrongly credited to the Trade and Industries Corporation Ltd. The mistake was discovered sometime in July, 1952, when the Bharat Nidhi Ltd. called upon the Trade and Industries Corporation Ltd. and its various directors to refund these amounts to the company. Having failed to get the money back, on 26th October, 1953, the petition, out of which this appeal has arisen, under Section 216 and 235 was filled in the Court of the learned District Judge at Delhi.

The contesting respondents opposed this petition inter alia on the ground of limitation and the learned District Judge came to the conclusion that application under Section 235 of the Companies Act, VII of 1913, should have been made within three years from the date of the first appointment of a liquidator in the winding up or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer.

In the instant case the liquidator of the Trade and Industries Corporation Ltd. having been appointed before the year 1949, which was clearly more than three years before the presentation of the petition, the present petition would clearly be barred by time. It was contended before the learned District Judge that the retainer of the amounts in the instant case should be considered to have taken place in July, 1952, when the petitioner-appellant became aware of the wrong credits. This argument did not find favour with the learned District Judge and, as already observed, the application was dismissed.

(3) On appeal before me Mr. K. L. Mehra, learned counsel on behalf of the Bharat Nidhi Ltd., has repeated the same contentions. He has in addition relied upon a fresh argument which is based on Section 543 of the Companies Act of 1956. The argument of the counsel is that an appeal being under the law of India a rehearing, this Court on appeal should apply the Provisions of Section 543 of Act I of 1956 and hold the application dated 26th October. 1953, filed under Section 235 of Act VII of 1913 to be within limitation. In support of his contention he has tried to seek support from the following decided cases:

Ram Lal v. Raja Ram, 1960-62 Pun L. R. 291, a decision by Chief Justice Khosla and Dulat J., has been referred to in support of the contention. This decision, however, is wholly irrelevant for the purposes of the present case and is of no assistance to the learned counsel, suit for pre-emption on the ground of vicinage. The trial Court dismissed the suit holding that the place where the pre-empted property was situate fell outside the limits of Panipat town and in that locality no custom of Pre-emption prevailed. On appeal, the lower appellate Court reversed the decision of the trial Court and decreed the plaintiff's suit holding that the custom of pre-emption prevailed in the locality in which the property in dispute was situate.

Against this decision, the vendee filled a second appeal in the High Court and during the pendency of that appeal the Punjab Pre-emption Act was amended by Punjab Act, X of 1960, whereby Section 16 of the Punjab Pre-emption Act was deleted and in its place a new section substituted whereby the round on which the urban property can be pre-empted was taken away. It was held on these facts that quite apart from the fact that a change in law after the decision of the trial Court must be given effect to by the appellate Court, with regard to pre-emption cases the law has always been that the right of pre-emption must subsist not only on the date of the sale but also on the date when the suit is brought and finally on the date when the decree is passed. I do not see how the ratio and the underlying principle of this decision can help the appellant. when asked to cite any authority in which a dead claim was revived by means of an amendment in the law of limitation, the counsel frankly expressed his inability to do so.

Lachmeshwar Prasad v. Keshwar Lal, AIR 1941 FC 5, is the next authority on which the counsel has placed reliance. From this decision support is sought for the proposition that the hearing of an appeal under the procedural law of India is in the nature of re-hearing and therefore, in moulding the relief to be granted in a case on appeal, the appellate Court is entitled to take into account even facts and events which have come into existence after the decree appealed against, and consequently, the appellate Court is competent to take into account legislative changes since the decision in appeal was given and its powers are not confined only to see whether the lower Court's decision was correct according to the law as it stood at the time when its decision was given. I fail to see how this decision can advance the appellant's case. It is wholly unhelpful in deciding whether Section 543 of the Companies Act, I of 1956, can be made to apply to the petition filed in 1953 for determining if it was within limitation.

British Medical Stores v. Bhagirath Mal, (1954) 56 Pun L. R. 449 : ((S) AIR 1955 Punj 5), is the next authority on which reliance is placed. From this decision also support is sought for the proposition that an appeal to the Court of appeal is by way of re-hearing and the Court may make such order as the Judge of first instance could have made if the case had been heard by him at the date on which the appeal was being determined. I may in passing mention that on the merits of the dispute in the reported case the Supreme Court has reversed this decision but in so far as the proposition, with respect to the jurisdiction and power of the Court of appeal to take notice of changes in law, made applicable to the controversy before it, is concerned the proposition enunciated therein is unexceptionable. This rule as I have already observed is not of much assistance to the appellant. Singaram Pillai v. Ghulam Gouse, ILR 36 Mad. 438, is clearly unavailing to the appellant's case. This also does not touch the real point which arises in the case in hand.

(4) In the present case there is no question of any amended provision of an existing law, by which amendment has been made retrospective in its operation and is to be deemed to be operative on the date when the appellant filed the application under Section 235 of the Indian Companies Act, VII of 1913. And indeed it is this question which required illucidation, but the appellant has not been able to bring to my notice any precedent or principle in support of his contention. It is well settled that ordinarily a suit or an application would be governed by the law of limitation which is in force at the time of the institution of the suit or the presentation of the application in court, as the case may be. It is equally settled that a claim which has become barred by time cannot be revived by mere amendment of the provisions prescribing the period of limitation unless the amending Act makes retrospective operation of the amendment clear either in express words or by necessary intendment. That it is admittedly not the case here.

(5) While dealing with a similar question Sir Madhavan Nair who prepared the judgment of the Judicial Committee of the Privy Council in M. Ramayya v. U. Lakshamayya, AIR 1942 PC 54, spoke thus:

'Ordinarily, the suit would be governed by the Limitation Act, IX of 1908 which is the law in force when the suit was instituted; but if the defendants are able to show that the right of action had become barred under the Act of 1859 then the title that they had acquired could not be defeated by the subsequent Limitation Acts.'

In Sarkar Dutt Roy and Co. v. Shree Bank Ltd. AIR 1960 Cal 243, S. C. Lahiri C J. while dealing with a similar question observed as follows:

'It is a settled rule of construction of statutes that retrospective effect is not given to an enactment so as to affect substantive rights unless the contrary intention appears by express language or necessary intendment. Section 45-O(1) has the effect of extending the period of limitation for filling an application for execution by a banking company and in the absence of express words or necessary intendment it cannot operate to revive and render effective a decree which has been barred under the previous law, namely, Article 182(7) of the Indian Limitation Act. This point has been settled by the decision of the Judicial Committee in the case of Sachindra Nath Roy v. Maharaj Bahadur Singh, 48 Ind. App. 335 at pp. 344-345: (AIR 1922 PC 187 at pp. 190-191).'

In the same judgment Bachawat J. has also stated the position in the following words:--

'Unless the contrary appears by express words or by necessary implication a statute extending the period of limitation is presumed not to operate retrospectively so as to revive a decree which has become unenforceable by operation of the Laws of Limitation; see ILR 48 Ind App 335: (AIR 1922 PC 187). A statute which has the effect of reviving a barred decree is not a mere matter of procedure and such a statute is presumed not to have retrospective operation. This rule of construction rests upon the presumed intention of the Legislature and arises independently of Section 6 of the General Clauses Act, 1897.'

(6) In some reported cases an argument has been raised that the law of limitation as in force at the time when the cause of action arises should govern the litigation but this contention has been repelled by observing that rules of limitation being prima facie rules of procedure no one has a vested right in a period of limitation unless the contrary follows from the rules themselves and the law of limitation, in force at the time of the initiation of the legal proceedings concerned alone, must be looked at for determining the question of time bar. Strictly speaking, it is this principle, which though having an independent existence, is also embodied in Section 6 of the General Clauses Act which provides as follows:

'Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not--

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.'

As a matter of fact so far as the instant case is concerned I find that the Indian companies Act, I of 1956, itself contains a provision according which this Act is clearly made inapplicable to the winding up proceedings commenced before the commencement of the Act; the only exception from the exemption being cases falling under Section 555(7). This is provided by Section 647 which is in the following terms:--

'Where the winding up of a company has commenced before the commencement of this Act--

(i) sub-section (7) of Section 555 shall apply in respect of any moneys paid into the Companies Liquidation Account whether before or after such commencement; and

(ii) the other provisions with respect to winding up contained in this Act shall not apply, but the company shall be would up in the same manner and with the same incidents as if this Act had not been passed.'

(7) In view of the above discussion I have not the slightest hesitation in repelling the appellant's contention which is wholly devoid of merit.

(8) The counsel then contended that the language of Section 235 of the Indian Companies Act, VII of 1913, is discretionary with the result that it is open to the Court to entertain a petition under this section, even if filed beyond the period prescribed. In support of this contention the counsel has cited Benares Bank Ltd. v. Prakasha Bhagwan Das, AIR 1946 All. 269. The reported decision is no authority for the proposition advanced by the learned counsel. All that is laid down there is that it is discretionary with the Court whether or not to proceed under Section 235 of the Indian Companies Act. To quote the language of Braund J. in the reported case at page 272,

'it may be that in a proper case the Court might still view lapse of time as a sufficient reason for refusing to exercise its discretion in the liquidator's favour.'

In other words, even if the application under Section 235 of Act VII of 1913 is within time, the Court may, in its discretion, still refuse to grant the relief claimed by the liquidator. It does not lay down that in spite of the specific language of Section 235 an application admittedly filed after the period of limitation can be entertained by the Court in the exercise of its discretion. The argument is wholly unsustainable and must be rejected.

(9) Lastly, it was contended that terminus a quo was the date of the knowledge of the company of the mistake in entries. It is submitted that it was only when some of the business of the company or its predecessor Bank was transferred to the Punjab National Bank Ltd. that the mistake was discovered and that it is from this date that the terminus a quo began. Here again, date that the terminus a quo began. Here again the counsel is not right. Reliance has been placed on Section 24 of the Limitation Act which is in the following terms:

'In the case of a suit for compensation for an act which does not give rise to a cause of action unless some specific injury actually results therefrom, the period of limitation shall be computed from the time when the injury results.'

It is contended that specific injury actually resulted to Bharat Nidhi Ltd. Only when they became aware of withdrawal of the amount of the constituent in whose account the amount had been wrongly credited and on the disbursal of the amount by the directors of the Trade and Industries Corporation Ltd. The argument has merely to be stated to be rejected. Section 24, as its language clearly shows, is applicable to suits for compensation for acts not actionable without special knowledge. I fail to see how the principle underlying this section can at all be of any assistance to the counsel for the appellant. The facts of the case in hand can by no means attract the application of Section 24.

(10) Before concluding I might also observe that in this case it is extremely doubtful if Section 235 of the Indian Companies Act VII of 1913, is at all applicable to the application filed by the appellant before me. Merely because the Trade and Industries Corporation Ltd. have withdrawn an amount from their own current account with the Bharat Bank Ltd., its directors cannot be considered to have been guilty of any misfeasance or breach of trust in relation to their own company, namely, the Trade and Industries Corporation Ltd. They may have done some wrong to the Bharat Bank Ltd. They may have done some wrong there may be or perhaps is some other remedy available by proper legal proceedings against those who have withdrawn an amount not legitimately and lawfully belonging to them. But I cannot understand how Section 235 of Act VII of 1913 can be pressed into service by the Bharat Nidhi Ltd. for the purposes of getting back the amount improperly withdrawn from the current account.

When I confronted Mr. K. L. Mehra with this view, the only reply he could give was that this point was not raised in the Court below and, therefore, he was not in a position to deal with it. Without pursuing this aspect of the case any further, in my view the learned District Judge was fully justified in dismissing the petition under Sections 216 and 235 of the Indian Companies Act.

(11) For the reasons given above this appeal fails and is hereby dismissed with costs.

KE/D.H.Z.

(12) Appeal dismissed.