2003 (11) TMI 452 - HC - Companies Law

Court rules deposit not time-barred under Limitation Act. Respondent must deposit principal + interest within 4 weeks.

Basant Lal Agarwal Versus Lloyds Finance Ltd.

The court found that the debt was not time-barred under the Limitation Act as the deposit was payable on demand, triggering the limitation period upon ... Winding up - Circumstances in which a comp- any may be wound up Issues:1. Whether the debt is time-barred under the Limitation Act.2. The distinction between a loan and a deposit.3. Appropriate order in a petition for winding up.Issue 1: Debt Time-Barred under Limitation Act:The petitioner deposited Rs. 3,75,000 with the respondent for three years at 18% interest. The deposit matured on 5-12-1999. The respondent argued that the debt was time-barred as the company petition was filed on 23-8-2002, beyond the three-year limit. The Limitation Act's articles 21 and 22 were examined, which specify the period of limitation for money lent and deposited. The court analyzed the terms of the deposit agreement, emphasizing the need for a demand by the depositor to trigger repayment. As the deposit was payable on demand, the three-year limitation period would start upon such demand. The court concluded that the debt was not time-barred under article 22 of the Limitation Act.Issue 2: Distinction Between Loan and Deposit:The court referred to legal precedents to distinguish between a loan and a deposit. It highlighted that a deposit does not impose an immediate obligation on the depositee to repay unless demanded by the depositor. Repayment of a deposit depends on the maturity date or terms of the agreement. In this case, the deposit was payable on demand, as per the terms of the agreement, requiring the return of the receipt before refund or renewal. The court concluded that the obligation to repay arose upon demand, indicating a deposit arrangement rather than a loan.Issue 3: Appropriate Order in Petition for Winding Up:Considering the raised defense and to avoid passing a winding-up decree, the court issued an alternative order. The respondent was directed to deposit the principal amount with interest within four weeks. Upon compliance, the winding-up petition would be disposed of, allowing the petitioner to pursue a civil suit for recovery. The deposited amount would be credited to the suit, with further instructions for its management. Failure to deposit would lead to the winding-up petition being admitted and advertised. The court's order provided a structured approach to resolve the matter without immediate winding-up.In conclusion, the judgment addressed the issue of the debt's limitation period, clarified the distinction between loans and deposits, and provided a pragmatic solution in a petition for winding up, ensuring due process and fair resolution of the dispute.