Borrowing from a director and limitation on fixed-term deposits under the Limitation Act

A company may borrow from one of its directors where its memorandum and articles authorise borrowing for the stated business purpose, provided there is full disclosure and fairness; the director's fiduciary position does not by itself invalidate the transaction. On limitation, a fixed-term deposit is not a demand deposit, so the three-year period runs from the date the amount becomes payable and Article 60 does not apply. An alleged board resolution did not amount to a valid acknowledgment, the balance sheets were not satisfactorily proved as acknowledgments, and section 14 was unavailable because the winding-up proceeding involved a different cause of action.

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Issues: (i) Whether the company had authority to borrow money from one of its own directors for the purpose of financing traders; (ii) whether the claim was barred by limitation and whether the transaction fell within Article 60 of the Limitation Act or was saved by acknowledgment, balance sheets, or section 14 of the Limitation Act.

Issue (i): Whether the company had authority to borrow money from one of its own directors for the purpose of financing traders.

Analysis: The memorandum and articles empowered the company to borrow money for the purpose of advancing it to traders. The Court also held that, subject to full and frank disclosure and fairness, a company is entitled to borrow from one of its directors. The director's fiduciary position does not prohibit the transaction where the company is authorised to enter into it and no undue advantage is taken.

Conclusion: The borrowing was within the company's powers and was not invalid merely because the lender was a managing director.

Issue (ii): Whether the claim was barred by limitation and whether the transaction fell within Article 60 of the Limitation Act or was saved by acknowledgment, balance sheets, or section 14 of the Limitation Act.

Analysis: A deposit payable on a fixed date is not a deposit payable on demand, so Article 60 did not apply. The Court held that limitation ran for three years from the date when the amount became payable. The alleged acknowledgment in the board resolution did not amount to an acknowledgment of liability and, in any event, was out of time. The balance sheets did not operate as acknowledgments because the copies relied on were not satisfactorily proved and the accounts had not been validly passed. The winding-up application also did not attract section 14 because the cause of action in liquidation proceedings was not the same as the cause of action for recovery of the debt.

Conclusion: The suit was barred by limitation and was not saved by acknowledgment, balance sheets, estoppel, or section 14.

Final Conclusion: The appeal failed, and the decree against the appellant was maintained. The cross-objection also failed.

Ratio Decidendi: A fixed-term deposit not payable on demand is outside Article 60 of the Limitation Act, and limitation cannot be extended by an ineffective acknowledgment, unauthenticated balance sheets, or a distinct winding-up proceeding based on a different cause of action.

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