Court recalls order due to suppression of facts, finds claim time-barred but allows filing as unsecured creditor.

The court recalled the order granting the first respondent leave to file a suit due to suppression of material facts. The first respondent's claim for unpaid installments was found to be time-barred. Despite this, the court allowed the first respondent to file as an unsecured creditor, emphasizing the need for honesty in court proceedings and equitable distribution among creditors.

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Issues Involved:
1. Recall of the order dated 20-3-1990 granting leave to file a suit.
2. Whether the claim of the first respondent is within the limitation period.
3. Suppression of material facts by the first respondent.
4. Entitlement of the first respondent to file a claim as an unsecured creditor.

Detailed Analysis:

1. Recall of the Order Dated 20-3-1990 Granting Leave to File a Suit:

The Official Liquidator sought to recall the order dated 20-3-1990, which granted the first respondent leave to file a suit under section 446 of the Companies Act, 1956, read with rule 9 of the Companies (Court) Rules, 1959. The first respondent, a company incorporated in England, supplied machinery to the company in liquidation (Hindustan Thermo Prints Ltd.). The first respondent had previously filed applications (C.A. Nos. 829 and 831 of 1988) seeking interim relief and restoration of machinery possession or payment of dues, which were withdrawn with liberty to move again if the claim was within time. However, the first respondent filed a fresh application (C.A. No. 7567 of 1989) without disclosing the earlier applications and their withdrawal, leading to the grant of leave to file a suit.

2. Whether the Claim of the First Respondent is Within the Limitation Period:

The court examined whether the first respondent's claim was within the limitation period. The machinery was supplied under a contract dated 23-12-1980, with payments to be made in installments. The first respondent claimed that payments for two installments were not made. However, the court observed that the claim for payment was barred by time on 22-12-1984, as per the order dated 20-5-1988. The first respondent argued that the title to the machinery remained with it due to non-payment, invoking clause 6 of the contract. The court rejected this argument, noting that the invoices dated 22-12-1981 and 24-12-1981 superseded the contract's clause 6, requiring payment within thirty days, thus making the suit for repossession of machinery untenable.

3. Suppression of Material Facts by the First Respondent:

The court found that the first respondent suppressed material facts by not disclosing the earlier applications (C.A. Nos. 829 and 831 of 1988) and the orders passed thereon in its subsequent application (C.A. No. 7567 of 1989). This suppression led to an unwarranted advantage, resulting in the grant of leave to file a suit. The court emphasized that a litigant who gains an advantage through suppression and concealment of material facts must have such an advantage withdrawn. The principle of finality of litigation cannot be used to perpetuate fraud.

4. Entitlement of the First Respondent to File a Claim as an Unsecured Creditor:

The court permitted the first respondent to file its claim as an unsecured creditor before the Official Liquidator. The first respondent could prove that the company was indebted to it, and if the claim was proved, it would be paid out of the amount set apart for unsecured creditors, subject to equitable distribution and the orders of the Company Judge.

Conclusion:

The order dated 20-3-1990, which granted the first respondent leave to file a suit, was recalled. The first respondent was allowed to file its claim as an unsecured creditor before the Official Liquidator, subject to proving the company's indebtedness and equitable distribution amongst unsecured creditors. The court emphasized the importance of coming to court with clean hands and the consequences of suppressing material facts.

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