2001 (10) TMI 1069 - HC - Companies Law

Summary

Issues Involved:
1. Whether the expression 'other legal proceedings' in section 446(1) of the Companies Act, 1956 includes criminal proceedings.
2. Jurisdiction of the Company Court to transfer criminal cases from one state to another.
3. Requirement of obtaining prior permission for lodging proceedings against a company under liquidation.

Issue-wise Detailed Analysis:

1. Interpretation of 'Other Legal Proceedings' in Section 446(1):
The central issue was whether the term 'other legal proceedings' in section 446(1) of the Companies Act, 1956 encompasses criminal proceedings. The court observed that section 446 is designed to protect the assets of a company undergoing liquidation. It was determined that the term 'other legal proceedings' does not include criminal prosecutions. This interpretation was based on the legislative intent and the language used in the statute, which aims to safeguard the company's assets rather than shield it or its directors from criminal liability.

2. Jurisdiction to Transfer Criminal Cases:
The court held that the Company Court does not possess the jurisdiction to transfer criminal cases from one state to another. This power is vested exclusively in the Supreme Court under section 406 of the Code of Criminal Procedure, 1973. The court emphasized that section 446 does not provide for such a transfer, and any attempt to do so would be beyond the scope of the Company Court's authority.

3. Requirement of Prior Permission for Lodging Proceedings:
The court addressed whether prior permission is needed before initiating proceedings against a company under liquidation. It was argued that the official liquidator, being an officer of the court, should be notified and permission obtained before lodging any proceedings. However, the court clarified that while section 446 requires leave of the court for suits or other legal proceedings against a company under liquidation, this does not extend to criminal prosecutions. The court noted that criminal proceedings, such as those under section 138 of the Negotiable Instruments Act, do not require such leave, as they are not intended to protect the company's assets but to address personal criminal misconduct.

Conclusion:
The court concluded that the expression 'other legal proceedings' in section 446(1) of the Companies Act, 1956, does not include criminal prosecutions. Additionally, the Company Court lacks the jurisdiction to transfer criminal cases from one state to another. The court also clarified that prior permission from the Company Court is not required to initiate criminal proceedings against a company or its directors. The judgment emphasized the distinct treatment of civil and criminal proceedings within the framework of the Companies Act and the Code of Criminal Procedure.