R.K. Chemicals vs Kohinoor Paints Faridabad Pvt. ...
2004 Latest Caselaw 1331 Del

JUDGMENT

A.K. Sikri, J.

1. This petition is filed by the petitioner seeking winding up of the respondent company on the ground that the respondent company is indebted to the petitioner in the sum of Rs. 20,025/- which the respondent company has not paid. The averments in respect of transactions are made in para VI of the petition and the manner in which balance of Rs. 20,025/- is shown is reproduced as below:-

 Date         Particulars Debit                 Credit Balance 
01.0496      Opening Balance                      25,125.00 
9.4.96       To bill No. 2205                      1,260.00 
10.4.96      To Bill No. 2208                      1,510.00 
12.04.96     To Bill No. 2211                      1,130.00 
15.04.96     By Cash                               5,000.00 
17.04.96     By Cash                               4,000.00 
________             _______                     __________ 
29,025.00            9,000.00                     20,025.00 
------------      -----------                 -------------
 

It is further stated that in the balance sheet of the respondent company as on 31st March, 1996, respondent had admitted the liability to the tune of Rs. 20,840/-.
 

Although there is a dispute as to what was the balance as on 31st March, 1996 in as much as, as per the petitioner, amount payable was 25,125/- whereas respondent has acknowledged the liability of Rs. 20,840/- in its balance sheet, it is not necessary to go into this question as I am of the opinion that the petition filed by the petitioner against the respondent is time barred and therefore can not be entertained. From the particulars extracted above, it is clear that the last payment was made on 17th April, 1996. However, the present petition was filed on 26th November, 1999. It is admittedly beyond three years of the said transaction which is the limitation period prescribed under the Limitation Act even if the petitioner relies upon the Balance Sheet of the respondent, that is for the year ending 31st March, 1996. However, counsel for the petitioner submitted that the auditor's report is dated 27.11.1996 Along with which balance sheet as on 31st March, 1996 was annexed and therefore three years period should be counted from 27th November, 1996 and it should be treated that even on 27th November, 1996 the liability shown in the balance sheet was acknowledged. I am not in a position to agree with this submission of the counsel for the petitioner. No doubt Section 18 of the Limitation Act extends the period of limitation and fresh period of limitation is to be computed from the time when the acknowledgment of liability is made. However, I am not inclined to agree with the submission of learned counsel for the petitioner that later auditor's report dated 27th November, 1996 constitutes any such `acknowledgment' as provided under Section 18 of the Limitation Act. The Supreme Court in the case of Valliamma Champaka Pillai v. Sivathanu Pillai and Ors. held that :

''Under Section 18 of Limitation Act, 1908, one of the essential requirements for a valid `acknowledgment' is that the writing concerned must contain an admission of a `subsisting liability'. A mere admission of the past liability is not sufficient to constitute such an `acknowledgment'. Hence a mere recital in a document as to the existence of a past liability, coupled with a statement of its discharge, does not constitute an `acknowledgment' within this Section.''

Admittedly the auditor's report is in respect of affairs of the company for the year 1995-96. The auditors while preparing the final account as well as balance sheet, naturally, looked into the books of accounts of the respondent company for this year i.e., 1995-96 (1.4.95 to 31.3.96). It is for this reason that statement of affairs reflected in the final accounts is for the aforesaid period and the balance sheet is as on 31st March, 1996. Merely because the report of the auditor is dated 27th March, 1996, it would not amount to acknowledgment by the auditors of the debt existing even on 27.11.1996 as well. This position would become obvious by giving an illustration. If the position of debtors and of creditors undergo change after 31.3.96 and before 27.11.1996, that would not be reflected in the balance sheet and such change would appear only in the balance sheet as on 31st March, 1997. Thus, say for example, a particular creditor was paid in May, 1996. Even when auditor's report comes on 27th November, 1996 his name would still be shown in the Balance Sheet as on 31st March, 1996 as a creditor. It can not be claimed by that creditor that the amount is still due as auditors have acknowledged the same on 27th November, 1996 What is emphasised from the above illustration is that auditor's report merely affirms the state of affairs prevailing as on 31.3.1996 and cannot be treated as the position existing on the date of report as well i.e. 27th November, 1996.

This is made clear in the auditor's report itself. In para d (i) it is stated that ''in the case of balance sheet, of the state of affairs of the company, as at 31st March, 1996''. Therefore, the auditor's report is not the acknowledgment of the debt. It is the Balance Sheet only, which can be relied for this purpose and that is of 31st March, 1996. The claim is, therefore, time barred.

This petition is accordingly dismissed.