STEPHEN ARANHA Vs. JINDAL LEASEFIN LIMITED

JUDGEMENT

(1.) The common question that arises in these petitions filed under Section 482Cr.P.C., is whether a company and its directors can be proceeded against for havingcommitted an offence under Section 138 of the Negotiable Instruments Act (for shom'the Act') after the expiry of the period of payment of the cheque amount beforepassing of the order of winding up under Section 433 (e) and (f) of the CompaniesAct. Since the relevant facts involved in all the cases are similar and a commonquestion of law arises in all the cases, they were heard together and they are beingdisposed of by this order.

(2.) The factual score depict that post-dated cheques were issued on behalf of thecompany in favour of the complainant in the course of the business of the company.When the cheques were presented for encashment, they were dishonoured by thedrawee bank. The complainant issued notice to the company calling upon it to paythe amount. As the company failed to pay the amount, a complaint was filed beforethe Metropolitan Magistrate against the company and its directors for the offenceunder Section 138 of the Act. The Magistrate who took cognizance of the offenceissued process to all the accused. Aggrieved thereby, the petitioners have filedseparate petitions under Section 482 Cr. P. C. seeking quashing of the complaint/proceedings in the criminal case mainly on the ground that in view of the provisions ofSections 441(2) and 536(2) of the Companies Act, the criminal case institutedagainst them for commission of the alleged offence under Section 138 of the Act ismisconceived and compelling the accused to face ordeal of a trial in the case willamount to abuse of the process of court.

(3.) Learned counsel for the petitioners contended that on the company beingwound up by the order of the Company Court, no steps could be taken by thecomplainant for realisation of the amounts said to be due to it and, therefore, thecriminal proceedings initiated against the drawer company and its directors ismisconceived and should be quashed. He submitted that the expression "in the caseof a winding up by the Court" employed in Section 536(2) of the Companies Act doesnot mean that the said, Section is to come into force only after a winding up order ispassed. According to him, the said expression must be read in the light of Section441(2) and, therefore, once a petition for winding up is filed, Section 536(2) comesinto operation and there can be no transfer or disposition of properties. He submittedthat even if any transfer takes place, such transfer would be void. He further submittedthat in such a situation the company and its directors would be entitled not to makepayment because if such payment is made it would be void. He submitted that thecourt cannot force a company or its directors to make a void payment or do something,which is not sanctioned or permitted by law. He further submitted that on 12/08/1999, an order of winding up was passed by the Company Court and an officialliquidator was appointed, which bars the company and its directors from making anypayment. According to him, the said bar would operate retrospectively by virtue ofSection 441 but the bar would come into existence only on the order of winding upbeing passed or a provisional liquidator being appointed. He submitted that the saidlegal disability prevented the company and its directors from making payment. Hesubmitted that the offence under Section 138 of the Act is deemed to have beencommitted only if the drawer of the cheque fails to make payment of the money to theholder in due course within 15 days of the receipt of the notice as stipulated inSection 138 of the Act. If before the period of 15 days is over, any circumstanceintervenes which makes it impossible to make payment, then there can be no failureto make payment within the meaning of Section 138 of the Act.