TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 1480
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....fficial Liquidator attached to this Court has been appointed as a liquidator of the company in terms of Section 449 of the Companies Act, 1956 ['Act' for short]. The Official Liquidator has filed the above application under Section 446(2)(b) seeking for the above reliefs. 3. Smt. Kruthika Raghavan, learned counsel appearing for the Official Liquidator would submit that, 3.1. The Company in liquidation having been ordered to be wound up by order dated 7.02.2017, the company petition having been filed in the year 2012, the statement of affairs was filed by some of the directors on 3.12.2020 indicating the indebtedness of the respondent herein and it is on that basis that the above application is filed for recovery of monies owed by the respondent. 3.2. She submits that in terms of the statement of affairs filed by the ex-directors, respondent No.1 -company is indebted in a sum of Rs. 20,01,43,101/- as on 7.02.2017, the said amount having been advanced by the company in liquidation to respondent No.1. consequent to the winding up order and filing of statement of affairs, a demand notice was issued on 5.02.2021 to respondent No.1, calling upon respondent No.1 to make payment of the ....
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....espondent-company to make payment of the due amounts. The company has accepted the receipt and not having paid the amounts would amount to acceptance of the debt and therefore, filing of the present petition is within time inasmuch as correspondence was issued on 11.11.2021 to respondent No.1. Respondent No.1 appeared before the Official Liquidator, sought for time to submit the agreement between the company in liquidation and respondent No.1, the agreement was not furnished, time was sought for. Again, a notice was issued on 6.05.2022, and a demand was also made that respondent No.1 did not submit the document directed to be submitted to the Official Liquidator. Subsequently, when a meeting was called for, neither the representative nor the director of respondent No.1 appeared before the Official Liquidator. Another letter came to be issued on 4.08.2023 despite which payment was not made. The respondent company is taking advantage of its own wrongs. Respondent No.1, not having furnished the document and not having placed anything on record, cannot now contend that the claim on behalf of the company in liquidation by the Official Liquidator is beyond the limitation period. The resp....
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....Hon'ble Apex Court in the case of Karnataka Steel & Wire Products and others (supra1), more particularly para 4 thereof, which is reproduced hereunder for easy reference: 4. On a plain reading of the provisions contained in Section 458-A of the Companies Act, it is crystal clear that the aforesaid provision merely excludes the period during which a company was being wound up by the court from the date of the commencement of the winding up till the order of winding up is made and an additional period of one year immediately following the date of the winding up. In other words, in respect of a legally enforceable claim, which claim could have been made by the company on the date on which the application for winding up is made, could be filed by the official liquidator by taking the benefit of Section 458-A of the Companies Act and getting the period of four years to be excluded from the period of three years, as provided under Article 137 of the Limitation Act. The legislature, by way of an amendment, brought into force the provisions of Section 458-A, so that an official liquidator, who is supposed to be in custody of the assets and liabilities of the company, would be able to fil....
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....n the right to apply accrues. Even after giving the benefit of S. 458-A of the Act and taking into account the period of limitation prescribed by Article 137 of the Limitation Act, 1963, the limitation would have expired, even according to the case of the Official Liquidator that the claim is based on open and current account, on 19-9-1969. 4.8. Relying on all three Judgments, he submits that the total period of time which is available to the Official Liquidator to file proceedings under Section 446 is four years and nothing more than that. 4.9. He relies upon the decision of the Bombay High Court in the case of Orkay Industries Ltd. And others -v- State of Maharashtra and others (1998 SCC OnLine Bom 248) more particularly para 48 thereof which is reproduced hereunder for easy reference: 48. For the above reasons, it will have to be held that merely on the presentation of a Petition for winding up the affairs of a Company do not come to an absolute standstill. It will have to be held that merely on the presentation of a Petition for winding up, the Directors of the Company do not cease to be in charge of and responsible to the Company for the conduct of the business of the Comp....
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....above, he submits with the filing of a company petition for winding up; the operation of the company does not come to a standstill; the company continues its operations as was being done in the present case. The correspondence between the company in liquidation and respondent No.1 has gone on, the communication/request/demand of respondent No.1 has been accepted by the company in liquidation, and the amount advanced by the company in liquidation has been treated as a doubtful debt while the company was functioning before the company was ordered to be wound up. Thus, the Official Liquidator cannot now seek to claim the amount that has already been declared to be bad debt and written off by the company in liquidation. 4.11. He relies upon the decision of the Delhi High Court in the case of Rakman Industries Limited -v- Sumaja Electro Infra Private Ltd. (2022 SCC OnLine Del 3719) more particularly para 17 thereof which is reproduced hereunder for easy reference: 17. It is settled law that mere demand for the repayment of does not extend the period of limitation. It is also equally well settled that merely sending a legal notice to repay the amount does not assist the plaintiff for ....
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....application for appointment of an arbitrator is 3 years from the date on which cause of action arose i.e. 8-2-1986. Similarly, with respect to Arbitration Application No. 28/2003 relating to the work order dated 3-5-1985, the respondent has stated that final bill was handed over and became due on 10-8-1989. This has not been disputed by the appellant. Hence the limitation period ended on 10-8-1992. Since the appellant served notice for appointment of arbitrator in 2002, and requested the appointment of an arbitrator before a court only by the end of 2003, his claim is clearly barred by limitation. 4.13. He relies upon the decision of the Hon'ble Apex Court in the case of BSNL -v- Nortel Networks India Private Limited (2021)5 SCC 738 more particularly para 51 thereof which is reproduced hereunder for easy reference: 51. The period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters, [S.S. Rathore v. State of M.P., (1989) 4 SCC 582 : 1990 SCC (L&S) 50; Union of India v. Har Dayal, (2010) 1 SCC 394; CLP (India) (P) Ltd. v. Gujarat Urja Vikas Nigam Ltd., (2020) 5 SCC 185] or mere settlement discussions, where a final bill is rejected by....
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....istrate or the District Magistrate may thereupon after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with the provisions of sub-section (1A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary. (2) All the property and effects of the company shall be deemed to be in the custody of the 1 [Tribunal] as from the date of the order for the winding up of the company. 4.16. By referring to the above provision, he submits that the liquidator or provisional liquidator, as appointed, shall take into custody or under his control all the property, effects and actionable claims to which the company is or appears to be entitled. Thus, it is for the Official Liquidator to conduct due diligence, ascertain the amounts due, and initiate proceedings. The Official Liquidator, not having done so within the time prescribed under Section 458-A, the Official....
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....I Special case No.6/2017 for the handover of documents. The said court vide order dated 23.08.2021 allowed the same and few documents have been handed over on 26.10.2021. It is on that basis, the above application has been filed. Therefore, she submits that the application is well within the limitation period under Section 458-A and cannot be said that it is barred by limitation at this stage. 6. Heard Ms. Krutika Raghavan, learned counsel on behalf of Official Liquidator and Sri. Perikal K.Arjun, learned counsel for the respondents. Perused papers. 7. The points that would arise for consideration are: i) When would the limitation period commence in terms of Section 458-A of the Companies Act, 1956, for the Official Liquidator to take action against the company's creditors? ii) Would the limitation period stand extended if an appeal is filed challenging the winding up order and the winding up order is stayed? If so, from when would the limitation period have to be calculated? iii) Is the Official Liquidator expected to conduct an investigation, ascertain the creditors, and initiate action against such creditors on his own? iv) In the present matter, can the applicatio....
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....se (supra) as also by the Hon'ble Delhi High Court in Dimension and Investment Securities Limited's case and R.C.Abrol and Company (P) Ltd's case, the period of limitation prescribed is three years from the date when the right to sue accrues. 9.5. If the right to sue accrued more than three years prior to the date of filing of the winding up petition, Article 137 of the Limitation Act would apply and the limitation period would have lapsed even as on the date of filing of the winding up petition, and as such, the official liquidator would not have a right to initiate any proceedings. The company in liquidation not having initiated any proceedings during that time, when there was no winding up petition pending. 9.6. If the limitation period commenced less than 3 years prior to the filing of the winding up petition, the time period from the date on which the limitation accrued till the date of filing of the winding up petition would have to be taken into consideration. In terms of Section 458A i.e., the time period from the time of filing of winding up petition till the date of order of winding up, the limitation period is excluded. A further period of one year from the date on whi....
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.... the Tribunal, shall within a period not exceeding two weeks from the date of passing of the order, cause intimation thereof to be sent to the Official Liquidator and the Registrar. 9.11. Any suits filed against the company in liquidation would stand stayed in terms of Section 446(1) of the Companies Act. In terms of Section 446A, the director and other officers of the company shall ensure that the company's books of accounts are completed and audited up to the date of the winding-up order and submitted to the liquidator at the cost of the company. Section 446 is reproduced hereunder for easy reference: 446. SUITS STAYED ON WINDING UP ORDER- (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose. (2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of - (a) any suit or proceeding by or a....
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....or other chief officer of the company, or by such of the persons hereinafter in this sub-section mentioned, as the Official Liquidator, subject to the direction of the Tribunal, may require to submit and verify the statement, that is to say, persons- (a) who are or have been officers of the company ; (b) who have taken part in the formation of the company at any time within one year before the relevant date ; (c) who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the Official Liquidator, capable of giving the information required ; (d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates. (3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Tribunal may, for special reasons, appoint. (4) Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by ....
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....dator shall, as soon as practicable after receipt of the statement to be submitted under section 454 and not later than six months from the date of the order or such extended period as may be allowed by the Tribunal, or in a case where the Tribunal orders that no statement need be submitted, as soon as practicable after the date of the order, submit a preliminary report to the Tribunal - (a) as to the amount of capital issued, subscribed, and paid-up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories; (iii) debts due to the company and securities, if any, available in respect thereof; (iv) movable and immovable properties belonging to the company ; and (v) unpaid calls ; (b) if the company has failed, as to the causes of the failure ; and (c) whether, in his opinion, further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof. (2) The Official Liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which ....
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....he order for the winding up of the company. 9.15. In this regard, by way of amendment in the year 1960, Sub-sections 1(a) and 1(b) were introduced whereunder the official liquidator was permitted to send a request to the Chief Presidency Magistrate or District Magistrate for taking such possession. Vide sub-section (2) of Section 456, it is made clear that the property and effects of the company shall be deemed to be in the custody of the Tribunal/Court from the date of the order of the winding up. 9.16. Reading of all the above provisions together would give the reason why a period of one year is excluded from the date of winding up, in the sense that the order of winding up is required to be communicated to the official liquidator within two weeks of the order of winding up. The statement of affairs has to be submitted within a period of 21 days from the relevant date or within such extended time not exceeding three months from the date as the official liquidator may appoint. The report of the official liquidator is to be filed within six months after the filing of the statement of affairs, which would all have to be completed within the aforesaid period of one year. 9.17. In ....
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....on/debt; it only makes a person disentitled to a remedy through a court of law. For this reason, also, the period of limitation would have to be considered from the date the Official Liquidator came to know the amount due and the person from whom it is due. 9.22. In the present case, the statement of affairs by the ex-directors was filed only on 3.12.2020 and part of the books were handed over to the official liquidator only on 26.10.2021. The earlier of the two dates, being 3.12.2020, the exclusionary period under section 458 would have to be taken into calculation from the date on which the statement of affairs was filed and not on the date on which the order of winding up was passed since such a reading would give rise to an anomalous situation of imposing an obligation on the official liquidator to take action against the creditor without knowing the details of the creditors, without knowing the amounts due from the creditors, without knowing the basis on which the amounts are due from such creditors. 9.23. There could also be a situation where the statement of affairs does not contain the details of a particular creditor; in such a situation, it is only after the statement o....
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....y, when the order/judgment in original proceedings is stayed, the same cannot be implemented or executed. Furthermore, there is a possibility that the Appellate Court may vary or modify the order passed in the Original Proceedings by the Court of First Instance. Thus, depending on what happens in the appellate proceedings, there could be a further impact on the limitation period of implementing the order/judgment passed in the appellate court. 10.2. In so far as winding proceedings are concerned, as dealt with in answer to point No.1, the limitation period under Section 458A is firstly extended by a period for one year from the date of the winding up order. 10.3. Firstly, if the winding-up order itself is stayed in the appellate forum, the winding-up order cannot be implemented, and consequently, the Official Liquidator cannot take any step in furtherance of the order of winding-up stayed by the Appellate court. Thus, until the order of stay in the Appellate court is vacated, the Official Liquidator cannot do anything; as such, naturally, the limitation period would have to stand extended until the order of stay is vacated, the period between the date on which the Order of windin....
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....tors, and initiate action against such creditors on his own? 11.1. Sri. Perikal Arjun, learned counsel for the respondents, has contended that there is a deeming fiction regarding all assets and liabilities, including all books of the company in liquidation, being vested with the Official Liquidator from and on the date of the winding up order. On that basis, his further submission is that the Official Liquidator, having deemed possession of all the above, is deemed to have knowledge of the dues from each and every creditor, requiring the Official Liquidator to take action against such creditors. 11.2. His alternate submission is that the balance sheets, etc, being available with the Registrar of Companies whether statement of affairs are filed or not, whether the books of accounts are made available or not to the Official Liquidator, the Official Liquidator could verify the documents which are available in the public domain like that before the ROC and initiate action. 11.3. Though at first blush the argument seems to hold some water, I am unable to agree to the said submission and impose such an onerous duty on the Official Liquidator. 11.4. The ex-directors are required to f....
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.... COP No.57/2012 was filed on 26.03.2012 and the order of winding up was passed on 7.02.2017. 12.2. The transaction in question was entered into on 16.04.2013, and the transfer of monies by the company in liquidation to respondent No.1 was made on 16.04.2013. Thus, the transaction is during the pendency of the winding-up proceedings. 12.3. There is no allegation made as regards fraud or fraudulent transfer, if the transaction is taken to be bonafide, the transaction having occurred during the pendency of the winding up proceedings, the time from that date till the date of winding up would stand excluded i.e. until 7.02.2017. In terms of Section 458A period of one year stands excluded from 7.02.2017; however, taking into account that the statement of affairs was filed on 3.12.2020, and few of the documents were handed over by the CBI to Official Liquidator on 26.06.2021, the time for filing statement of affairs being earlier, it is only from 3.12.2020 that the exclusion period of one year under Section 458A can be taken into consideration. The statement of affairs having been filed on 3.12.2020, the extension of period of limitation of 1 year being applicable until 2.12.2021 and th....