IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD FRIDAY, THE FIRST DAY OF JULY, TWO THOUSAND AND ELEVEN PRESENT THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO LETTERS PATENT APPEAL No.291 OF 1998 BETWEEN: Nunna Rama Krishna Anantha Subrahmanyam and others …APPELLANTS AND M/s. Sudarsan Chits (India) Ltd. …RESPONDENT The Court made the following: THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO LETTERS PATENT APPEAL No.291 OF 1998 JUDGMENT:(Per Hon’ble Sri Justice N.R.L. Nageswara Rao) The Letters Patent Appeal arises out of the judgment in A.S.No.3208 of 1982 passed by the learned Single Judge of this Court as against the judgment in O.S.No.46 of 1980 on the file of the Subordinate Judge, Chodavaram. 2. The appellants herein are the defendants in O.S.No.46 of 1980. The suit was one filed by the plaintiff/respondent for recovery of Rs.15,679.01 ps. 3. The case of the plaintiff is that the 1st defendant is a subscriber of the chit bearing No.K.C.7 of the value of Rs.25,000/- effective from 06.06.1975 on monthly instalment of Rs.500/-. On 18.01.1977 he became the highest bidder agreeing to forego a sum of Rs.6,250/- and defendants Nos. 2 to 4 stood as guarantors and executed an agreement. The 1st defendant has committed default of instalments from 04.12.1978 and hence the suit. 4. The 1st defendant has filed a written statement contending that the suit is not maintainable and the Court has no jurisdiction and the person who has filed the suit is not competent. It was also further pleaded that the last payment of the instalment was on 24.06.1977 and the suit was filed beyond the period of three years and as such, the suit is liable to be dismissed. 5. Before the lower Court, on the basis of the above pleadings, the following issues have been framed for trial: 1. Whether this Court has no territorial jurisdiction to try the case? 2. Whether the suit is barred by time? 3. Whether the plaintiff is a registered (company) and as such A.D. Prasadarao has right to sign on the plaint? 4. Whether the defendants are entitled for the benefits of Madras Act 4 of 1938? 5. Whether the plaintiff is not entitled to the interest claimed? 6. Whether the suit is not maintainable? 7. To what relief? Subsequently, on 19.02.1982 the following additional issues were framed: 1) Whether the suit is maintainable without adding the official liquidator as one of the plaintiff? 2) Whether the suit is not maintainable as per the provisions of Sec.25(b) of the A.P. Chit Funds Act? 3) To what relief? 6. On behalf of the plaintiff, PW.1 was examined and marked Exs.A-1 to A-12. On behalf of the defendants, DW.1 was examined and marked Exs.B.1 to B.14. 7. The learned Subordinate Judge, Chodavaram, after considering the rival contentions, found that the suit is not maintainable without adding the official liquidator as one of the plaintiffs as contemplated under Section 446(1) of the Companies Act (for short, ‘The Act’) and also found that the suit is barred by time, as the last instalment was on 24.06.1977 and the suit was filed on 11.11.1980. As against the said judgment and decree, an appeal was carried and the learned Single Judge by his judgment dated 10.02.1995 set aside the judgment of the lower Court and decreed the suit of the plaintiff for the instalments due from November, 1977. Aggrieved by the said judgment and decree, the present appeal is filed. 8. The learned counsel for the appellants raised the following contentions: 1. The suit is not maintainable as no permission was taken under Section 446 of the Companies Act. 2. The suit is barred by time since the last instalment was paid on 24.06.1977. Therefore, points arise for consideration are: 1) Whether the suit is barred under Section 446(1) of the Companies Act? 2) Whether the suit is barred by time? 9. POINT No.1: So far as this point is concerned, it is useful to extract Section 446 of the Companies Act as it stood prior to the amendment and on the date of institution of the suit. “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 Court and subject to such terms as the Court may impose. [(2) The Court which is winding up the Company 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 against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under Section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; Whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960”. 10. The learned Judge found that the suit against the Company is not maintainable when once a company is under liquidation or Official Liquidator is appointed temporarily but the bar does not apply to cases where the suit was filed by the Company itself. 11. The learned counsel for the appellants relied upon a decision reported in Sudarsan Chits India Limited Vs. O.Sukumaran Pillai[1], wherein the Legislative background of enacting Section 446 of the Indian Companies Act was considered and felt special powers are conferred on the Company Court in respect of the claims against the Company instead of driving the Company to several suits. It was also found in Para No.14 that if the winding up order was merely held in abeyance, it will not be operative for the time being. If the winding up order is subsisting, the Court which made that order or the Court which kept it in abeyance will have jurisdiction to give necessary directions to the provisional liquidator to take recourse to Section 446(2) of the Act. 12. In this case also, it is to be noticed that before the lower Court Exs.A.11 and A.12 were filed, where-under the winding up proceedings are said to have been stayed by the Supreme Court and also the High Court of Kerala pertaining to this Company. As can be seen from the Judgment relied above, the Company petitions are said to have been filed in the year, 1981 and the present suit was filed evidently in November, 1980. The fact that the proceedings were kept in abeyance can also be gathered from the judgment referred to above. 13. It is also useful to refer to the judgment reported in Harihar Nath and others Vs. State Bank of India and others[2], whereunder the scope of Section 446 of the Act was considered. As can be seen from reading of Section 446(1) of the Act, it does not prohibit the institution of a suit by the Company against the third parties. Under Section 446(2) of the Act the Company Court is given the powers to deal with the matters. Therefore, when both the clauses are read together, there is no bar in instituting the suit by the company against the debtors. Further-more, in the above said judgment in para No.20 after considering the various alternatives under Section 446, the Court held that: “Even if the suit is proceeded with, without obtaining leave of the Company Court, either not being aware of the order of winding up or ignoring the provisions of Section 446(1), the resultant decree will not be void, but only be viodable at the instance and option of the Official Liquidator of the Company”. 14. Therefore, in view of the language of Section 446 of the Act and also the above decision, it cannot be said that the judgment of the learned Single Judge in holding that the bar under Section 446 of the Act does not attract is incorrect. We have no hesitation in holding that the suit is maintainable. Accordingly, point No.1 is answered. 15. POINT No.2: So far as the limitation is concerned, the learned Single Judge has taken the view that all the instalments due within three years from the date of institution of the suit will be in time and accordingly, from November, 1980 the amount due was decreed. In fact, much of the contentions raised by the defendants may not be valid since the payment on 04.12.1978 by the defendants is admitted and accepted by the Courts which amounts to acknowledgement of the liability of the amounts due by then and consequently a fresh period of limitation starts. But however, the learned Single Judge relying upon the decisions reported in Nanoo Sukumaran and another Vs. Padmanabhan Sankaran[3] and P.J. Kuriakose Vs. K.C. Cherian[4], wherein it was held that the limitation starts from the date of default and if the claim is within the period of three years prior to the date of institution of the suit, they are not barred. The reason is simple as each default constitutes an independent cause of action and under Section 25 of the Chit Funds Act the Foreman has got a right to demand the lumpsum amount after the default by issuing a notice. The view taken by the learned Single Judge in the appeal following the Judgment of the Kerala High Court was also reiterated by this Court in the decision reported in Vastava Chit Funds (Private) Ltd., Vijayawada Vs. Madala Benarjee and others[5], referring to earlier decisions of this Court and holding that the Article 37 of the Limitation Act is applicable and the suit for the defaulting the instalments within a period of three years prior to the date of suit are recoverable. Accordingly, point No.2 is answered. 16. Hence, this Appeal has no merits and accordingly, the Letters Patent Appeal is dismissed with costs. ____________ V.V.S.RAO, J ________________________ N.R.L.NAGESWARA RAO, J Date: 01.07.2011. Note: L.R. Copy be marked (B/o.) INL [1] 1984-AIR(SC)-0-1579 [2] (2006) 4 Supreme Court Cases 457 [3] AIR 1978 KERALA 28 [4] 1984 K.L.T.744 [5] 2005(3) ALT 405