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2003 Supreme(Kar) 872
Karnataka High Court
Judges : N.KUAR
M/S.MYSORE TOOLS LIMITED - Appellant
Versus
M/S.DOMINION HARDWARE STORES - Respondent
Co. P. 3 Of 1975
Decided On : 10/21/2003
The main legal principle established in the judgment is the application of the appropriate limitation period under the Limitation Act to determine the recovery of dues under the Companies Act, based on the nature of the accounts and transactions between the parties.
Headnote:
Companies Act - Recovery of dues - Section 446(2)(b) - Articles 1, 14, 137 - The court considered the applicability of Articles 1, 14, and 137 of the Limitation Act to determine the limitation period for recovery of dues under the Companies Act. It held that the accounts did not constitute a mutual, open, and current account with reciprocal demands between the parties, and thus Article 1 did not apply. It further ruled that Article 14 did not apply as the application was not a suit for recovery of the price of goods sold and delivered. Consequently, the court applied the residuary Article 137, providing a three-year limitation period from the date the right to apply accrued.
Fact of the Case:
The petitioner sought recovery of dues from the respondent under the Companies Act, 1956. The respondent opposed the claim, contending that the entire amount due had been paid and that the claim was barred by law of limitation.
Finding of the Court:
The court analyzed the nature of the accounts and transactions between the parties to determine the applicable limitation period. It found that the accounts did not meet the criteria of a mutual, open, and current account with reciprocal demands, leading to the conclusion that Article 1 did not apply. It also ruled out the applicability of Article 14 and applied the residuary Article 137, providing a three-year limitation period from the date the right to apply accrued.
Issues: The key issue was to determine the applicable limitation period for the recovery of dues under the Companies Act, considering the nature of the accounts and transactions between the parties.
Ratio Decidendi: The court's decision was based on the finding that the accounts did not constitute a mutual, open, and current account with reciprocal demands, leading to the inapplicability of Article 1. It further ruled out the applicability of Article 14 and applied the residuary Article 137, providing a three-year limitation period from the date the right to apply accrued.
Final Decision: The court partly allowed the application, directing the respondent to pay a specific sum with interest at 12% per annum after the expiry of 30 days from the date of delivery under the relevant invoices.
( 2 ) THE claim of the petitioner was opposed by the respondent by filing statement of objections. They deny the entries made in the statement of accounts. In fact, they admit the supplies. But, they contend that the entire among due to the petitioner has been paid. In the legal notice issued prior to initiation of the proceedings the interest claimed is only 6%, whereas in the application 12% interest has been claimed which is without any basis. It is also contended that the claim is barred by law of limitation. Subsequently, they have filed additional objection contending that the entire claim is barred by limitation.
( 3 ) APPLICANT has filed affidavit by way of examination-in-chief and he has produced the statement of accounts and invoices on the basis of which the said claim is made. They are marked. Ex. P-1 is the accounts extract and Exs. p-2 to p-92 are the invoices under which supplies were made by the company under liquidation to the respondent. The witness of the petitioner has been cross-examined at length. The respondent did not step into the box and adduced any evidence.
( 4 ) THE learned Counsel for the petitioner contends that the accounts extract produced which is also supported by the invoices shows that between the parties there was a mutual, open and current account. Therefore, Article 1 of the Limitation Act is attracted to the facts of the case. The latest of such supply was on 14. 02. 1973. The winding up proceedings was initiated on 16. 06. 1975 and the winding up order was passed on 02. 07. 1982. Therefore, this application filed on 19. 01. 1987 is well within time.
( 5 ) PER contra, the learned Counsel for the respondent contends that Article 1 has no application to the facts of the case as there has been no reciprocal demand between the parties as is clear from Ex. P-1 the statement of accounts. The said Article is not attracted, it is Article 14 which is attracted and in the alternative it is Article 137 of the Act. Therefore the cause of action for the claim arose from the date of delivery of the goods under each invoices, As such, barring the invoices which are marked as Exs. P-34, 44, 46, 47, 48, 49, 91 and 92, all other supply made under invoices are barred by time.
( 6 ) IN support of his contention, the learned Counsel for the petitioner relied on the judgment of the Supreme Court in the case of KARNATAKA STEEL and WIRE PRODUCTS AND OTHER Vs. KOHINOOR ROLLING SHUTTERS AND ENG. WORKS AND OTHERS, reported in ILR 2003 KAR 177. The learned Counsel for the respondent in support of his contention that it is not a mutual, open and current account which reciprocal demands, relied on three judgments namely, the judgments of the Supreme Court in the case of HINDUSTAN FOREST COMPANY Vs. LAL CHAND and OTHERS, reported in AIR 1959 SC 1349, the judgment of Madras High Court in the case of RAJU and OTHERS Vs. L. KUMARAMUTHU reported in AIR 1975 MADRAS 1 and the judgment of the Calcutta High Court in the case of RAGHUNATH SHAW Vs. KANAI LAL DAS and OTHERS reported in AIR 1962 CALCUTTA 97 and contend that Article 1 has no application.
( 7 ) THEREFORE, the short question that arises for my consideration is which is the Article that is applicable to the facts of this case, whether, Article 1 or Article 14 or 137?
( 8 ) IN order to decide which Article applies we have to see the nature of the transaction, nature of the accounts maintained by the parties. It is the contention of the petitioner that Article 1 is attracted as the application is filed for the balance due on a mutual, open and current account. As such, the starting point of limitation would be three years from the date of close of the year in which the last item admitted or proved is entere
