The Supreme Court has held that a winding-up proceeding and a civil suit for recovery of money are distinct and independent remedies, and the initiation of one does not impact the limitation for the other. Referring to Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari [1950 SCC 766] and Jignesh Shah v. Union of India [(2019) 10 SCC 750] the Court clarified that the period spent in prosecuting insolvency or winding-up proceedings cannot be excluded under Section 14 of the Limitation Act for the purpose of filing a delayed civil suit for recovery.
The Court further held that the suit was filed on the strength of individual bills and not on the basis of a running account, and Annexure P-18 did not amount to an acknowledgment of the debt sought to be recovered. The acceptance of two specific bills before the Company Court was not an admission giving up the plea of limitation, and the Company Court was not competent to extend the limitation period. The claim for recovery was accordingly held to be barred by limitation, and the suit stood dismissed.
A Two-Judge Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran found that Exhibit-8, the Memorandum issued by the Registrar of Firms, West Bengal, was indeed sufficient evidence to prove the registration of the respondent-firm. The Registration Number L73931 was allotted to the firm on May 14, 2010, and the certified copy of Form-VIII of the Registrar of Firms corroborated this fact. The Court also noted that the application to produce additional documents was rightly allowed since it furthered the cause of justice and enabled the court to pronounce judgment.
However, on the question of limitation, the Court made several crucial observations. The suit was filed on the strength of individual bills and not on the basis of a running account. Annexure P-18 did not acknowledge the debt as sought to be recovered; rather, the payment made was specifically for three admitted invoices was already paid on Dec 12, 2007 and did not even figure in the schedule of the claim. The appellant had agreed to provide security only for two specific bills before the Company Court.
The Court explained that to surpass the limitation for these bills dated Jan 30, 2006, the suit should have been filed before Jan 29, 2009. Even if the date of filing the Company Petition i.e., Feb 10, 2009) was taken for determining limitation under Section 14 of the Limitation Act, it would fall outside the limitation period. The last of the other bills was dated March 06, 2007, which remained unpaid, and the suit was filed on June 05, 2010, well after the limitation had expired.
Thus, the mere deduction shown with respect to the payment of admitted bills in the schedule to the plaint did not make it a running account. The notice of demand, the reply issued, or the payment made on admission of two bills, with disputes raised with respect to the other bills, demolished the case set up by the respondent-plaintiff on cause of action.
Briefly, the dispute arose from a commercial transaction between M/s. Trade Centre (respondent) and Mageba Bridge Products Private Limited (appellant). Trade Centre supplied goods to Mageba Bridge Products and raised multiple bills totalling Rs. 23.41 lakhs. When payment was not forthcoming, Trade Centre filed a civil suit for recovery of money. The Trial Court dismissed the suit on the ground that Trade Centre failed to prove its status as a registered partnership firm, which was a mandatory requirement under Section 69(2) of the Indian Partnership Act, 1932.
The First Appellate Court reversed this finding, accepting Exhibit-8 (a Memorandum of Registration issued by the Registrar of Firms, West Bengal) as conclusive proof of registration, and decreed the suit for Rs. 24.36 lakhs along with interest at 6% per annum from the date of filing till realisation. Aggrieved, Mageba Bridge Products approached the Supreme Court, primarily contending that the suit was barred by limitation and that the registration of the plaintiff-firm was not validly proved. The respondent had also initially approached the Company Court by way of a winding-up petition, which directed the matter to be taken to the civil court.
