KRISHNA TEXPORT INDUSTRIES LTD Vs. DCM LIMITED

JUDGEMENT

(1.) A conflict of judicial view between the Bombay High Court and the Gujarat high Court in respect of the power of the company court u/s 391 (6) of the companies Act, 1956 (hereinafter referred to as the said Act) to stay criminal proceedings has given rise to the present appeal.

(2.) THE commercial relationship between the appellant and the respondent started with an Inter Corporate Deposit (ICD) of Rs. 2. 50 crores being placed by the appellant with the respondent under two separate agreements dated 26. 9. 1997 and 03. 10. 1997 by way of two separate cheques of Rs. 1. 25 lac each which were duly encashed. The said ICDs were for a period of 120 days and the respondent company were liable to repay the same before the expiry of the said period along with interest @25. 5% per annum. In case of default, the rate of interest was to be enhanced by an additional interest of 11% per annum. It is the case of the appellant that the respondent failed to re-pay the ICD with interest and, thus, gave rise to two sets of separate proceedings. One proceeding arose out of the cheques issued by the respondent to clear the liabilities which were dishonoured on account of paucity of funds resulting in complaints being filed by the appellant u/s 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the NI Act) and the other arose by reason of the appellant filing proceedings for winding up under the said Act against the respondents after serving them with a legal notice. In respect of the complaint u/s 138 of the NI act, the respondent filed proceedings for quashing of the same before this Court but they were ultimately withdrawn. In the winding up proceedings, it came to light that certain shares kept by the respondent with the appellant as security for the ICD had, in fact, been sold for an amount of about Rs. 37. 00 lacs and since the sale was without the leave of the Court, the proceeds were directed to be deposited in Court and are still lying deposited. A third proceeding arose out of a suit filed by the respondent, being Suit No. 1815/2003, on the Original side of this Court seeking reliefs of declaration, injunction, recovery etc. as according to the respondent the liability towards the ICD had been cleared and part of the claim was settled by payment to a third party at the behest of the appellant, which was disputed by the appellant.

(3.) IN the proceedings before the learned Company Judge, interim orders were granted whereby in view of the pending scheme for restructuring and arrangement, the proceedings against the respondent company were stayed. The order with which the appellant is aggrieved in the present case was passed on 25. 4. 2005. The order notes the contention of the counsel for the respondent that the scheme had been sanctioned and the same provided for payment to the creditors through the mechanism of an escrow account subject to the condition that the creditors withdraw all the cases against the company and its Executive Directors. It was pleaded that three persons, whose particulars were given, had not withdrawn the proceedings because of which payment could not be made to them although the respondent was ready and willing to make the payment in terms of the scheme subject to withdrawal of the criminal complaints. The learned Company Judge stayed the proceedings of the cases filed by the three parties. Not only that, it was noticed that some of the creditors had filed complaints before different consumer forums which claim also the respondent was willing to settle in accordance with the scheme.