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2006 (11) TMI 346 - HC - Companies Law


Issues Involved:
1. Maintainability of a complaint under section 138 of the Negotiable Instruments Act against a company and its directors after the winding up of the company.

Issue-wise Detailed Analysis:

1. Maintainability of Complaint Against the Company Post-Winding Up:
The court addressed whether a complaint under section 138 of the Negotiable Instruments Act can be filed against a company and its directors after the company has been wound up. The court noted that once a company is ordered to be wound up, the Official Liquidator takes charge of all assets and properties, leading to the discharge of all employees and officers, including the Board of Directors. The court emphasized that the complaint against the company cannot proceed without the permission of the Company Judge of the High Court that ordered the winding up. It was concluded that a complaint under section 138 cannot be filed against a company that is already wound up at the time of cheque dishonour and notice issuance.

2. Maintainability of Complaint Against Directors Post-Winding Up:
The court examined whether the complaint is maintainable against the directors after the winding up of the company. It was established that if the complaint was filed before the winding up orders, the criminal proceedings could continue against the directors even if the company is dropped from the proceedings. The court referenced the Supreme Court's decision in Anil Hada v. Indian Acrylic Ltd., which held that penal liability under section 138 extends to persons connected with the company by virtue of section 141 of the Act. However, for directors to be liable, it must be shown that the offence was actually committed by the company.

3. Legal Consequences of Winding Up:
The court highlighted that winding up results in the discharge of all employees and officers, including the Board of Directors, and the Official Liquidator takes over the company's affairs. Any payment or cheque presented after the winding up order is legally barred, and the bank is precluded from honouring such cheques. Consequently, the directors, who are no longer in charge of the company's day-to-day affairs, cannot be held liable under section 141 of the Negotiable Instruments Act.

4. Interpretation of Legal Provisions:
The court referred to the Supreme Court's judgment in Pankaj Mehra v. State of Maharashtra, which clarified that mere filing of a winding up petition does not attract section 536(2) of the Companies Act. The court emphasized that the winding up order must be passed for the provisions to apply, and until then, the company can continue its business. The court also noted that the liability of the company and directors under sections 138 and 141 remains if the cheque is presented after the winding up petition is filed but before the winding up orders are passed.

5. Enforcement of Debt Post-Winding Up:
The court discussed the enforcement of debt post-winding up, stating that while the debt does not become unenforceable, it is subject to the conditions prescribed under the Companies Act. The Official Liquidator must disburse payments according to the Act, prioritizing preferential creditors and statutory dues before unsecured creditors.

6. Case Law References:
The court referenced the Supreme Court's judgment in Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., which dealt with the impact of BIFR orders on proceedings under section 138 of the Negotiable Instruments Act. It was held that if a restraint order under section 22A of SICA is passed, the company and its directors cannot be held liable for cheque dishonour.

Conclusion:
The court concluded that a complaint under section 138 of the Negotiable Instruments Act is not maintainable if filed after the company has been ordered to be wound up. The summoning order issued was set aside, and the complaint was dismissed. The court clarified that while allegations of cheating under section 420 read with section 120B of the IPC might be maintainable, the complaint in the present case was solely under section 138, which is not sustainable post-winding up.

 

 

 

 

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