K.K Desai, J.:— [His Lordship after stating the facts and rejecting the first contention of the Mills, proceeded.] As regards the question as to whether the suit was barred by the law of limitation, Mr. Divekar has argued that admittedly the date of breach must be July 31, 1951, and that this suit was filed on June 6, 1955, i.e more than three years after the date of the breach. The suit being a suit for damages ought, to be filed within three years from the date of the breach and, therefore, was barred by the law of limitation. In this connection, Mr. Daji has relied upon the following facts: An order for winding up of the defendants' Mills was passed on December 17, 1951. The plaintiff lodged his claim for damages in respect of the contract, in this suit amounting to Rs. 1,79,103-11-9 with the Joint Official Liquidators of the defendants' Mills on June 14, 1952. On a reference by the Liquidators of the claim to the District Judge, the same was investigated by him. As regards the balance of deposit money i.e Rs. 15,000 and interest, the District Judge granted the claim of the plaintiff. By his order dated April 30, 1955, the District Judge held that “the claim being a claim for damages” the plaintiff “should establish and prove the same by filing a suit against the defendants' Mills.” Having regard to that order, by their application dated June 6, 1955, the plaintiff applied to the District Judge, East Khandesh, who was dealing with the winding up of the defendants' Mills, to give to the plaintiff leave to file the suit for the balance of the claim. By his order dated June 6, 1955, the District Judge granted that permission and the plaintiff accordingly filed this suit on June 6, 1955. Mr. Daji also relies upon the provisions of s. 171 of the Companies Act, 1913, which was applicable to the facts of the case. The section provides:

“When a winding up order has been made, no suit or other legal proceeding shall be proceeded with or commenced against the company, except by leave of the Court and subject to such terms as the Court may impose”.

2. He also relies upon the Explanation to s. 3 and s. 14 of the Limitation Act. His first contention is that having regard to s. 171 of the Companies Act, institution of the suit was completely barred and that having regard to the Explanation to s. 3 and s. 14 of the Limitation Act, the application made to the Joint Liquidators on June 14, 1952, claiming the damages as claimed in this suit, was a civil proceeding in the Court of first instance. That proceeding was, for the inherent difficulty that the Court found in summary trial of the claim for damages, dismissed on April 30, 1955. The time that expired between the date of the winding up order and dismissal of that proceeding on April 30, 1955, must be excluded in computing the period of limitation. According to him, in any event, the time taken in the civil proceedings before the Liquidators between June 14, 1952 and April 30, 1955, should be excluded in computing the period of limitation. Mr. Divekar contends that the provisions in s. 171 do not bar institution of suits and, therefore, the date of the winding up order has no relation with the computation of the period of limitation. He further contends that the lodging of the claim before the Joint Liquidators on June 14, 1952, cannot be considered as a suit or a civil proceeding and that in any event the dismissal of that claim in the manner mentioned above is not dismissal of a suit by a Court for defect of jurisdiction or any other cause of a like nature within the meaning of s. 14 of the Limitation Act and the time cannot be excluded.

3. In this connection, it is important to notice the Explanation to s. 3 of the Limitation Act. The first paragraph of s. 3, inter alia, provides that every suit or application instituted after the period of limitation prescribed therefor shall be dismissed. The Explanation to the section provides:

“A suit is instituted, in ordinary cases, when the plaint is presented to the proper officer; in the case of a pauper, when his application for leave to sue as a pauper is made; and, in the case of a claim against a company which is being wound up by the Court, when the claimant first sends in his claim to the official liquidator.”

4. In the case of Hansraj Gupta v. Official Liquidators, Dehra Dun-Mussoorie Electric Tramway Co. . 1932 L.R 60 I.A 13, S.C 35 Bom. L.R 319. in connection with the proceedings instituted by the Liquidators of a company in liquidation, their Lordships of the Privy Council considered the true construction and effect of the provisions of s. 3 of the Limitation Act. The suit in that case was instituted by a company in liquidation through its Liquidators. In connection with the language in the Explanation to that section, their Lordships observed (p. 19):

“…The application of the liquidators would not be a suit within s. 3, if that section stood alone, unaccompanied by the explanation”.

5. Their-Lordships did not accept the argument that the Explanation showed by its concluding sentence that the claim against a company in compulsory liquidation can be considered to be a suit instituted within those words in s. 3. They further observed (p. 19):

“…The explanation is not concerned with the question of what is a suit, or is to be considered a suit, within s. 3. It is addressed to quite a different subject-matter. It assumes the existence of a suit which has been instituted by the presentation of a plaint, and is concerned only with the point of time at which that suit is for the purpose of s. 3 to be treated as being instituted. The ordinary rule is stated by the explanation to be that the suit is instituted when the plaint is presented; but to this two exceptions are prescribed—namely, (1) in the case of a suit by a pauper, the time at which that suit is (for the purposes of s. 3) instituted, is to be taken as at an earlier date, namely, the date when the application for leave to sue as a pauper was made; and (21) in the case of a suit against a company which is being wound up by the Court, the institution of the suit is (for the purposes of s. 3) advanced also to an earlier date—namely, the date when the claim was first sent in to the official liquidator”.

6. Now, this observation of their Lordships, in our view, applies to the facts of this case in all particulars. The present suit is a suit against a company which is being wound up by the Court. As regards this suit, in accordance with the observations of their Lordships, the date of the institution of the suit is not the factual true date being June 6, 1955, but for the purposes of s. 3 it stands advanced to an earlier date, viz. the date when the plaintiff lodged his claim in the first instance before the Joint Liquidators, i.e June 14, 1952. That being the true position, having regard to the observations of their Lordships, in this case Ave must hold that this suit, though in truth instituted on June 6, 1955, was in law instituted on June 14, 1952. The result is that the suit was filed within about 11 months and 2 weeks from the date of breach being July 31, 1951.

7. The further observations as contained in the case of Hansraj Gupta v. Official Liquidators, Dehra, Dun-Mussoorde Electric Tramway Co. also support the view that the application before the Joint Liquidators can be considered to be a civil proceeding instituted in a Court within the meaning of those words in s. 14 of the Limitation Act.

8. The relevant part of s. 14 of the Limitation Act provides:

“In computing the period of limitation prescribed for any suit, the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a Court of first instance or in a Court of appeal, against the defendant, shall be excluded, where the proceeding is founded upon the same cause of action and is prosecuted in good faith in a Court which, from defect of jurisdiction, or other cause of a like nature is unable to entertain it.”

9. The first question that arises is as to whether the proceeding by way of lodging the claim before the Joint Official Liquidators is “a civil proceeding in a Court of first instance” as referred to in the section. There would have been some difficulty in accepting the contention of Mr. Daji that the Liquidators must be considered as the Court of first instance, if the language of the Explanation to s. 3 as quoted above was not clear in providing that a claim lodged before the Liquidator is relevant in connection with a suit against a company in liquidation. It is also clear having regard to the provisions of the companies act that all claims in respect of a company in winding up must be made by lodging them before the Liquidator. It is not necessary or compulsory for any party having a claim against a company in liquidation to file a suit for recovering the amount due to the party. It is, on the contrary, necessary under the provisions of the companies act that ordinarily a creditor of a company in winding up must initially lodge a claim for the amount due to him before the Liquidator in accordance with the scheme prescribed by the Companies Act. The Act further provides for appeal and reference to the Civil Court for decision in the ultimate instance of the claims preferred before the Liquidator. In appeals before the Court, the decisions of the Liquidator are liable to be confirmed, modified and altered in all respects. It is having regard to that scheme that the Companies Act provides that as against a company ordered to be wound up no suit or proceedings could be continued or commenced except by leave of the Court. It is in the light of these provisions and the scheme of the Companies Act that we have come to the conclusion that a claim lodged before a Liquidator of a company ordered to be wound up must be held to be a civil proceeding filed before a Court of first instance as provided in s. 14 of the Limitation Act. An extremely difficult and absurd position must arise if this is not the true construction of the provisions of s. 14 of the Limitation Act. In spite of a claim duly lodged before the Liquidator having been fought out in the ultimate Court, it would be permissible for the defendants in a further suit which may have to be filed to contend that the time that was taken in the proceedings before the Liquidator cannot be excluded in computation of the period of limitation. In our view, the provisions of the companies act and the scheme therein provided for proof of claims by lodging the same before the Liquidator were not intended to bring about such a situation.

10. In this connection, we may observe that similar questions have arisen having regard to the provisions in the Insolvency law and the Courts have always held that where claims could be lodged before Receivers and Official Assignees the time taken in infructuous proceedings before the Receivers and the Official Assignees was liable to be excluded in computing the period of limitation.

11. We cannot accept the contention made by Mr. Divekar that the claim of the plaintiff was not rejected by the Court on the grounds as mentioned in s. 14 of the Limitation Act, viz. from defect of jurisdiction or other cause of a like nature. The claim of the plaintiff before the Liquidators was ultimately rejected by the District Judge only on the ground that it was a claim, for damages and could not be, therefore, disposed of summarily in the proceedings by way of claim. The District Judge himself directed the plaintiff to file this suit if he wanted to substantiate his claim. It was thereafter that the District Judge dealing with the defendants' Mills in winding up gave leave for filing this suit. This rejection of the plaintiff's claim lodged before the Liquidators, in our view, must be held to be rejection, though not on the ground of defect of jurisdiction, in any event, on the cause of a like nature. It was permissible for the District Judge to deal completely with the claim of the plaintiff. He, however, appears to have felt difficulty in summarily dealing with the plaintiff's claim. He accordingly rejected the claim and directed the plaintiff to file the suit. These must be held to be the circumstances indicating the cause of a like nature within the meaning of that phrase in s. 14 of the Limitation Act. Having regard to the above findings, in our view, the period that expired between June 14, 1952 and April 30, 1955, must be excluded in computing the period of limitation for the filing of this suit.

12. In this connection, reference may be made to the case of Upper India Bice Mills, Limited v. The Jaunpur Sugar Factory, Limited . 1927 I.L.R 49 All. 520, F.B, where it is observed (p. 523):

“…The rule is that the liquidator of a company which is in liquidation being a trustee for the creditors, time does not run after an order, or resolution, of winding up. The date for testing the liability is the commencement of the winding up.”

13. Mr. Divekar for the appellants has relied upon the decision in the case of Nazir Ahmad v. Peoples Bank of N.I . [1942] A.I.R Lah. 289, F.B In that case, there was no question relating to the true construction and effect of the provisions of s. 3 or s. 14 of the Limitation Act in connection with a suit filed against a company in liquidation. The question there related to the suit filed against a company in liquidation without leave under s. 171 of the Companies Act.

14. The Court held as follows:—

“Where a plaintiff institutes a suit against a company in liquidation without the leave of the Court under S. 171 and subsequently applies for such leave within the period of limitation of the suit and the leave is granted only after the period of limitation has expired, the suit should not be dismissed and limitation should be calculated in the same way as if the suit had originally been instituted with leave”.

15. In our view, there is nothing in that case which is applicable to the facts of this case.

16. Having regard to what we have observed above, the contention made by Mr. Divekar that the plaintiff's suit was barred by the law of limitation must be negatived.

[The rest of the judgment is not material to this report.]

17. Decree modified.