Case: Ramesh B. Desai  Vs. Bipin Vadilal Mehta

or mistake. (1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act, (a) the suit or application is based upon the fraud of the defendant or respondent or his agent; or (b) the knowledge of the right or title on which a suit or application is founded is concealed by the fraud of any such person as aforesaid; or (c) the suit or application is for relief from the consequences of a mistake; or (d) ....................................... (omitted as not relevant)the period of limitation shall not begin to run until the plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it; or in the case of a concealed document, until the plaintiff or the applicant first had the means of producing the concealed document or compelling its production: Provided that .......................................................... .......................................... omitted as not relevant) 24. In our opinion, in view of the facts pleaded in the Company Petition, the case is covered by Section 17(1)(a) of the Limitation Act and not by Section 17(1)(b) as the petitioners are not claiming any right or title over the shares of the Company, which according to them were purchased out of the funds of the Company. Section 17(1)(b) will apply when the plaintiff or applicant is claiming any kind of right or title to any moveable or immoveable property etc. Their simple case is that in view of the fact that the funds of the Company were utilized for purchase of shares by Bipinbhai, which were then recorded in his name, the whole transaction was in violation of Section 77 of the Companies Act, and consequently the register of the Company required to be rectified in accordance with Section 155 of the Companies Act. It was also pleaded that the petitioners had got no knowledge of the fraud played by the respondents of the Company Petition whereby the funds of the Company were utilized for purchase of shares and they came to know about it in May, 1987 through the criminal complaint. In view of the pleadings as aforesaid, it is Section 17(1)(a) of the Limitation Act which would govern the situation and not Section 17(1)(b) of the Limitation Act. 25. The decisions cited by Mr. Chagla have been rendered on Section 18 of the Limitation Act, 1908 which reads as under: - S.18. Effect of Fraud : Where any person having a right to institute a suit or make an application has, by means of fraud, been kept from the knowledge of such right or of the title on which it is founded, or where any document necessary to establish such right has been fraudulently concealed from him, the time limited for instituting a suit or making an application (a) against the person guilty of the fraud or accessory thereto, or (b) against any person claiming through him otherwise than in good faith and for a valuable consideration, shall be computed from the time when the fraud first became known to the person injuriously affected thereby, or, in the case of the concealed document, when he first had the means of producing it or compelling its production. 26. The corresponding provision of Section 18 of the Limitation Act, 1908 is Section 17 of the Limitation Act, 1963. The Statement of Objects and Reasons for amending Section 18 of the old Limitation Act read thus : - OBJECTS AND REASONS Clause 16: - Section 18 of the existing Act has been re-cast on the lines of Section 26 of the Limitation Act, 1939, of the united Kingdom so as to include actions based on fraud and also for relief founded on mistake. The clause also seeks to afford suitable protection to purchasers for valuable consideration in all such cases. Sub-clause (2) incorporates the principle contained in the proviso to Section 48 of the Code of Civil Procedure, 1908, which now finds a place in this Bill (see Art. 135). The benefit is, however, made available only if the application for extension is made within one year from the date of discovery of the fraud or cessation of force. Clause (a) of sub-section (1) of Section 17 of Limitation Act, 1963 is same as clause (a) of Section 26 of the English Act. There was no corresponding provision like clause (a) of sub-section (1) of Section 17 in Section 18 of the old Limitation Act and this provision has been introduced for the first time as a result of the amendment. All the decisions cited by Mr. Chagla have been rendered on Section 18 of Limitation Act, 1908. In view of the amendment incorporated in the Limitation Act, 1963 and specially the language in which Section 17 is cast now, they can have no application to the facts of the present case 27. Mr. Soli Sorabjee has also submitted that the continuance of the name of Bipinbhai in the register of the Company was a continuing wrong and, therefore, the period of limitation would begin to run at every moment of time during which the wrong name of Bipinbhai continues to remain in the register. Learned counsel has submitted that in such a situation the principles enshrined in Section 22of the Limitation Act will apply and the Company Petition cannot be held to be barred by limitation and the view to the contrary taken by the High Court is erroneous in law. Since we have held above that the Company Petition could not be dismissed on a preliminary issue, namely, as being barred by limitation as the petitioners had not been given opportunity to lead evidence and the finding of the High Court has been reversed on that point, we do not consider it appropriate to examine the aforesaid contention on merits. However, as the High Court has to hear the Company Petition again, the findings recorded by the High Court on the point of continuing wrong and condonation of delay are set side.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]19. Undoubtedly, Order VI Rule 4 CPC requires that complete particulars of fraud shall be stated in the pleadings. The particulars of alleged fraud, which are required to be stated in the plaint, will depend upon the facts of each particular case and no abstract principle can be laid down in this regard. Where some transaction of money takes place to which A, B and C are parties and payment is made by cheques, in normal circumstances a third party X may not get knowledge of the said transaction unless he is informed about it by someone who has knowledge of the transaction or he gets an opportunity to see the accounts of the concerned parties in the Bank. In such a case an assertion by X that he got no knowledge of the transaction when it took place and that he came to know about it subsequently through some proceedings in court cannot be said to be insufficient pleading for the purpose of Order VI Rule 4 CPC. In such a case X can only plead that he got no knowledge of the transaction and nothing more. Having regard to the circumstances of the case, we are of the opinion that the High Court was in error in holding that there was no proper pleading of fraud20. The learned Company Judge has referred to the affidavit in reply filed by R.T. Doshi opposing the admission of the Company Petition and on the basis of the said affidavit has laid great emphasis on the fact that father Vadilal Lallubhai Mehta was present all along with the appellant No. 1 Ramesh B. Desai at all material times and that things were done in the presence of everyone, viz., two sons of Vadilal Lallubhai Mehta, namely, Bipinbhai and Suhasbhai. Emphasis has also been laid on the fact that the last cheque dated 25.11.1982 given by the Company to M/s. Santosh Starch Products was signed by the petitioner No. 1 Ramesh B. Desai himself. These are all questions of fact, findings on which could be recorded only after the parties had been given opportunity to adduce evidence. The mere fact that one cheque for Rs.5 lacs was signed by Ramesh B. Desai does not lead to the only inference that he got knowledge of the entire transaction relating to payment of Rs.20 lacs by the Company to M/s. Santosh Starch Products and the payment of the said amount on the same day by M/s. Santosh Starch Products to Bipinbhai and his family members. The learned Company Judge and the Division Bench in appeal have referred to these facts and have recorded a finding that the petitioners had knowledge of the entire transaction and the Company Petition was barred by limitation. It is important to point out that apart from Ramesh B. Desai there are 8 other shareholders who had filed the Company Petition. There is not even a slightest inkling in the impugned judgments of the High Court that the other 8 petitioners had acquired knowledge of the transaction much earlier. In our opinion the approach adopted by the High Court is clearly illegal as no finding on the point of knowledge could have been recorded until the parties had been given opportunity to lead evidence and in such circumstances dismissal of the Company Petition at a preliminary stage on the finding that it was barred by limitation is clearly erroneous in law21. Mr. Iqbal Chagla, learned counsel for the respondents, has submitted that the full particulars of fraud had not been given in the Company Petition and as such there was no compliance of Order VI Rule 4 CPC in the Company Petition and the learned Company Judge has rightly dismissed the same. In support of this submission he has placed reliance on Bishundeo Narain and another vs. Seogeni Rai and others AIR 1951 SC 280 wherein it was held that in case of fraud, undue influence and coercion, the parties pleading it must set forth full particulars and the case can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment of fraud of which any court ought to take notice however strong the language in which they are couched may be. Reliance has also been placed on Bijendra Nath Srivastava vs. Mayank Srivastava and others (1994) 6 SCC 117  and paragraphs 208 and 228 of the report in Sangramsinh P. Gaekwad and others vs. Shantadevi P. Gaekwad and others (2005) 11 SCC 314 , where the same principle has been reiterated.We have already considered this aspect of the matter and in our opinion in the acts and circumstances of the case the plea raised in the Company Petition cannot be held to be wanting in compliance of Order VI Rule 4 CPC24. In our opinion, in view of the facts pleaded in the Company Petition, the case is covered by Section 17(1)(a) of the Limitation Act and not by Section 17(1)(b) as the petitioners are not claiming any right or title over the shares of the Company, which according to them were purchased out of the funds of the Company. Section 17(1)(b) will apply when the plaintiff or applicant is claiming any kind of right or title to any moveable or immoveable property etc. Their simple case is that in view of the fact that the funds of the Company were utilized for purchase of shares by Bipinbhai, which were then recorded in his name, the whole transaction was in violation of Section 77 of the Companies Act, and consequently the register of the Company required to be rectified in accordance with Section 155 of the Companies Act. It was also pleaded that the petitioners had got no knowledge of the fraud played by the respondents of the Company Petition whereby the funds of the Company were utilized for purchase of shares and they came to know about it in May, 1987 through the criminal complaint. In view of the pleadings as aforesaid, it is Section 17(1)(a) of the Limitation Act which would govern the situation and not Section 17(1)(b) of the Limitation Act27. Mr. Soli Sorabjee has also submitted that the continuance of the name of Bipinbhai in the register of the Company was a continuing wrong and, therefore, the period of limitation would begin to run at every moment of time during which the wrong name of Bipinbhai continues to remain in the register. Learned counsel has submitted that in such a situation the principles enshrined in Section 22of the Limitation Act will apply and the Company Petition cannot be held to be barred by limitation and the view to the contrary taken by the High Court is erroneous inSince we have held above that the Company Petition could not be dismissed on a preliminary issue, namely, as being barred by limitation as the petitioners had not been given opportunity to lead evidence and the finding of the High Court has been reversed on that point, we do not consider it appropriate to examine the aforesaid contention on merits. However, as the High Court has to hear the Company Petition again, the findings recorded by the High Court on the point of continuing wrong and condonation of delay are set side.