2020 (5) TMI 266 - HC - Indian Laws

Dishonor of Cheque - cheque was returned unpaid - existence of legal debt - Section 138 of the NI Act - respondent opposed the application by contending that the cheque in question worth of ₹ 4,24,800/- has been issued by the applicants company for discharge of legal debt and the same was dishonoured, therefore, the applicants are liable to be prosecuted for commission of offence punishable under Section 138 of the NI Act - HELD THAT - This Court, vide order dated 14/05/2018 permitted the Official Liquidator to took the actual physical possession of assets of the Company M/s Plethico Pharmaceuticals Ltd. in liquidation. After that, on 23/05/2018, the respondent /complainant gave a notice to the applicants for payment of the cheque amount and when the applicants fails to pay the cheque amount, then the respondent/complainant filed private complaint against the applicants under Section 138 of the Negotiable Instruments Act, 1881 on 05/07/2018, which was got registered vide order dated 27/07/2018. Where cheque presented is dishonoured and complaint is filed under Section 138 of the Negotiable Instruments Act against the company and its Directors after the company has already been ordered to be wound up. Whether such a complaint would be maintainable? - HELD THAT - After the winding up orders and taking over the affairs of the company by the Official Liquidator since erstwhile the directors seized to be the directors as on the date of dishonour of the cheque because they were not in-charge of day to day affairs of the company. Offence is committed under Section 138 of the Act only on the dishonour of cheque amount and issuance of notice for demand of the cheque amount. As on that day, no such notice could be issued to the Company, which was in liquidation and the creditors is not to be paid as per the statute of the Companies Act, Therefore, the liability on them also cannot be fastened under Section 141 of the Negotiable Instruments Act, 1881. Interpretation of the expression fails to make payment - HELD THAT - The drawer in the instant case would be a company, which has gone into liquidation and case of a company is on different footing and is governed by the statute, namely, the Companies Act. What is emphasized is that actual offence has to be committed by the company and then alone the Directors can become liable for the offence. When the company goes into liquidation and the cheque is presented thereafter, it cannot be said that the company has committed the offence as it is because of legal bar that it is precluded from making the payment. Once dishonour of the cheque by the Bank and failure to make payment of amount by the company is beyond its control, the Directors (who are in fact ex-Directors) can also not be held liable - such a complaint would not be maintainable, when the cheque is presented after the company has already been ordered to be wound up. The complaint filed under Section 138 of the Negotiable Instruments Act, 1881 is not maintainable because the complainant /respondent sent a notice to the applicants on 23/05/2018 i.e. after passing of the wind up order by this Court meaning thereby on the date of issuance of notice to the applicants the company was in liquidation and cannot be stated to have committed any offence, therefore, summoning order is bad in law - Petition allowed.

Summary

Issues Involved:
1. Maintainability of a complaint under Section 138 of the Negotiable Instruments Act (NI Act) against a company and its directors after the company has been ordered to be wound up.
2. The effect of liquidation and appointment of an Official Liquidator on the liability of directors under Section 138 of the NI Act.
3. The interplay between the Companies Act, 2013 and the NI Act concerning criminal proceedings for dishonoured cheques.

Issue-wise Detailed Analysis:

1. Maintainability of Complaint Under Section 138 of the NI Act:
The core issue was whether a complaint under Section 138 of the NI Act is maintainable against a company and its directors after the company has been ordered to be wound up. The court noted that the cheque in question, issued by the company, was dishonoured due to an "Income Tax Notice." The respondent/complainant issued a statutory notice to the applicants, which was not responded to, leading to the filing of a complaint under Section 138 of the NI Act.

2. Effect of Liquidation and Appointment of an Official Liquidator:
The applicants argued that the company was in liquidation and the Official Liquidator had taken possession of the company's assets before the statutory notice was issued. They contended that they had no administrative or financial control over the company and thus could not be held liable for the dishonoured cheque. The court emphasized that after the winding-up order and the appointment of the Official Liquidator, the directors ceased to have control over the company's affairs. Consequently, no notice could be issued to a company in liquidation, and the liability under Section 141 of the NI Act could not be fastened on the directors.

3. Interplay Between the Companies Act and the NI Act:
The court examined various precedents, including the Madras High Court's decision in Counter Point Advt. P. Ltd. v. Harita Finance Limited and the Kerala High Court's decision in Jose Antony Kakkad v. Official Liquidator. The Kerala High Court held that criminal proceedings under Section 138 of the NI Act are not related to the assets of the company and thus cannot be stayed under Section 446 of the Companies Act. The court also referenced the Supreme Court's decision in Anil Hada v. Indian Acrylic Ltd., which stated that the actual offence must be committed by the company for the directors to be held liable. The court concluded that when a company is in liquidation and a cheque is presented thereafter, the company cannot be said to have committed an offence under Section 138 of the NI Act due to the legal bar on making payments.

Conclusion:
The court concluded that the complaint under Section 138 of the NI Act was not maintainable because the statutory notice was issued after the company had been ordered to be wound up. Consequently, the summoning order was deemed bad in law, and the criminal complaint was quashed. The court directed that a copy of the order be sent to the concerned trial court for compliance.