Limitation as a defence in winding-up proceedings can defeat a refund claim for share application money.
A claim for refund of share application money must be supported by proof of repayment where receipt is admitted, but a prior compromise concerning a separate share transfer dispute does not by itself establish repayment of the application money. The article also notes that where money was paid for allotment of shares and the claim is governed by Article 24 of the Limitation Act, limitation runs from the date of receipt; a petition filed beyond that period is time-barred. In winding-up proceedings based on inability to pay debts, limitation remains a valid defence, so a time-barred underlying claim can defeat the petition even if repayment is not proved.
Issues: (i) Whether the amount of Rs. 1.10 lakhs paid towards share application money was returned to the petitioner. (ii) Whether the petitioner's claim for refund was barred by limitation and, if so, whether that constituted a valid defence in winding-up proceedings.
Issue (i): Whether the amount of Rs. 1.10 lakhs paid towards share application money was returned to the petitioner.
Analysis: The company admitted receipt of the amount, so the burden lay on it to prove repayment. The alleged settlement in earlier civil proceedings related to a different dispute concerning transfer and ownership of shares, not to the share application money. The compromise statement did not mention repayment of the Rs. 1.10 lakhs, and the surrounding conduct of the company, including the doubtful replies to statutory notices, did not satisfactorily establish that the amount had been repaid.
Conclusion: The company failed to prove repayment of the amount.
Issue (ii): Whether the petitioner's claim for refund was barred by limitation and, if so, whether that constituted a valid defence in winding-up proceedings.
Analysis: The amount was paid in 1982 for allotment of shares and was not a deposit in the strict sense. The applicable provision was Article 24 of the Limitation Act, 1963, governing money received by a defendant for the plaintiff's use, under which limitation runs from the date of receipt. Since the petition was filed in 1993, the claim was time-barred. A time-barred claim is a valid defence in a winding-up petition based on inability to pay debts.
Conclusion: The claim was barred by limitation, and the defence was available to the company.
Final Conclusion: The winding-up petition could not be sustained because the underlying claim was time-barred, notwithstanding the failure of the company to establish repayment.
Ratio Decidendi: In a winding-up petition, where the debt claimed is barred by limitation, the company has a valid defence against the alleged inability to pay debts, and the petition must fail.
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