REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.  4597   of 2008

(Arising out of S.L.P. (C) No.14126 OF 2006)

Ajay G. Podar … Appellant (s)

versus

Official Liquidator of J.S. & W.M. & Ors.     .... Respondent (s)

J U D G M E N T

S.H. KAPADIA, J.

Leave granted.

2. A short question which arises for determination in this

civil appeal is : whether misfeasance proceedings filed by the

Official  Liquidator  on  1.12.89  under  Section  543(1)  of  the

Companies  Act  stood  barred  by  limitation  provided  for  in

Section 543(2) of the said Act.

3. The facts of this case lie in a very narrow compass.

4. On 2.12.83 order of winding up was passed by the High

Court.  Official Liquidator (“O.L.”, for short) was appointed on

that day.  The period of five years referred to in Section 543(2)

of  the  Companies  Act,  1956  (“companies  Act”,  for  short)

expired  on  1.12.1988.   As  stated  above,  misfeasance

proceedings  were  filed  by  the  O.L.  on  1.12.89.   Therefore,

contention  has  been  raised  by  the  appellant  that  the  said

proceedings filed on 1.12.89 stood filed beyond limitation as

prescribed under Section 543(2) of the said Act.  Under the

said section the period is five years from the date of the order

for winding up or of the first appointment of the liquidator in

the winding up.

5. Mr. Shyam Divan, learned senior counsel appearing on

behalf  of  the  appellant,  submitted  at  the  outset  that  since

limitation  is  specifically  provided  for  of  five  years  under

Section 543(2) of the said Act, it was not open to the O.L. to

rely  upon  and  take  resort  to  general  limitation  provision

contemplated  by Section  458A of  the  said  Act.   He  further

contended that the non-obstante clause in Section 458A refers

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to  laws  other  than  the  Companies  Act  and  consequently

Sections 543(1) and (2) constituted a separate Code by itself

and, therefore, the said section was not required to be read

with Section 458A.  Alternatively,  he contended that even if

one is to read harmoniously Section 458A with Section 543(2),

the  former  is  enacted  to  override  the  provisions  of  the

Limitation Act, 1963 (for short, “Limitation Act”) and not the

provision  of  the  Companies  Act,  1956.   In  this  connection,

learned  counsel  submitted  that  since  Section  543(2)  of  the

Companies Act specifically provides for limitation of five years,

it is not open to read the said section with Section 458A of the

Companies Act so as to extend the period of limitation from

five years to six years by adding one more year to the specific

period of limitation of five years prescribed by Section 543(2).

According  to  learned  counsel  Section  543  is  a  stand-alone

provision as it contemplates a right to recover, a forum locus

and  computation  of  the  period  of  and,  therefore,  the  said

section need not be read with Section 458A and even if it is to

be read harmoniously learned counsel submitted that the two

sections operate in different spheres, inasmuch as for all non-

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misfeasance proceedings Section 458A would apply whereas

for misfeasance proceedings Section 543(2) alone would apply

and  if  this  dichotomy  is  kept  in  mind  then  the  period  of

limitation under Section 543(2) will remain as five years which

period cannot be extended by invoking Section 458A of  the

said  Act.   In  Section  543  there  is  a  reference  to  other

proceedings  but  in  this  case  we  are  concerned  with  the

question  of  limitation  and  its  computation  qua  only  the

misfeasance proceedings.

6. Learned  senior  counsel,  next  contended  that  Section

458A,  in  any  event,  is  not  applicable  as  misfeasance

proceedings  instituted  by  the  O.L.  cannot  be  said  to  be

proceeding  instituted  in  the  name  and  on  behalf  of  the

company.  In this connection, learned counsel submitted that

the intention of the Parliament in enacting Section 458A is to

keep  out  Section  543(2)  from  its  ambit.   That,  the  non-

obstante clause in Section 458A refers to a potential conflict

between  the  provisions  of  the  Companies  Act  and  the

Limitation Act  or to a potential  conflict  between Companies

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Act  and any other  law for  the time being in force.   In  this

connection, learned counsel  invited our attention to Section

408(4) of the Companies Act in support of his contention that

the  words  “notwithstanding  anything  contained  in  the

Companies Act” which find place in the said sub-section do

not find place in Section 458A which indicates the intention of

the  Parliament  to  treat  Section  543(2)  as  a  stand-alone

provision applicable to only misfeasance proceedings whereas

Section 458A in the matter of computation of limitation would

apply  to  all  other  non-misfeasance  proceedings.   Therefore,

according to learned counsel, the Parliament did not intend to

override  vide  Section  458A  any  other  provisions  of  the

Companies  Act.   On  the  contrary,  according  to  learned

counsel,  the  Parliament  vide  Section  458A  intended  to

override potential conflict between the Companies Act and the

Limitation Act on one hand and any other law for the time

being in force.

7. Mr. Puneet Jain, learned counsel appearing on behalf of

the  Official  Liquidator,  submitted  that  Section  458A  of  the

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Companies Act supplements Part III of the Limitation Act.  He

submitted  that  Section 458A does  not  extend the  period  of

limitation of five years mentioned in Section 543(2).  Learned

counsel  submitted  that  on  the  contrary  Section  458A  only

provides for exclusion in the matter of computation of a period

of five years limitation under Section 543(2).  Learned counsel

submitted as and by way of illustration that if a contributor

moves an application in his own name and not in the name of

the company and on behalf of the company then Section 458A

is not applicable and in such a situation what would apply is

Part III  alone of the Limitation Act.  Therefore, according to

learned counsel, there is no merit in the argument advanced

on behalf  of the appellant that if  Section 458A is read with

Section 543(2) we are extending the period of limitation from

five  years  to  six  years.   In  support  of  his  contention,

mentioned  hereinabove,  learned  counsel  placed  reliance  on

Sections 3 and 29(2) of the Limitation Act.

8. Before  dealing  with  the  arguments  advanced  on  both

sides it would be necessary for us to quote hereinbelow the

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relevant provisions of the Companies Act, 1956 as it stood at

the relevant time which reads as under :

“Powers of liquidator

457. (1) The  liquidator  in  a  winding  up  by  the Court shall  have power,  with the sanction of the Court, --

(a) to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company;

(b) to (d) xxx xxx xxx

(e) to  do  all  such  other  things  as  may  be necessary  for  winding  up  the  affairs  of  the company and distributing its assets.

Exclusion of certain time in computing periods of limitation.

458A.Notwithstanding  anything  in  the  Indian Limitation  Act,  1908  (9  of  1908)  or  in  any other  law  for  the  time  being  in  force,  in computing the period of limitation prescribed for any suit or application in the name and on behalf of a company which is being wound up by  the  Court,  the  period  from  the  date  of commencement  of  the  winding  up  of  the company to the date on which the winding up order is made (both inclusive) and a period of one year immediately following the date of the winding up order shall be excluded.

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Power  of  Court  to  assess  damages  against delinquent directors, etc.

543.(1) If in the course of winding up a company, it appears that any person who has taken part in the promotion or formation of the company, or  any  past  or  present  director,  managing agent,  secretaries  and  treasurers,  manager, liquidator or officer of the company—

(a) has  misapplied,  or  retained,  or  become liable  or  accountable  for,  any money or property of the company; or

(b) has  been  guilty  of  any  misfeasance  or breach  of  trust  in  relation  to  the company;

the  Court  may,  on  the  application  of  the Official Liquidator, of the liquidator, or of any creditor or contributory, made within the time specified  in  that  behalf  in  sub-section  (2), examine  into  the  conduct  of  the  person, director,  managing  agent,  secretaries  and treasurers,  manager,  liquidator  or  officer aforesaid, and compel him to repay or restore the  money  or  property  or  any  part  thereof respectively, with interest at such rate as the Court thinks just, or to contribute such sum to  the  assets  of  the  company  by  way  of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks just.

(2) An application under sub-section (1) shall be made  within  five  years  from the  date  of  the order  for  winding  up,  or  of  the  first appointment  of  the  liquidator  in the  winding

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up,  or  of  the  misapplication,  retainer, misfeasance  or  breach  of  trust,  as  the  case may be, whichever is longer.”

9. On reading the provisions of Section 458A and Section

543(2)  of  the  Limitation  Act,  we  find  that  there  is  a  clear

dichotomy between the concept of the “period of limitation” on

one  hand and the  concept  of  “computation  of  that  period”.

Section  543(2)  limits  the  time  after  which  misfeasance  or

breach  of  trust  proceedings,  retainer  proceedings  and

misapplication  proceedings  becomes  time  barred.   This

dichotomy finds place not only in the above provisions of the

Companies  Act  but  also  under  the  provisions  of  Limitation

Act.   Under Section 2(f)  of  the Limitation Act,  the period of

limitation is required to be computed in accordance with the

provisions of that Act.  Further, the Limitation Act not only

prescribes the period of limitation for different types of suits

and applications but it also further provides for computation.

If  any  period  of  limitation  is  to  be  excluded  from  the

prescribed period of limitation the party has to satisfy any of

the appropriate provisions in Sections 4 to 24 of the Limitation

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Act.  The law of limitation is a procedural law.  It is addressed

to the commencement of a proceeding.   

10. In the case of Kosana Ranganayakamma vs. Pasupulati

Subbamma – AIR 1967 AP 208, it has been held that though

the schedule to the Limitation Act did not prescribe any period

of limitation for an application under Section 417(3)  Cr.P.C.

1898 and even though Section 417(4) of that Code prescribed

a different limitation within the meaning of Section 29(2) of the

Limitation Act still by virtue of Section 3, the other Sections 4

to 24 of the Limitation Act applied to all applications under

Section 417(3) of the 1898 Code.

11. Coming to the provisions of the Companies Act, we find

that  although  Section  543(1)  &  (2)  provides  for  locus  and

forum, there is no provision for computation of the period of

limitation.  We are proceeding on the basis that Section 543(2)

provides  for  a  different  limitation  than  the  limitation

prescribed under Article 137 of the Limitation Act.  However,

Section 543(2) does not rule out the applicability of Sections

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12  to  24  in  Part  III  of  the  Limitation  Act.   Part  II  of  the

Limitation  Act  deals  with  limitation  of  suits,  appeals  and

applications whereas  Part  III  deals  with the computation of

period  of  limitation.   Similarly,  in  our  view  Section  543(2)

deals  with  limitation  for  applications/claims  mentioned  in

Section  543(1)  which  includes  misfeasance  proceedings

whereas  the  computation  of  the  period  of  five  years  is

contemplated by Section 458A of the Companies Act.

12. In our view, there is no merit in the contention advanced

on behalf of the appellant that by virtue of Section 458A the

period of limitation is extended by one year.  Part III  of the

Limitation Act  excludes  certain  circumstances  mentioned in

Sections 12 to 24 for computation of the period of limitation.

Similarly,  Section  458A  provides  for  an  additional

circumstance which is not there in the Limitation Act which is

required to be taken into account as an item of exclusion in

the matter of computation of the period of Limitation of five

years prescribed by Section 543(2).   That circumstance is a

period spent between the date of commencement of winding

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up of  the  company and the  date  on which the  winding up

order  is  passed  plus  one  year  therefrom.   If  this  period  of

limitation is to stand excluded it is only by virtue of Section

458A which circumstance is not contemplated by Sections 12

to  24  of  the  Limitation  Act.   Just  as  a  different  period  of

limitation  is  prescribed  for  misfeasance  proceedings  vide

Section  543(2)  so  also  vide  Section  458A  a  special

circumstance is indicated as an item of exclusion of certain

time in computing the period of limitation.  Therefore, there is

no conflict  between Section 458A and Section 543(2)  of  the

Companies Act.  If so read, there is no extension of the period

of  limitation  of  five  years  as  contended  on  behalf  of  the

appellant.   In  our  view,  Section  458A  excludes  the  period

between  the  date  of  commencement  of  winding  up  of  the

company  and  the  date  on  which  the  winding  up  order  is

passed  plus  one  year  therefrom.   Therefore,  it  is  a  case  of

exclusion and not extension of the period of limitation of five

years prescribed under Section 543(2) of the Companies Act.

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13. Learned counsel for the appellant placed heavy reliance

on the judgment of the Karnataka High Court in the case of

Kabini  Papers Ltd.  vs.  M.D.  Shivananjappa and others  –

1999 (98) CompCas 675, in which it has been held that the

period  of  five  years,  prescribed  under  Section 543(2)  of  the

Companies Act for initiation of proceedings by O.L., cannot be

extended by adding periods mentioned in Section 458A.  In

our  view,  the  judgment  of  the  Karnataka  High  Court,  with

respect, is not correct.  It has failed to take into account the

dichotomy between the two concepts,  namely, “the period of

limitation” and “its computation”.  Moreover, as stated above,

Section 458A provides for exclusion of the period between the

commencement of winding up proceedings and the date when

the winding up order is passed plus one year therefrom.  This

is the circumstance of exclusion.  Therefore, as stated above,

there is no question of extension of the period of limitation of

five years as prescribed by Section 543(2).   

14. In  the  case  of  Fabrimats  (Madras)  P.  Ltd.  (In

Liquidation),  In  re./Official  Liquidator  vs.  Best  and

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Crompton Engineering Ltd. – 1982 (52) CompCas 501,  it

has been held by the Madras High Court that Section 458A of

the Companies Act is of  universal  application and does not

contemplate any qualification or exception to the calculation

indicated therein regarding exclusion of the aggregate of two

periods mentioned therein, namely, the period from the date of

commencement of winding up proceedings to the date of the

order of winding up and one year immediately following such

date of order of winding up.  We are in agreement with the

view  expressed  by  the  Madras  High  Court  in  the  said

judgment.    

15. One  of  the  contentions  advanced  on  behalf  of  the

appellant is that Section 458A is not applicable to misfeasance

proceedings instituted by the O.L. as such proceedings are not

in the name and on behalf of a company which is being wound

up by the  Court.   In  this connection,  reliance  is  placed  on

Section 458A which prescribes the mode of computation of the

period of limitation for any suit or an application in the name

and on behalf of a company which is being wound up by the

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Court.  Therefore, it is sought to be argued that misfeasance

proceedings  instituted  by  the  O.L.  is  neither  a  suit  nor  an

application in the name and on behalf of a company which is

being  wound  up  by  the  Court.   We  find  no  merit  in  this

argument.  If book-debt is assigned by the company to a bank

which fails to file a suit for recovery of money within the time

prescribed under the Limitation Act, it would not be open to

O.L. to institute the suit under Section 458A because in that

event the O.L. is said to have filed a suit not on behalf of the

company but on behalf of the bank.  It is to such cases that

Section 458A will not apply.  In the present case, the O.L. was

authorized to take steps to recover assets both financial and

other  assets  by  the  company  court  under  the  winding  up

order.   It  is  pursuant  to  that  authority  that  the  O.L.  has

instituted  the  misfeasance  proceedings  for  recovery  on

1.12.89.   The  said  proceedings  have  been  initiated  in  the

name of  the  company and on behalf  of  the  company to be

wound  up.   The  name  of  the  applicant,  indicated  at  page

no.27 of the appeal paper book, shows that the O.L. has filed

misfeasance proceedings in the name of the company and on

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behalf of the company.  Therefore, in our view, Section 458A is

squarely applicable to misfeasance proceedings instituted by

the O.L.  in the name of  the company and on behalf  of  the

company in liquidation.  Once an application is made in the

name  and  on  behalf  of  the  company,  Section  458A  would

become applicable.  On this aspect more provision needs to be

mentioned.   Section  457  deals  with  powers  of  liquidator.

Under Section 457(1) the liquidator, in a winding up by the

Court,  has  the  power  with  the  sanction  of  the  Court  to

institute any suit prosecution or legal proceedings in the name

and  on  behalf  of  the  company.   In  the  present  case  the

winding  up  order  indicates  that  the  company  court  had

granted  such  a  sanction  and  the  misfeasance  proceedings

have been instituted by the O.L. in terms of Section 457(1)(a)

of the Limitation Act.  The claim on behalf of a company (in

liquidation)  filed  by  the  O.L.  is  in  the  form  of  application

though it is really a plaint and hence it cannot be stated that

the misfeasance proceedings are proceedings instituted by the

O.L. in his own independent right.  Once it is held that the

said application is in the nature of a plaint then Section 457 of

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the  Companies  Act  would  apply.   Section  458A  of  the

Companies Act is intended to extend the limitation period for

the  benefit  of  the  company  (in  liquidation)  and  the  O.L.

appointed to carry on its winding up process by collecting the

assets and distributing the same among those entitled to the

same.  The underlying object in extending the limitation is to

enable the O.L. to take charge of the affairs of the company, to

examine  the  records,  account  books,  to  study  the  annual

statements and accordingly proceed to recover and collect the

assets.   He  has  also  to  find  resources  for  conducting  the

proceedings.   The  proceedings  initiated  by  him  by  way  of

judge’s  summons  or  suit  for  enforcement  of  the  recoveries,

cannot but be on behalf of the company having regard to his

source of authority, viz., the provisions of the Companies Act

and the statutory obligation in discharge of which he has to

act  in  this  behalf.   The  said  Act  does  not  contemplate  his

acting  in  the  matter  of  recoveries  excepting  as  O.L.  and

excepting on behalf of the company.

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16. Before concluding, we may state that learned counsel for

the appellant placed reliance on the judgment of the Orissa

High Court in the case of  B. Pattnaik Mines (Pvt.) Ltd. vs.

Bijoyananda  Pattnaik  and  others  –  1994  (80)  CompCas

237, in which it has been held that when the liquidator or a

creditor or a contributory makes an application under Section

543 he does not do so as representing the company but in his

own  independent  right.   As  against  this  judgment,  learned

counsel  for  the  respondents  (O.L.)  cited  before  us  the

judgment of the Bombay High Court in the case of Gleitlargor

(India)  P.  Ltd.  and  H.S.  Kamlani,  Official  Liquidator  vs.

Mazagaon Dock Ltd. and others – 1985 (57) CompCas 742,

which has taken the view that the proceedings initiated by the

O.L. for recovery cannot but be on behalf of the company and

that the Companies Act does not contemplate his acting in the

matter of recoveries excepting as O.L. and excepting on behalf

of the company.  In our view, in the light of what is stated

above we approve the judgment of the Bombay High Court in

the case of Gleitlargor (India) P. Ltd. (supra) and we further

hold that the judgment of the Orissa High Court in the case of

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B. Pattnaik Mines (Pvt.) Ltd. (supra) is not correct.  We may

further state that the view taken by the Bombay High Court

also finds support in the case of Official Liquidator vs. T.J.

Swamy and others – 1992 (73) CompCas 583 in which the

Andhra  Pradesh  High  Court  has  held  that  misfeasance

proceedings are proceedings initiated by the O.L. in the name

of and on behalf of the company (in liquidation).   

17. Therefore,  in our view, Section 458A of the Companies

Act, dealing with computation of the period of limitation, has

to be read with Section 543(2) of that Act.

18. For the aforestated reasons, we find no merit in this civil

appeal and the same is accordingly dismissed with no order as

to costs.    

……………………………J.                                    (S.H. Kapadia)

……………………………J.

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                                             (B. Sudershan Reddy)

New Delhi; July 22, 2008.

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