Limitation in winding-up proceedings turns on leave of court and suspension under sick company law, defeating recovery claims.

A recovery suit against a company in liquidation was treated as time-barred because limitation had to be computed after excluding the period during which proceedings under the Sick Industrial Companies Act suspended the remedy, and the suit became effective only from the date leave of the winding-up court was granted under the Companies Act. The court also found no enforceable liability against the alleged sureties because the surety bond was executed by individuals in their personal capacities and did not fasten liability on them as entities. The recovery claim therefore failed in full, and no principal sum or interest was recoverable from the defendants.

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Issues: (i) Whether the suit for recovery was barred by limitation in view of the proceedings before the Board for Industrial and Financial Reconstruction and the subsequent winding up of the company. (ii) Whether the plaintiff could fasten liability on the alleged sureties and recover the suit amount from them on the basis of the surety bond.

Issue (i): Whether the suit for recovery was barred by limitation in view of the proceedings before the Board for Industrial and Financial Reconstruction and the subsequent winding up of the company.

Analysis: A pending enquiry under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 attracted the statutory suspension under section 22, and the period during which the remedy remained suspended was required to be excluded while computing limitation. After the winding up order, section 446(1) of the Companies Act, 1956 required leave of the winding up court before the suit could be proceeded with. Leave granted after institution did not validate the suit from the date of filing, but made it effective only from the date of grant of leave. On that approach, the suit, treated as effective only from the date of leave, was beyond the prescribed period.

Conclusion: The suit was held to be time-barred and the finding was against the plaintiff.

Issue (ii): Whether the plaintiff could fasten liability on the alleged sureties and recover the suit amount from them on the basis of the surety bond.

Analysis: The surety bond was executed by individuals in their personal capacities and not by the firm or company as such. On the language of the bond, the contractual liability did not attach to the alleged surety entities, and no enforceable cause was made out against them on that footing.

Conclusion: Liability of the alleged sureties was negatived and the finding was against the plaintiff.

Final Conclusion: The recovery claim failed in its entirety, and no principal amount or interest was held recoverable from the defendants.

Ratio Decidendi: Where leave of the company court is obtained after institution of a suit against a company in liquidation, the suit becomes effective only from the date of grant of leave, and limitation must be assessed on that basis after excluding any period during which the statutory remedy remained suspended.

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