PHIROJSHAH PESTONJI CONTRACTOR Vs. RAMNATH JANARDA PRABHAU

JUDGEMENT

(1.) These four appeals arise out of an application made by the Official Liquidator of the Bombay Baroda Assurance Company Limited (hereinafter referred to as the Company) against its former Officers under section 235 of the Indian Companies Act 1913 and section 543 of the Companies Act 1956 The Company was incorporated under the Baroda Companies Act and carried on business of life insurance with its Head Office at Baroda and branches in Bombay and Indore. Opponent No. 1 was at all material times the Manager of the Bombay Office; Opponent No. 2 was the General Manager and Opponents Nos. 3 to 5 were the Directors of the Company. As the financial position of the Company was unsatisfactory the Controller of Insurance presented a petition for winding up the Company in the District Court Baroda. In the petition an application was made for appointment of a provisional Liquidator and on the application a provisional Liquidator was appointed by the District Court on 28th April 1951. The petition was thereafter heard and an order for winding up the Company was made and the provisional Liquidator was confirmed as the Official Liquidator of the Company on 14th August 1951. In the course of winding up the Company the Official Liquidator found that the opponents were guilty of misfeasance breach of trust and or misapplication of the moneys of the Company and as a result thereof the Company had suffered a loss of Rs. 46 383 and he therefore filed the present application for an order requiring the opponents to contribute the sum of Rs. 46 383 to the assets of the Company by way of compensation in respect of such misfeasance breach of trust and/or misapplication. The application was headed as one under sec. 235 of the Indian Companies Act 1913 and sec. 543 of the Companies Act 1956 but it may be pointed out at the outset that since the winding up of the Company had commenced before the coming into force of the Companies Act 1956 the Companies Act 1956 did not apply in relation to the winding up of the Company and the Company was required to be wound up in accordance with the provisions of the Indian Companies Act 1913 (Vide sec. 647 of the Companies Act 1956 The application was therefore really an application under sec. 235 of Indian Companies Act 1913 The acts of misfeasance breach of trust and/or misapplication of the moneys of the Company charged against the opponents were set out in the application and it was alleged that by reason of these acts of the opponents the Company had been put to a loss of Rs. 46 383 The application was made on 7th September 1957 more than three years from the date of first appointment of the Liquidator and was therefore prima facie beyond the time prescribed by sec. 235 of the Indian Companies Act 1913 but the Official Liquidator alleged in the application that he was kept from the knowledge of his right to make the application by means of fraud committed by the opponents and the fraud first became known to him on or about 2nd August 1957 or at the earliest on or about 21st December 1956 and the period of three years was therefore liable to be computed not from the date of first appointment of the Liquidator but from 2nd August 1957 or at any rate 21 December 1956 being the date when the fraud first became known to him and if that was done the application was within time. The Official Liquidator in taking this plea obviously invoked sec. 18 of the Limitation Act. The application was resisted by all the opponents and amongst the various contentions raised by the opponents there were two of a preliminary character. The first was that the application was not tenable as it did not disclose a cause of action and the second was that it was barred by limitation. On these contentions two issues were raised by the learned District Judge and they were ordered to be tried as preliminary issues. At the commencement of the hearing of these two issues the issue in regard to the contention that the application was not tenable as it did not disclose a cause of action was given up and the only issue which was debated was whether the application was barred by limitation and that was on the assumption that the allegations as to fraud set out in the application were correct. The argument urged on behalf of the opponents was that even if those allegations were correct the application was time-barred since sec. 18 of the Limitation Act did not apply to an application under sec. 235 of the Indian Companies Act 1913 and the Official Liquidator was therefore not entitled to invoke the aid of that section in computing the period of three years prescribed by sec. 235 of the Indian Companies Act 1913 It was also sought to be contended on behalf of the opponents that in any event those allegations even if correct did not constitute fraud within the meaning of sec. 18 of the Limitation Act but the learned District Judge did not allow this contention to be urged since the issue as regards limitation was ordered to be tried as a preliminary issue only on the basis of the contention that sec. 18 of the Limitation Act was not applicable and the learned District Judge observed that for this contention a separate issue would be framed if necessary and that issue could be decided later. The learned District Judge then proceeded to decide the contention as regards the applicability of sec. 18 and held that by reason of sec. 29(2) sec. 18 was applicable to an application under sec. 235 of the Indian Companies Act 1913 and that the Official Liquidator was therefore entitled to invoke sec. 18 in computing the period of three years prescribed for the application by sec. 235 of the Indian Companies Act 1913 and the application was consequently not barred by limitation Opponents Nos. 1 3 4 and 5 being aggrieved by this decision of the learned District Judge preferred separate appeals in this Court and these are the appeals which have come up for hearing before us to-day. Since these appeals are directed against the same judgment and involve the same question it would be convenient to dispose them of by a common judgment.

(2.) It would be seen from what is stated above that the question which arises in these appeals is a narrow one namely whether section 18 of the Limitation Act applies to an application under section 235 of the Indian Companies Act 1913 Section 235 of the Indian Companies Act 1913 requires an application under that section to be made within three years from the date 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. Now so far as the present application is concerned it was obviously made more than three years from the date of the first appointment of the Liquidator that being the longer of the two periods available to the Official Liquidator under sec. 235 and the application was therefore prima facie beyond the time prescribed by section 235. The Official Liquidator was therefore obliged to rely on section 18 of the Limitation Act and unless that section could be availed of by the Official Liquidator it is evident that the application would fail. Now section 18 was sought to be made applicable by reference to section 29(2) of the Limitation Act. Section 29(2) provided as follows:-

(3.) It is clear on a plain reading of this section that two conditions must be satisfied before the section can be called in aid by the Official Liquidator. First there should be a special or local law which prescribes for an application under section 235 of the Indian Companies Act 1913 a period of limitation different from that prescribed therefor by the First Schedule to the Limitation Act and secondly there should be no provision in such special or local law which expressly excludes the applicability of section 18 to such an application. Now so far as the second condition is concerned it was not disputed that if the first condition was satisfied the second condition did not present any difficulty in the way of the Official Liquidator for there was nothing in the Indian Companies Act 1913 which expressly excluded the applicability of section 18 to an application under section 235. But the real controversy centred round the question whether the first condition was satisfied. Could it be said that the Indian Companies Act 1913 which by section 235 prescribed a period of three years within which an application under that section should be made to the Court embodied a special or local law prescribing for such an application a period of limitation different from the period of limitation prescribed therefor by the First Schedule to the Limitation Act. It was of course not disputed that the Indian Companies Act 1913 was a special law but the contention urged on behalf of the opponents was that the other requirements of the condition were not satisfied and the argument in this behalf was a two-fold argument.