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Issues:
- Winding up petition filed by the petitioner against the respondent company for non-payment of dues. - Respondent's application for stay of winding up proceedings citing ongoing criminal complaint under section 138 of the Negotiable Instruments Act and section 420 of the Indian Penal Code. - Applicability of the decision in M.S. Sheriff v. State of Madras, AIR 1954 SC 397, for granting stay of civil proceedings during criminal cases. - Evaluation of whether the winding up proceedings should be stayed due to potential prejudice to the defense in the criminal case. Analysis: The petitioner filed a winding up petition against the respondent company due to its alleged inability to pay the outstanding amount of Rs. 11,29,444 for goods supplied. The petitioner claimed that 15 cheques issued by the respondent were dishonored by the bank for insufficient funds. Despite issuing a statutory notice of demand, the respondent failed to respond or make any payments, leading to the initiation of winding up proceedings. The respondent later applied for a stay of the proceedings, contending that the criminal complaint filed by the petitioner under section 138 of the Negotiable Instruments Act and section 420 of the Indian Penal Code arose from the same set of facts as the winding up petition. The respondent relied on the decision in M.S. Sheriff v. State of Madras, AIR 1954 SC 397, to support its request for a stay of the winding up proceedings. However, the court noted that the Supreme Court's decision did not establish a strict rule for staying civil proceedings during criminal cases but emphasized the need to consider special circumstances in each case. The court highlighted that criminal proceedings generally take precedence over civil matters but clarified that simultaneous civil and criminal proceedings could be allowed based on the specific facts and likelihood of prejudice. In assessing the respondent's application for a stay, the court considered the potential embarrassment and prejudice to the defense in the criminal case if the winding up proceedings continued. The court observed that the Companies Act provided a summary process for winding up petitions, distinct from lengthy civil suits. The respondent's delay in filing the application for stay and lack of detailed explanation on how the defense in the criminal proceedings would be affected indicated a lack of substantial grounds for staying the winding up proceedings. Referring to a previous judgment, the court reiterated that there was no legal impediment to conducting civil and criminal proceedings concurrently based on the circumstances of each case. Ultimately, the court dismissed the respondent's application for a stay of the winding up proceedings, deeming it as misconceived and intended to cause delay. The court imposed costs on the respondent and emphasized that the application lacked merit due to insufficient grounds for halting the ongoing winding up process.
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