KABINI PAPERS LIMITED Vs. M D SHIVANANJAPPA

JUDGEMENT

(1.) THIS is a misfeasance proceeding against the Directors of any limited company that is in liquidation.

(2.) ). The case involves an interesting issues concerning the interpretation of two of the Sections of the Companies Act, viz. , Sec. 458-A and Sec. 543 (2), both of which revolve around the question as to what precisely is the period of limitation within which the Official Liquidator is permitted to institute proceedings before a judicial forum in such cases.

(3.) THERE is no dispute about the fact that the windingup petition was presented before the High Court on 26-5-1987 and that a windingup order came to be passed on 7-4-1988. Simultaneously the Official Liquidator was appointed as Liquidator of the Company on the same day. The present application under Sec. 543 (2) has been filed before the High Court on 19-9-1994. The application is contested and, on behalf of some of the Directors a preliminary objection has been canvassed viz. , that the application has been presented beyond the period prescribed by law and that consequently, it would have to be dismissed on the ground of limitation. For this purpose, the respondents have pointed out to the Court that there is no ambiguity with regard to the time limit prescribed under Sec. 543 (2) of the Act which is five years from the date on which the Company was woundup, the Official Liquidator was appointed as Liquidator or the dates on which the acts complained of have been committed, whichever is later. The section very clearly mandates that there is an outer limit of five years provided to the Official Liquidator for institution of these proceedings and the section uses the word 'shall' which leaves no doubt about the fact that this period of time cannot be extended. To my mind, there is a very valid reason why the Legislature has prescribed the ceiling, insofar as five years is a sufficiently long period of time within which the Official Liquidator can have the affairs of the Company examined threadbare and institute proceedings against the guilty persons. The Legislature was also conscious of the fact that if hopelessly belated action is instituted, that it always turns out to be an infructuous exercise because either the parties are dead or not traceable; more importantly because of the practical difficulty of establishing the charges at that late point of time when either the witnesses are not available or documents are not traceable and the like.