IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD MONDAY, THE TWENTY FOURTH DAY OF AUGUST TWO THOUSAND AND TEN PRESENT: HON’BLE SRI JUSTICE G.V.SEETHAPATHY COMPANY APPEAL No.2 OF 2010 IN R.C.C.No.11 OF 2001 IN THE MATTER OF THE COMPANIES ACT, 1956 AND IN THE MATTER OF M/s BULL POWER SYSTEMS LTD (IN LIQUIDATION) Between: M/s Integrated Finance Company Limited, No.10, ‘R’ Block, II Floor, Prem Nagar Colony, South Boag Road, T.Nagar, Chennai – 600 017. …Applicant A n d M/s Bull Power Systems Limited (in liquidation) Rep. by the Official Liquidator, High Court of A.P., Hyderabad. …Respondent HON’BLE SRI JUSTICE G.V.SEETHAPATHY COMPANY APPEAL No.2 OF 2010 IN R.C.C.No.11 OF 2001 JUDGMENT: This appeal is filed under Rule 164 of the Companies (Court) Rules, 1959 for setting aside the notice of rejection of proof of debt dated 14-11-2008 issued by the Official Liquidator and to direct the Official Liquidator to consider afresh the claim application dated 19-04-2006 filed by the applicant. 2. The Official Liquidator filed a report in O.L.R.No.45 of 2009 and second report in O.L.R.No.29 of 2010 and a further report in O.L.R.No.369 of 2010. 3. Heard the learned counsel for the appellant and the learned counsel representing the Official Liquidator for the respondent company in liquidation. Perused the record. 4. By order dated 26-02-2002 in R.C.C.No.11 of 2001, this Court directed winding up of M/s Bull Power Systems Limited, respondent company in liquidation, and appointed Official Liquidator as its liquidator. By order dated 28-09-2005 in C.A.No.986 of 2005, this Court permitted the Official Liquidator to invite claims from the creditors. A notice in Form 63 was published in the newspapers i.e., Eenadu, Andhra Jyothi, Deccan Chronicle fixing the last date as 06-12-2005. The Official Liquidator completed adjudication of the claims of the secured creditors and workmen and filed Form 71, which was taken on record by this Court, by order dated 27-11-2009 in C.A.Nos.1874 and 1875 of 2009. Thereafter, dividends were also declared to the eligible workmen and secured creditors proportionately. 5. The appellant filed application in Form 66 on 19-04-2006 claiming an amount of Rs.14,87,426-55 Ps under hire purchase agreement dated 25-03-1997 and lease agreement dated 24-02-1995. By letter dated 07- 03-2008, the Official Liquidator advised the appellant to furnish documents in support of his claim. The appellant gave a reply dated 27-03-2008 furnishing certain documents. The Official Liquidator states that the appellant has not produced any evidence to show how the debts were not barred by limitation. On considering the material on record, the Official Liquidator issued orders in Form 69 dated 14-11- 2008 rejecting the claim of the appellant for non- production of evidence on two aspects viz., (i) determination of lease on default for re-possession of leased machinery/equipments and (ii) the claim of the applicant was barred by limitation as on the date of winding up order. According to the appellant, they initiated proceedings under Section 138 of the Negotiable Instruments Act in C.C.Nos.1705 and 1635 of 1997 before the learned XI Metropolitan Magistrate, Secunderabad, wherein orders were passed in favour of the appellant and, therefore, the period taken for disposal of the said proceedings needs to be excluded, while computing the period of limitation. The Official Liquidator, on the other hand, would contend that as per the terms and conditions of the lease deed dated 24-02-1997, the lessor was authorised to terminate the lease on commission of default by the lessee and initiate proceedings for re-possession of the machinery. But, however, the appellant has not exercised the said right and did not file any suit for recovery of possession duly determining the lease and initiation of proceedings under Section 138 of the Negotiable Instruments Act does not extend the period of limitation. The Official Liquidator further stated that there was no bar on the appellant to re-possess the leased machinery over the period of limitation and hence exclusion of time for extending the period of limitation either under Section 22(5) of Sick Industries Companies Act (SICA) (for short ‘the Act’) or under Section 461 of the Companies Act does not arise. 6. As per the record, the company in liquidation was a defaulter from the year 1998-99, having failed to pay the charges on hire purchase. There was default in payment of the lease amounts w.e.f 01-01-1997. As on the date of the winding up order i.e., 26-02-2002, the claim has become stale and accordingly it was rejected by the Official Liquidator. 7. During the course of hearing, this Court directed the Official Liquidator to verify whether amounts were paid to the secured creditors. The Official Liquidator filed a second report in O.L.R.No.29 of 2010 stating that an amount of Rs.255 lakhs was realized from the sale of the properties of the company and the claims of the secured creditors and workers were adjudicated admitting a total amount of Rs.40,67,64,014-61 Ps. It is further stated that an amount of Rs.11.43 lakhs is available to the credit of the company in liquidation, which is earmarked for concluding the affairs after reconciling the actual receipts and payments and other liquidation expenses. 8. The appellant preferred claim before the Official Liquidator for a total amount of Rs.14,87,426-55 Ps under the hire purchase agreement dated 25-03-1997 and lease agreement dated 24-02-1995. The said claim was rejected by the Official Liquidator by order dated 14-11-2008 on the ground that the appellant failed to produce any evidence to show that the claim was not barred by limitation as on the date of winding up order date i.e., 26-02-2002. The respondent company in liquidation was referred to BIFR in 1992 and the BIFR by order dated 03-10-2001 recommended for winding up of the company in liquidation under Section 20 of the Act. 9. It is not disputed that under Section 441 of the Companies Act, the limitation begins from the date of presentation of winding up petition. In NGEF LTD., vs. CHANDRA DEVELOPERS (P) LTD. AND ANOTHER[1], the Apex Court held that the date of recommendation of the winding up under Section 20 of the Act is deemed to be the date of presentation of the winding up petition. In the present case, the limitation has to be calculated from the date of recommendation for winding up i.e., 03- 10-2001. Any claim which is not barred as on 03-10-2001 does not, therefore get time barred in view of Section 22(5) of Act, which provides that in computing the period of limitation, the period during which the remedy for enforcement of the right or privilege etc., remains suspended, shall be excluded. The period during which the proceedings were pending before the BIFR would, therefore, gets excluded while computing the period of limitation in respect of the claim of the appellant. It is stated that the last due date in respect of lease agreement was 23-02-1998 and the last due date in respect of hire purchase agreement was 25-02-2000. It is, therefore, to be seen whether the claim of the appellant in respect of lease agreement and hire purchase agreement are within time after duly excluding the period during which the matter was pending before the BIFR. 10. The matter is, therefore, remitted to the Official Liquidator to consider afresh the question as to whether the claim of the appellant is in time or barred by limitation in the light of Sections 20(1) and 22(5) of the Act and Section 441 of the Companies Act and the decision of the Apex Court in NGEF LTD’s case (supra) and adjudicate upon the same in case the claim or any part thereof is found to be in time. 11. In the result, the company application is allowed, setting aside the notice of rejection of proof of debt dated 14-11-2008 issued by the Official Liquidator and the matter is remitted back to the Official Liquidator for fresh consideration and adjudication, in the light of the observations made above. ____________________ G.V.SEETHAPATHY, J 24th August, 2010 Lrkm. [1] 2005(8) SCC 219