2017 (4) TMI 1499 - HC - Companies Law

Court allows appeal, stays winding-up petition due to limitation issue, clarifies acknowledgment requirements.

M/s. Prowess International Pvt. Ltd. Versus M/s. Shyam Steel Industries Ltd.

M/s. Prowess International Pvt. Ltd. Versus M/s. Shyam Steel Industries Ltd. - TMI Issues:1. Marginal delay in preferring the appeal2. Petition for winding up the respondent company permanently stayed on the ground of limitation3. Acknowledgement of debt in the company's financial statements4. Interpretation of Section 41 of the Income Tax Act, 19615. Requirements for an acknowledgement within the meaning of Section 18 of the Limitation Act, 1963Analysis:1. The High Court of Calcutta condoned the marginal delay in preferring the appeal and allowed ACO No. 152 of 2016 without costs. The appeal was deemed frivolous and devoid of merit, stemming from an order permanently staying the petitioner's winding-up petition against the respondent company due to limitation.2. The appellant's petition for winding up the respondent company was found to be time-barred as per the Limitation Act. Despite the appellant's claim that the respondent acknowledged the debt in its financial statements for three consecutive financial years, the court noted that the balance sheets did not identify the appellant as a creditor whose debt had been acknowledged by the respondent company.3. The appellant relied on a judgment and Section 41 of the Income Tax Act, 1961, to argue that an acknowledgement of dues to creditors evident from a balance sheet would suffice for the purpose of the Limitation Act. However, the court clarified that the acknowledgement must clearly identify the creditor and the indebtedness, without necessarily specifying the quantum of the debt.4. Section 41 of the Income Tax Act, 1961, was deemed irrelevant in the context of the case, as it pertains to recording amounts not paid to third parties as profit for income tax assessment. The court emphasized the importance of a valid acknowledgement within the meaning of the Limitation Act, which should be in writing and clearly acknowledge the debt due to another party.5. Ultimately, the court upheld the order staying the winding-up petition, stating that the petitioner had no valid claim to bring before the Company Court. APO No. 147 of 2017 and ACO No. 153 of 2016 were dismissed with costs assessed at 200 GM to be paid to the respondent, concluding the judgment.