Stephen Aranha, Dadan Bhai & Anr. vs M/S. Jindal Leasefin Ltd. And M/S. ...
2000 Latest Caselaw 569 Del

ORDER

M.S.A. Siddiqui, J.

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

2. The factual score depict that post-dated cheques were issued on behalf of the company 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 the drawee bank. The complainant issued notice to the company calling upon it to pay the amount. As the company failed to pay the amount, a complaint was filed before the Metropolitan Magistrate against the company and its directors for the offence under Section 138 of the Act. The Magistrate who took cognizance of the offence issued process to all the accused. Aggrieved thereby, the petitioners have filed separate 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 of Sections 441(2) and 536(2) of the Companies Act, the criminal case insti-

tuted against them for commission of the alleged offence under Section 138 of the Act is misconceived and compelling the accused to face ordeal of a trial in the case will amount to abuse of the process of court.

3. Learned counsel for the petitioners contended that on the company being wound up by the order of the Company Court, no steps could be taken by the complainant for realisation of the amounts said to be due to it and, therefore, the criminal proceedings initiated against the drawer company and its directors is misconceived and should be quashed. He submitted that the expression "in the case of a winding up by the Court" employed in Section 536(2) of the Companies Act does not mean that the said, Section is to come into force only after a winding up order is passed. According to him, the said expression must be read in the light of Section 441(2) and, therefore, once a petition for winding up is filed, Section 536(2) comes into operation and there can be no transfer or disposition of properties. He submitted that even if any transfer takes place, such transfer would be void. He further submitted that in such a situation the company and its directors would be entitled not to make payment because if such payment is made it would be void. He submitted that the court 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 12th August, 1999, an order of winding up was passed by the Company Court and an offi-

cial liquidator was appointed, which bars the company and its directors from making any payment. According to him, the said bar would operate retrospectively by virtue of Section 441 but the bar would come into existence only on the order of winding up being passed or a provisional liquidator being appointed. He submitted that the said legal disability prevented the company and its directors from making payment. He submitted that the offence under Section 138 of the Act is deemed to have been committed only if the drawer of the cheque fails to make payment of the money to the holder in due course within 15 days of the receipt of the notice as stipulated in Section 138 of the Act. If before the period of 15 days is over, any circumstance intervenes which makes it impossible to make payment, then there can be no failure to make payment within the meaning of Section 138 of the Act.

4. On the other hand, learned counsel appearing for the respondents submitted that under Section 138 of the Act the offence is deemed to be committed on dishonour and non-payment of the amount covered by the cheque within 15 days of receipt of notice of demand and a subsequent order of winding up, even though it relates back, would have no effect on the offence which is already deemed to be committed.

5. It is significant to mention that the winding up order dated 12.8.1999 passed by the Company Court shows that the winding up petition was admitted on 11.6.1998. The offending cheques were issued on 26.2.1998. Thus, till the end of the period of 15 days there has been no order of winding up. That being so, the question for consideration is whether merely by reason of a winding up petition being presented there was a bar or legal disability in making payment by the company and its directors. In Pankaj Mehra & Anr. Vs. State of Maharashtra & Ors., , similar question was raised before the Supreme Court. After analysing the scope and ambit of Sections 441(2) and 536(2) of the Companies Act and Sections 138/141 of the Act, their Lordships of the Supreme Court have held that a company and its directors cannot escape from penal liability under Section 138 of the Act on the premise that a petition for winding up of the company has been presented and was pending during the relevant time. Their Lordships have also held that issuance of a cheque does not amount to disposition of property. Their Lordships have further held that "it is difficult to lay down that all disposition of property made by a company during the interregnum between the presentation of a petition for winding up and the passing of the order for winding up would be null and void." If the payment is not ab initio void the company cannot contend that it is legally forbidden from making payment of the cheque amount when the notice was issued by the payee regarding dishonour of the cheque. In this context, I may usefully excerpt the following passages of the judgment:

"If the payment is not ab initio void the company cannot contend that it is legally forbidden from making payment of the cheque amount when notice was issued by the payee regarding dishonour of the cheque. To circumvent this hurdle an endeavour was made by some of the appellants' counsel to show that the very issuance of a cheque would amount to disposition of property. We are unable to accept the said contention particularly in view of the defini-

tion of "cheque" in the NI Act. "A Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand."

"Bill of exchange is "an instrument in writing containing an unconditional order, signed by the maker, directing certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument". The cheque, therefore, can be an order on the banker to pay the amount to the holder thereof and no disposition of property would take place until the payment is made by the banker pursuant thereto. At the most, drawing of a cheque can be considered as a step towards disposition of property, but that is insufficient to amount disposition of property".

"There is no provision in the Companies Act which prohibits enforcement of the debt due from a company. When a company goes into liquidation, enforcement of debt due from the company is only made subject to the conditions prescribed therein. But that does not mean that the debt has become unenforceable altogether. Perhaps due to want of sufficient assets for the company the realisation of a debt would be difficult. But that is no premise to hold that the debt is legally unenforceable. Enforceability of a debt is not to be tested on the touchstone of the modality or the procedure provided for its realisation or recovery. Hence the contention that the special provision incorporated in the Compa nies Act regarding the debts and liabilities due from the company will render the debt unenforceable, cannot be accepted."

6. It is relevant to mention that Section 536(2) of the Companies Act does not lay down any bar or prohibition preventing the company from making payments or even disposing of the property. Since there is no prohibition from making payments, there would be a failure under Section 138 of the Act if the company or its directors do not make payment only on the ground that a petition for winding up has been presented. That being so, a subsequent order by the Company Court appointing a provisional liquidator or winding up the company does not affect a criminal case for an offence under Section 138 of the Act once the offence is deemed to be committed prior to such order being passed. It has to be borne in mind that under Section 138 of the Act the deemed commission of offence is not by virtue of any disposition of property or payment but by virtue of non-payment of the amount covered by the cheque within the period of 15 days after receipt of the notice of the demand. Thus, in my opinion, the present case is squarely covered by the decision of the Supreme Court in Pankaj Mehra & Anr. Vs. State of Maharashtra & Ors. (Supra).

7. Lastly, it is submitted by learned counsel for the petitioners that the petitioners had resigned as directors of the company much before issuance of the offending cheques and so they cannot be proceeded against for having committed the offence under Section 138 of the Act. This being the disputed question of fact cannot be decided by this Court in exercise of the inherent power under Section 482 Cr. P. C.

8. For the foregoing reasons, I am of the opinion that the impugned order dated 24.6.1999 passed by the Metropolitan Magistrate does not suffer from any legal infirmity warranting interference of this Court under Section 482 Cr.P.C. Accordingly, the petitions are dismissed.