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The Official Liquidator of Liberty Finance Pvt. Ltd. (In Liquidation) Vs. Radha Mohan and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Appeal Nos. 137 of 1974 and 518 of 1977
Judge
Reported in[1979]49CompCas287(Delhi); ILR1979Delhi128
ActsCompanies Act, 1956 - Sections 446
AppellantThe Official Liquidator of Liberty Finance Pvt. Ltd. (In Liquidation)
RespondentRadha Mohan and ors.
Advocates: V.V. Shastri and; M.C. Anand, Advs
Excerpt:
.....446--enforceable claim defind--limitation act, section 5--'bona fide impression that no period of limitation for application for applications under section 446 of the companies act' a ground for condoning the delay.; in the instant case the official liquidator filed a claim petition under section 446 of the companies act, 1956 for the recovery of rs. 33,173.87 beyond the prescribed period of limitation, hence he filed an application for condensation of delay under section 5 of the limitation act.; that having regard to the date of the last payment made by the respondent the claim against the respondents was alive as on the date of the petition for the winding up of the company. there was, thereforee, an enforceable claim in respect of the amounts due from the respondents for which the..........public and investing the same by financing the purchases vehicles by individuals on the basis of hire-purchase agreements. the company financed the purchase of a tata mercedes benz by respondent no. 1 on the basis of hire-purchase agreement. respondents no. 2 and 3 were guarantors of the due performance of the agreement by respondent no. 1 and they also signed the hire purchase agreement in favor of the company. they also signed guarantor's proposal forms in respect of the above transaction. as per the accounts of respondent no. 1 with the company the amount payable by the respondent was rs. 16,640'.00 repayable in one installment of rs. 701.00 followed by 23 equal installments of rs. 693/. the first installment was payable on or before 7th september, 1964 and the subsequent.....
Judgment:

S. Ranganathan, J.

(1) C. A. 137 of 1974 is an application taken out by the Official Liquidator under Sections 446 and 447 of the Companies Act for a payment order for Rs. 33,173.87 jointly and severally against the three respondents. C.A. No. S. 137/74 & 518/77 Respondents I and 3 have been set ex parte but respondent No. 2 has appeared through counsel. He filed a reply on 25th April, 1977 in which he took among others the ground that the claim of the company was time barred. There upon the applicant filed a rejoinder on 2nd May, 1977 staling that there was no bar of limitation for. the relief claimed in the application and that in any event he was entitled to the benefit of Section 5 of the Limitation Act. Subsequently on 19th July, 77 the applicant also filed an application under Section 5 of the Limitation Act being C. A. 518/77 seeking condensation of the delay in filing C. A. 137 of 1974. The facts alleged in the application are as follows:

(2) M./S. Liberty Finance (P) Ltd. (now in liquidation and hereinafter referred to as the company) was carrying on the business of receiving deposits from the public and investing the same by financing the purchases vehicles by individuals on the basis of hire-purchase agreements. The company financed the purchase of a Tata Mercedes Benz by respondent No. 1 on the basis of hire-purchase agreement. Respondents No. 2 and 3 were guarantors of the due performance of the agreement by respondent No. 1 and they also signed the hire purchase agreement in favor of the company. They also signed guarantor's proposal forms in respect of the above transaction. As per the accounts of respondent No. 1 with the company the amount payable by the respondent was Rs. 16,640'.00 repayable in one Installment of Rs. 701.00 followed by 23 equal Installments of Rs. 693/. The first Installment was payable on or before 7th September, 1964 and the subsequent Installments were payable on the 7th of each and every succeeding month. In case of default of payment the respondents were also liable to pay interest at 2 per cent per mensem on the hire monies and the other sums payable under the agreement. It is stated that as per the account of the first respondent with the company a sum of Rs. 16,140.00 remained due to the company towards the hire money. Ever since 7-8-1966 on which date there was default on the part of the respondents in paying the Installment. Interest thereon at 12 per cent per annum from 7-8-1966 to the date of the application was Rs. 13,2341/80. The account also showed a sum of Rs. 2,556.57 due to the applicant towards the incidental charges ax on 20-5-1966 and interest thereon at 12 per cent per annum till the date of the claim worked out to Rs. 1,742.50. Thus it was claimed that there was a sum of Rs. 33,173.87 due from the first respondent to the company which had remained unpaid inspire of the notice of demand thereforee. The winding up proceedings were started against the company on 29-8-1966 and the winding up order was passed by this Court on 13-2-1967. The Official Liquidator thereupon took charge of the company and thereafter has filed this application on the 19th February, 1974. It is prayed in the application that:

(I)Respondents No. 1 to 3 be summoned and examined on oath under Section 477 of the Act, and they one or two or all of them, be ordered to pay Rs. 33173.S7 to the applicant; (ii) in the alternative, this application be tried under Section 446 of the Act; (iii) vehicle No. Uso 1247, Tmb, is still the property of the company. Respondent No. 1 be ordered to surrender possession of the same to the Applicant and the same be ordered to be auctioned and its net sale proceeds be adjusted towards the amount due from Respondent No. 1 to the company; (iv) that future interest at the rate of Rs. 12 per cent per annum from the date. of presentation of this Application till the final order and thereafter at the rate of Rs. 6 per cent per annum fill realization be awarded to the Applicant; (v) the Applicant be allowed costs of this Application; (vi) any other relief which this Hon'ble Court deems just and reasonable in the circumstances of the case be granted to the applicant.

(3) In the reply of the second respondent it was stated as follows:

PARA3 of the application is not admitted. The vehicle in question was in fact. purchased for a sum of Rs. 15,000.00. A sum of Rs. 5.000.00 was paid by Respondent No. 1 in cash and for the payment of the balance sum of Rs. 10,000.00 the Company got various documents, including the alleged Hire Purchase Agreement, signed in blank by the respondents. As the vehicle was of 1955-1956 Model, it could not be plied with profit as the cost of wear and tear was more than its earnings. The company however seized, the vehicle after about a year and so after it was let to respondent No. 1 and transferred it to some one else, having got the Hire Purchase endorsement in the Registration book of the vehicle cancelled by the R. T. O., Agra. The Claim of the Official Liquidator is unfounded and no amount whatsoever, is payable by any of the respondents in respect of the vehicle in question. The accounts relied upon by the Official Liquidator are altogether false and fabricated. The entries made by the Company in its Books of Accounts are altogether false. In any case, the claim of the Company is time barred.

(4) As stated earlier the applicant filed a rejoinder on 2nd May, 1977 and thereafter followed it by C. A. No. 518177. By the latter application he prayed that the delay in the filing of C. A. No. 137/74 may be condoned under Section 5 of the Limitation Act. The grounds on which the condensation is prayed for are:

(I)though the company was wound up on 13-2-1967 the accounts of the company were incomplete and they could be got completed and audited; (ii) a statement of affairs of the company was filed on 17-4-1971 and thereafter the applicant scrutinized the accounts and hire-purchase records to locate the debtors and the amount due from them: (iii) the applicant was advised that there was no period of limitation for filing claims under Section 446 of the Companies Act and was under this bonafide belief until the position was clarified by a recent decision of the Supreme Court; and Civ) the claim was within time at the commencement of the winding up and the applicant is also entitled to the exclusion of the period specified in Section 458-A of the Companies Act. For the above reason it is submitted that there was sufficient cause in not preferring the application earlier and it is prayed that the company application should be admitted and decided on the merits.

(5) The following issues were framed by Kapur-J. on 21-9-1977:

1.Is the claim not barred by time? 2. If the claim is barred by time, is there any reason to condone the delay as per application under Section 5 of the Limitation Act? 3. Was the hire-purchase agreement signed in blank, and if so, what is the effect on the transaction? 4. Was the vehicle taken back by the company a year after the agreement and are the accounts of the company fabricated? 5. What amount, if any, is due to the company from the respondents or any of them? 6. Relief.

(6) In addition to the documents filed Along with the application the oral evidence of the 3rd respondent who had appeared earlier in the case as well as the oral evidence of the 2nd respondent have been let in on behalf of the respondents. The applicant has examined Shiv Dayal, the former Managing Director of the Company. It is on the basis of the above pleadings and evidence that the matter has to be decided.

(7) The issue regarding the period of limitation for applications under Section 446(2)(b) has been considered in two Full Bench Judgments of this Court. Mi/s. Faridabad Cold Storage and Allied Industry Vs . Official Liquidator of Ammonia Supplies Corporation (P) Ltd., : AIR1978Delhi158 and Abrol & Co. (P) Ltd. Vs . A. R. Chadha & Co.. : AIR1978Delhi167 (confirming the decision reported in 1973 Comp Cas 376 and the decision of Anand J. in Official Liquidator of Security & Finance (P) Ltd. v. Pushpawati Puri 1977 R.L.R. 391. The effect of these decision can be summarised as follows:

(A)The expression 'any claim' occurring in Section 446(2)(b) means a claim which is legally enforceable. A claim which had become time barred on the date of presentation of the winding up petition cannot be described as a legally enforceable claim and the provisions of Section 446(2)(b) do not enable the Official Liquidator to revive claims which had been quietened by the lapse of time. (b) Where there is an enforceable claim as on the date of the winding up petition, the official liquidator can make an application under Section 446(2). Such an application will attract the provisions of Article 137 of the Limitation Act, 1963 in view of the decision of the Supreme Court in the case of Kerala State Electricity Board, Trivandrum Vs . T. P. Kundaliumma, : [1977]1SCR996. ( c) The right of the Official Liquidator to make an application under Section 446 arises on the date when the winding up order is passed. Reading Section 458-A of the Act and Article 137 of the Limitation Act together, such an application by the Official Liquidator should be filed within a period of four years from the date of the winding up order.

(8) In the present case the hire-purchase agreement was entered into in August 1964 and a payment in cash was made on, the 14th September, 1964. There was no payment thereafter. The petition for winding up was preferred on the 29th August, 1966 and the winding up order was passed on 13-2-1967. Having regard to the date of the last payment made by the respondent the claim against the respondents was alive as on the date of the petition for the winding up of the company. There was, thereforee, an enforceable claim in respect of the amounts due from the respondents for which the Official Liquidator could file an application under Section 446. But such an application should have been presented within four years from the date of the winding up order i.e. on or before 12-2-1971. In the present case, the application was filed only on 19-2-1974. The application is, thereforee, clearly barred by time. The first issue has, thereforee, to be answered against the Official Liquidator.

(9) This takes me to the consideration of the second issue as to whether there is sufficient cause to condone the delay in the filing of the application by applying the provisions of Section 5 of the Limitation Act. 1 have set out earlier the grounds on which the applicant is seeking condensation of delay. Apart from general allegations that the accounts of the company were incomplete and that the statement of affairs was given to the Official Liquidator only very late, the main ground on which the applicant seeks condensation of delay is that he was under a bona fide impression that there was no period of limitation for filing claims under Section 446 of the Companies Act and that it was only after the position was recently clarified by a decision of the Supreme Court that it was realised that Article 137 would apply in the case of such applications and that thereforee C.A. 137/74 was likely to be treated as time barred. The judgment of the Supreme Court referred to is the judgment in the case of Kerala State Electricity Board, Trivandrum Vs . T. P. Kunhaliaumma, : [1977]1SCR996. The above decision of the Supreme Court was no doubt rendered on 29th October, 1976 but it has been reported in the J977 parts of A.I.R. Reading the rejoinder filed by the Official Liquidator on 2nd May, 1977 and the contents of application C.A. 518/77 which was filed on 19th July, 1977 together, it is clear that the awareness that Article 137 would apply also to petitions under Section 446 came to the applicant only about this lime. The question is whether these circumstances would justify the condensation of delay in the filing of the application. This issue has been touched upon by Anand J. in the decision earlier preferred to in para 12:

The first of these subsidiary question is as to whether in the rather nebulous state of the law of limitation in relation to proceedings under the Act even after the Act of 1963 in view of the decision of the Supreme Court in the case of Town Municipal Council. Athani (Supra), and until the controversy was laid to rest in the decision of the Supreme Court in Kerala State Electricity Board (Supra), it could be said that a person applying under the provisions of the Act had sufficient cause for not preferring the application within the period of limitation provided by Article 137 and he, thereforee, is entitled to the extension of the period prescribed by that Article. True, Article 137 was vide enough to include within its ambit applications under the Act and any applicant, thereforee, was bound, in terms of Section 3 of the Act of 1963, to apply within the period allowed by law. However, only a veiled doubt was cast on the correctness of the decision in the case of Town Municipal Council Athani (Supra) in the decision of the Supreme Court in the case of Nityanand M. Joshi (Supra) in the year 1970 but the earlier decision held unchallenged sway, The true legal position was. however, restored only with the decision in the of Kerala State Electricity Board (Supra) in 1976. Explanationn to Section 5 of the Act of 1963 lays down that the fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may he sufficient cause within the meaning of the Section. If that be so, would'nt the belief of the litigation based on a decision of the Supreme Court as to the true legal position of limitation equally constitute sufficient cause within the meaning of the Section. The answer to the question appears prima facie to be obvious. But the consideration of the question may perhaps be deferred until the provision of Section 5 is invoked in any case and the parties affected have been heard.

(10) I am inclined, after hearing the parties, to agree with the prima facie view expressed by Anand J. The decision of the Supreme Court in the Case of Town Municipal Council, Athani vs . Presiding Officer Labour Court, Hubli and others etc., : (1969)IILLJ651SC continued to hold the field until the Supreme Court clarified, in the Kerala Electricity case (Supra) that, having regard to the change brought about by the Act of 1963, Article 137 of the Limitation Act will apply to any petition or application filed under any Act to a civil court. In these circumstances and having regard to the terms of the Explanationn to Section 5 of the Limitation Act, 1 am of opinion that there was sufficient cause within the meaning of the Section to admit this petition beyond the period of limitation prescribed in Article 137 of the Limitation Act. The second issue is, thereforee.. decided in favor of the applicant.

(11) In view of my conclusion on the above issues, it is not necessary to consider the argument of Shri Shastry that since it is a claim for recovery of a vehicle given on hire-purchase, no period of limitation will start running until the respondents refuse to redeliver the vehicle, relying on a decision of Kapur J. in C.A. 670/73. I thereforee turn to the issues regarding the merits of the claim. The main objection taken on behalf of the respondents is that the hire purchase agreement which is Annexure 'A' to the application has been signed in blank. The annexure in question has not been filled in though it has been signed by all the respondents. However, in view of the oral evidence given in this case. this defect docs not affect the merits of the applicant's claim. The former managing director of the company. Shiv Dayal. stated that this was not the original of the hire-purchase agreement which had been completed and signed by every one. whereas Annexure 'A-1' is not signed by him. The suggestion on behalf of the applicant is that the original hire-purchase agreement which had been signed by all has been lost or misplaced. It is. however, seen that the respondents have admitted the hire purchase transaction. Murlidhar, respondent No. 3 has. stated that the truck was purchased by Radhey Mohan on hire-purchase agreement from the company and that he was the guarantor. The second respondent Manohar Lal, also admits the financing agreement. He also admits that he had received money from the company and that he had taken the vehicle though he was shown as the guarantor. In these circumstances, the hire-purchase transaction stands proved. The fact that Annexure 'A-1' has been signed in blank is thereforee not of any significance or effect on the claim of the applicant.

(12) The allegation of the respondents was that the accounts of the company have been fabricated and the vehicle had been taken back by the company a year after the agreement. The respondents have not led any evidence to show that the accounts were fabricated. ft is a bare allegation that has been made by them which is unsubstantiated. The allegation that the company had taken back the vehicle has also not been established. Murlidhar, the respondent No. 3, stated:

I think that the hire purchase agreement was cancelled and the inspector of the company took possession of the truck. The truck was seized in my presence by the Inspector.

But he is unable to say who the inspector was and whether the principal debtor had been paying the Installments regularly or not. He was also unable to give the year and the date on which the truck was seized. The second respondent Manohar Lal gives a different version. According to him the bus was seized by certain Sardars under threat of violence. The persons who took the vehicle did not show any authority from the company and he did not know whether they were employed by the company. According to him. they also got the endorsement on the certificate of registration cancelled by presents' the documents to R.T.O. But no evidence has been adduced on behalf of the respondents to show that there was any such cancellation. In my opinion, the version put forward by the two guarantors is totally unacceptable and unbelievable and there is no finding that the company had taken back the vehicle.

(13) The last issue is regarding the amount, if any, which is due to the company from the respondents or any of them. In the circumstances above referred to there is no question of passing an order for the recovery of the vehicle as the respondents deny that the vehicle is not with them. I have found that it has not been shown. to have been delivered back to the applicant company. It is now untraceable. The appropriate order to pass is, thereforee, one for recovery of the amounts due to the company in respect of this transaction. I have held earlier that there is no substance in the contention that the accounts of the company were fabricated or false. At the same time, there is an onus on the applicant to prove that a sum of Rs. 16,640.00 had been advanced to the principal debtor in connection with the hire-purchase of the truck. Apart from the opening entry in the statement of account (Annexure B) on 7-8-74 to the effect that an amount of Rs. 16,640.00 was due from the respondents, there is no indication regarding the date or mode by which the amount was advanced to the respondent. No evidence such as a cheque counter-foil or receipt or the like has been produced. Respondent No. 2 has stated that the actual sum received from the company was only a sum of Rs. 10,000.00 and that the balance of Rs. 5,000.00 had been contributed by he hirer. Having regard to the fact that the hire-purchase agreement filed on behalf of the applicant remains blank, the respondents could perhaps have completely denied the transaction. But they have come forward to admit the transaction and to state that they had received moneys from the company for the purchase of the vehicle. In these circumstances, I accept the evidence of Respondent No. 2 that only a sum of Rs. 10,000.00 was received by him in respect of the hire-purchase of the vehicle. So far as the incidental charges are concerned, the details are found in the statement of account and I see no reason to disbelieve the same. I, thereforee, hold that a sum of Rs. 9,500.00 (a sum of Rs. 500.00 had been paid on 14-9-64) was due towards the hire-money from the debtor as on 7-8-1968 and that the amount of incidental charges remaining payable to the company's on 25-6-76 was Rs. 2,056.57. The company is, thereforee, entitled to recover from the respondents the sum of Rs. 9.5007- by way of hire-money interest thereon at 12 per cent per annum from 7-8-1968 to the date of application (which works out to Rs. 8,550.00 ), the sum of Rs. 2.056.57 due towards incidental charges and interest thereon amounting to Rs. 1.742.50 as stated in the petition. In all thereforee. the applicant is entitled to recover from the respondents the sum of Rs. 21.850.00.

(14) The last issue is regarding the relief to which the applicant is entitled. In view of my above discussion, I pass a claim order in favor of the applicant jointly and severally against the three respondents for the recovery of a sum of Rs. 21,850.00.

(15) There will, however, be no order as to costs in the application.


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