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of <h1>Court sets aside liquidator's order, remands case for fresh disposal; clarifies balance-sheets as acknowledgments.</h1> The court set aside the official liquidator's order and remanded the case for fresh disposal. It clarified that balance-sheets could serve as ... Authentication of balance sheet and profit and loss account, Winding up – Exercise and control of liquidator’s powers Issues Involved:1. Whether the official liquidator erred in rejecting the creditor's proof of debt.2. Whether the balance-sheets of the company can be considered as acknowledgments of debt under Section 19 of the Limitation Act, 1908.3. Whether the authentication of balance-sheets by directors, including one with a fiduciary relationship, affects the validity of the acknowledgment.4. Whether the case should be remanded to the official liquidator for fresh consideration of evidence.Issue-wise Detailed Analysis:1. Rejection of Creditor's Proof of Debt:The creditor, M/s. Babulal Rukmanand, claimed a debt of Rs. 10,000 plus costs and interest, asserting the loan was confirmed by the company. The official liquidator dismissed the claim, questioning the genuineness of a letter dated March 8, 1958, and the validity of the balance-sheet dated December 31, 1956, as acknowledgments of debt. The liquidator concluded that the claim was time-barred before December 31, 1956. The appellant argued that the liquidator should have considered the entire record of the company, not just the evidence presented by the creditor.2. Balance-sheets as Acknowledgments of Debt:The court examined whether entries in balance-sheets could serve as acknowledgments under Section 19 of the Limitation Act, 1908. It was argued that directors, when drafting balance-sheets, do not intend to acknowledge liabilities but merely fulfill a statutory duty. However, the court referenced several cases, including Shapoor Fredoom Mazda v. Durga Prosad Chamaria, which supported the view that balance-sheets could be acknowledgments if they indicated a debtor-creditor relationship. The court concluded that balance-sheets could indeed serve as acknowledgments if they met the requirements of Section 19.3. Authentication of Balance-sheets:The court considered whether the authentication of balance-sheets by directors, including one with a fiduciary relationship (Radheyshyam Khandelwal, whose father was a partner in the creditor firm), vitiated the acknowledgment. The court reviewed cases like In re Coliseum (Barrow) Ltd. and In re Transplanters (Holding Company) Ltd., which dealt with similar issues. It was determined that if the balance-sheets were authenticated by the required number of directors who were not interested in the acknowledgment, the authentication would be valid. In this case, the balance-sheets were signed by at least two other directors not interested in the acknowledgment, making them valid acknowledgments under Section 19.4. Remand for Fresh Consideration:The court found that the official liquidator erred in dismissing the claim without considering all relevant evidence, including the balance-sheets and the alleged agreement (exhibit 1). The court held that the liquidator should have examined whether the entries in the balance-sheets related to the appellant's claim. The case was remanded to the official liquidator for fresh disposal, allowing for the consideration of all material evidence, including parol evidence to establish the relationship between the entries and the appellant's claim.Conclusion:The court set aside the official liquidator's order and remanded the case for fresh disposal, emphasizing the need to consider all relevant evidence. The court clarified that balance-sheets could serve as acknowledgments under Section 19 of the Limitation Act, 1908, provided they met the statutory requirements and were authenticated by directors not interested in the acknowledgment. The court did not express an opinion on additional arguments raised by the appellant, leaving them for the official liquidator's consideration. No order as to costs was made due to the appellant's failure to present the case properly initially.
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