2013 (2) TMI 195 - HC - Companies Law

Limitation Act applies to winding up petition under Companies Act. Time-barred debt petition dismissed with costs waived.

The court ruled that the Limitation Act, 1961 applies to a winding up petition under Sections 433(e), 434, and 439 of the Companies Act, 1956. It ... Winding up petition - claim was based on the debt recovery of which is barred under the law of limitation - Held that:- The appellant herein had last raised 39 invoices for Rs.67,86,255/- between April, 2007 to March, 2008. Payment of Rs.38,02,495.11 was made by the respondent on or before 12th January, 2009. Tax at source was also deducted on the payments and the tax deduction at source certificate was made available on 12th January, 2009. The winding up petition in the Delhi High Court was filed on 30th November, 2012. It was returned under office objection and was re-filed on 4th December, 2012. In the winding up petition, there is no allegation that the outstanding amount of Rs.23,54,853/- was admitted by the respondent as due and payable to the appellant in their books of accounts or in the annual returns, which was filed with the Registrar of Companies. The company petition was, therefore, filed for recovery of a time barred debt. The company petition does not elaborate and state why and for what reason the debt for which the winding up petition was filed was still due and payable and not barred by limitation as the last payment was received by the appellant and made by the respondent on 12th January, 2009. The period of 3 years, therefore, expired on 12th January, 2012. The appellant at best is entitled to exclusion of 301 days for the period between 15th January, 2011 and 11th November, 2011. The company petition before the Delhi High Court was filed on 30th November, 2012 or after 3 years and 323 days (2012 being a leap year). The claim which is made subject matter of the winding up proceedings would still be barred by limitation as the winding up petition in the Delhi High Court was filed belatedly by 22 days. Treating the notice under Section 434(1)(a) as equivalent to Section 80 CPC and to give benefit of Section 15(2) of the Limitation Act would, therefore, lead to analogous and somewhat incongruous situation where the creditor cannot sue a company in civil proceedings as time barred debt but can by invoking the exclusion under Section 15(2) of the Limitation Act, sue a company for winding up of company on account of deeming fiction that the company is unable to pay the same debt. However, need not further dwell and give an affirmation opinion on the said aspect because even if this period of 21 days excluded under Section 15(2) of the Limitation Act, the winding up petition would still be barred on the date of filing by 1 day. Being in the nature of original proceedings, Section 5 of the Limitation Act would not apply - no merit in the present appeal hence dismissed. The costs of Rs.10,000/- imposed by the learned Single Judge on appellant are waived. Issues:1. Applicability of the Limitation Act, 1961 to a winding up petition under Section 433(e) read with Sections 434 and 439 of the Companies Act, 1956.2. Interpretation of Section 433(e) and Section 434(1)(a) of the Companies Act, 1956.3. Filing of a winding up petition for recovery of a time-barred debt.4. Consideration of the period of limitation in filing the winding up petition.5. Exclusion of time spent in prosecuting the proceedings in good faith.6. Equivalence of notice under Section 434(1)(a) to Section 80 of the Code of Civil Procedure, 1908.7. Application of Section 15(2) and Section 5 of the Limitation Act in winding up proceedings.Analysis:1. The judgment addressed the issue of whether the Limitation Act, 1961 applies to a winding up petition under Section 433(e) read with Sections 434 and 439 of the Companies Act, 1956. The court rejected the contention that the Limitation Act does not apply, emphasizing that a winding up petition is maintainable when a company is unable to pay a debt that is legally recoverable and not barred by the law of limitation.2. The interpretation of Section 433(e) and Section 434(1)(a) was discussed, highlighting that a company is deemed unable to pay its debts when certain conditions are met, including serving a notice demanding payment. The court cited relevant case law to support the interpretation and emphasized the importance of the debt being legally recoverable and not time-barred.3. The judgment analyzed the filing of a winding up petition for a time-barred debt, noting that the petition in question was filed for the recovery of a debt that was beyond the prescribed period of limitation. The court scrutinized the timeline of events leading to the filing of the petition and found that the debt in question was indeed time-barred.4. In considering the period of limitation in filing the winding up petition, the court calculated the timeline of events and determined that the petition was filed belatedly, rendering the claim still barred by limitation even after excluding certain periods.5. The court discussed the exclusion of time spent in prosecuting the proceedings in good faith, highlighting that the period between certain dates could not be considered as time spent in good faith, further supporting the finding that the petition was filed beyond the limitation period.6. The equivalence of notice under Section 434(1)(a) to Section 80 of the Code of Civil Procedure, 1908 was examined, with the court emphasizing that such notice is not strictly mandatory like in civil suits against the government. The court discussed the implications of treating such notices as equivalent and their impact on limitation periods.7. The application of Section 15(2) and Section 5 of the Limitation Act in winding up proceedings was analyzed, with the court concluding that the appellant was to blame for the delay in filing the petition, and therefore, the consequences of the delay had to be borne by the appellant. The appeal was dismissed, and costs were waived based on the circumstances of the case.