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1932 Supreme(SC) 69
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BLANESBURGH, LORD RUSSELL OF KILLOWEN, SIR GEORGE LOWNDES, AND SIR DINSHAH MULLA.
HANSRAJ GUPTA - Appellant
Versus
OFFICIAL LIQUIDATORS OF THE DEHRA DUN-MUSSOORIE ELECTRIC TRAMWAY COMPANY, LIMITED - Respondents
On Appeal from the High Court at Allahabad.
Decided On : December 16, 1932.
Solicitors for appellants :W. W. Box & Co. Solicitors for respondents: Cardew-Smith & Ross.
Section 186 of the Indian Companies Act, 1913, provides a summary procedure for enforcing existing liabilities and does not create new rights. Consequently, "money due" refers only to debts recoverable in a suit; time-barred debts cannot be recovered through this summary process.
Headnote:(A) Indian Companies Act, 1913 - Sections 186(1) and 179(a) - Indian Limitation Act, 1908 - Section 3 and First Schedule Articles 51, 62, 85, 181 - Indian Contract Act, 1872 - Section 65 - Summary procedure for recovery of money from contributories - Section 186 does not create new liabilities or rights but provides a summary method to enforce existing liabilities - "Money due" must be interpreted as money due and recoverable in a suit - If a debt is time-barred by the Limitation Act, it cannot be recovered through this summary procedure.
(B) Indian Limitation Act, 1908 - Section 3 - Definition of "suit" - A proceeding not instituted by the presentation of a plaint is not a suit - The explanation to Section 3 regarding claims against companies in liquidation relates to the timing of institution, not the definition of a suit.
(C) Indian Contract Act, 1872 - Section 65 - Recovery of money paid under a void agreement - Cause of action arises at the date of the agreement, not upon the discovery that the agreement is void, absent special circumstances.
Facts of the case:
Liquidators of a company in winding-up applied for an order directing the executors of a deceased contributory to pay three specific sums of money. The lower court ordered payment, holding that the claims were not time-barred at the commencement of winding-up and that the summary procedure allowed for payment "at any time."
Findings of Court:
The three sums were not deposits or earnest money but anticipatory payments. However, all three sums were statute-barred by suit at the time the application for summary recovery was made.
Issues: Whether an application under Section 186 of the Companies Act is a "suit" under the Limitation Act; whether "money due" under Section 186 includes debts that are time-barred; and when the limitation period begins for recovering money paid under a void agreement.
Ratio Decidendi: Section 186 of the Companies Act provides a summary procedure to avoid multiple proceedings and does not create new causes of action. It is discretionary and cannot be used to deprive a debtor of a defense, such as limitation, that would be available in a regular suit. Therefore, only money that is legally recoverable in a suit can be ordered for payment. Under the Contract Act, the limitation for recovering money under a void agreement runs from the date of the agreement.
Result: Appeal allowed and the decree set aside.
Legal Category Hierarchy
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company law
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winding up
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contributories
- recovery of debts
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contributories
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winding up
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limitation law
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period of limitation
- summary proceedings
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period of limitation
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contract law
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void agreements
- recovery of payments
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void agreements
Judgement
Appeal (No. 86 of 1930) from a decree of the High Court (May 14, 1929) made in the winding-up of the Dehra Dun-Mussoorie Electric Tramway Company, Ld.
Law Rep. 60 Ind. App. 13 ( 1932- 1933) Hansraj Gupta v. Official Liquidators of Dehra Dun-Mussoorie 190
The above-named company was ordered to be wound up by an order made on March 26, 1926, upon a petition presented on January 26, 1926. The present appeal arose out of an application made by the respondents, the official liquidators, on March 26, 1928, under s. 186, sub-s. 1, of the Indian Companies Act, 1913, praying that the appellants, who as executors of Lala Raghumal were in the list of contributories, should be ordered to pay three sums of Rs. 27,000, Rs. 35,000, and Rs. 7703-13-0, as moneys due from the deceased to the company.
By the above-named sub-section " The Court may, at any time after making a winding-up order, make an order on any contributory for the time being settled on the list of contributories to pay, in manner directed by the order, any money due from him or from the estate of the person whom he represents to the company exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act.
The facts giving rise to the three claims are fully stated in the judgment of the Judicial Committee in Hansraj Gupta v. Asthana (reported supra, p. 1).
The application was heard by Mukerji and Young JJ., who made an order for payment of the three sums with interest. Upon grounds which appear in the judgment of the Board (Supra at p. 9.) in Hansraj Gupta v. Asthana, the learned judges held that suits by the company to recover the sums in question would not have been barred by the Indian Limitation Act, 1908, before the winding-up order. With regard to the sum of Rs. 35,000 they held that the claim being to recover money paid under a contract which had been discovered to be void, the time would ordinarily have run from the date of the agreement and a suit would have been barred on September 13, 1925 ; but that the company had been kept uninformed of the payment and that therefore art. 95 or art. 120 applied, and accordingly a suit would not have become barred until September 13, 1928, or later. The learned judges held that as the three claims were not time-barred at the commencement of the winding-up, the liquidators, representing the creditors as well as the company, were entitled to an order for payment under s. 186, sub-s. 1, of the Indian Companies Act, 1913. They attached particular weight to the words " at any time " in the sub-section, and rejected the view of the Lahore High Court in Sri Narain v. Liquidator, Union Bank of India (( 1922) I. L. R. 4 Lah. 109.), that under s. 186, sub-s. 1, an order could not be made for payment of a debt which was time-barred at the date of the application.
The present appeal was argued together with appeal No. 127 of 1930 (reported supra, p. 1), but by the judgment in that appeal was ordered to be further argued.
1932. June 16, 17, 20, 21 ; Nov. 24. Lionel Cohen K.C. and Wallach for the appellants. Neither of the sums Rs. 27,000 and Rs. 35,000 were recoverable by the company at any time. They were paid as earnest money and were to be set off against sums becoming due from the company; the company having failed to order the goods could not recover the payments. If, however, the Rs. 35,000 was ever recoverable the cause of action arose at the date of the agreement, and was time-barred even before the winding-up. The High Court was wrong in holding that the company did not know of the payment and that consequently the commencement of the period was postponed. The payment was made by the manager of the company who negotiated the contract on its behalf. Each of the claims being time-barred at the date when the application was made the liquidators were not entitled to an order under s. 186 of the Indian Companies Act. It was rightly held in Sri Narain v. Liquidator, Union Bank of India (( 1922)
