1979 (3) TMI 140 - HC - Companies Law

Court clarifies time limit for official liquidator application under Companies Act

The court held that the application filed by the official liquidator was not barred by limitation. It rejected the respondent's argument that the ... Winding up – Suits stayed on winding-up order, Effect of supervision order Issues Involved:1. Whether the application filed by the official liquidator is barred by limitation.2. Whether the official liquidator had the right to file an application under section 446 of the Companies Act during the voluntary winding up.3. The applicability of section 518 and section 526 of the Companies Act in the context of the official liquidator's application.Detailed Analysis:Issue 1: Limitation of the ApplicationThe primary contention raised by the first respondent was that the application filed by the official liquidator on July 14, 1978, was barred by limitation since the amounts had become due from the respondents in April 1973. The respondent argued that the application should have been filed within three years from the date the amounts became due, i.e., by April 1976.However, the court held that the period of limitation for filing such an application should be decided with reference to Article 137 of the Limitation Act and section 458A of the Companies Act. The court noted that the right to make an application under section 446 arose for the first time when the winding up was brought under the supervision of the court on November 13, 1975. Therefore, the application filed on July 14, 1978, was within the three-year period prescribed by law.Issue 2: Right to File Application Under Section 446 During Voluntary Winding UpThe respondent contended that an application under section 446 should have been filed by the voluntary liquidator by April 27, 1976, as section 518 enabled the voluntary liquidator to move the court to exercise its powers under section 446. The court, however, rejected this argument, stating that section 518 does not confer such extensive powers on a voluntary liquidator. The court emphasized that voluntary winding up is a process carried out without court intervention except in specific circumstances, and section 518 does not automatically import all powers of the court in a compulsory winding up into a voluntary winding up.The court further clarified that section 518 enables the liquidator to approach the court for specific orders when necessary, but it does not grant the voluntary liquidator the right to file an application under section 446 as a matter of course.Issue 3: Applicability of Section 518 and Section 526The court analyzed the scope of section 518 and concluded that it does not extend the right to file an application under section 446 to a voluntary liquidator. The court emphasized that section 518 is intended for specific situations where court intervention is necessary, such as enforcing calls or staying proceedings, but does not encompass the broad powers available under section 446.The court also addressed the argument that the position of the liquidator remains unchanged even after the winding up comes under court supervision. The court referred to sections 523 and 526, which create statutory fictions that equate a winding up under court supervision to a compulsory winding up. Section 526(2) specifically states that an order for winding up under court supervision shall be deemed to be an order for winding up by the court, thus enabling the liquidator to invoke the powers under section 446.The court concluded that the right to apply under section 446 became available to the liquidator only when the winding up came under court supervision on November 12, 1975. Therefore, the application filed on July 14, 1978, was within the permissible period of limitation.ConclusionThe court held that the application filed by the official liquidator was not barred by limitation. The court rejected the respondent's contention and scheduled the application for a hearing on merits. The judgment clarified the scope and applicability of sections 446, 518, and 526 of the Companies Act in the context of the official liquidator's powers and the period of limitation for filing applications.