9911796707
TMI Blog2005 (9) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... Gandhi, learned advocate appearing for the applicant has submitted that the Company in liquidation, prior to its liquidation was engaged in the business of production and trading of steel tubes. For the said purpose, the Company in liquidation used to purchase Steel Sheets and other materials, etc. from the applicant Company. The applicant Company used to supply goods as per the orders of the Company in liquidation and raised invoices for the same against the Company from time to time. Since the payment has not been made by the Company in liquidation, the applicant has filed Summary Suit No. 3006 of 1997 in the City Civil Court, Ahmedabad against the Opponent No. 1 Company for recovery of ₹ 5,95,73,087/- being the outstanding amount of various invoices with interest thereon upto 25.06.1997. As a counter blast to the said suit, the Opponent No. 1 Company has filed Civil Suit No. 637 of 1998 in the City Civil Court, Ahmedabad against the applicant. Both these suits are still pending before the City Civil Court, Ahmedabad. 3. Mr. Gandhi has further submitted that since certain cheques issued by the Opponent Nos. 1 2 were returned dishonoured, the applicant Company has filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Liquidator alone is empowered, that too, with the sanction of the Court, inter-alia to institute or defend any Suit, Prosecution or other Legal proceedings, Civil or Criminal in the name and on behalf of the Company. He has, therefore, submitted that Opponent No. 2 is now Functus-Officio and has no power or authority whatsoever to prosecute further Criminal Case Nos. 1698 to 1701 of 2000 filed by the Company in liquidation through him against the present applicant and Opponent Nos. 3 to 6 after passing of the winding up order. 5. Mr. Gandhi has further submitted that Opponent No. 2 is not bonafide prosecuting the criminal cases in question and at any rate now, he cannot be permitted to prosecute the criminal prosecution any longer. The Opponent No. 2 is interested only to escape altogether or to atleast delay the criminal proceedings filed by the applicant and others against him. On the other hand, the Opponent Nos. 3 to 6 as Officers of the applicant are liable to be transferred anywhere in India and accordingly, will cause immense hardship and harassment, if the pending impugned criminal prosecution is permitted to be continued in the Trial Court. Reading the Complaint at An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company irrespective of the fact whether such suit or proceeding has been instituted or is instituted before or after the order for the winding up of the Company. Here in the present case, admittedly, on behalf of the Company in liquidation, the Opponent No. 2 in his capacity as Managing Director of the Company has filed Criminal complaints against the applicant Company and Opponent Nos. 3 to 6 before the order of winding up passed by this Court and the said proceedings are still pending before the Court of Metropolitan Magistrate, Court No. 5, Ahmedabad. In view of the provisions contained in Section 446(2)(a), the Magistrate's court has no jurisdiction to entertain or dispose of the said criminal complaints filed by the Company in liquidation through its Managing Director against the applicant and Opponent Nos. 3 to 6. Mr. Gandhi has further submitted that the term 'proceeding' used in Section 446(2)(a) is very wide and it inter alia includes criminal proceedings. In support of this submission, he relied on the decision of the Punjab Haryana High Court in the case of Official Liquidator Khosla Fans (India) P. Ltd. (In Liquidation) v. Ramesh Khosla and Ors., 53 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o itself. Sub-section (3) of Section 446 is omitted by the Companies (Second Amendment) Act, 2002. Prior to its omission, it stood as under :- Any suit or proceeding by or against the Company which is pending in any Court other than that in which the winding up of the Company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court. Mr. Gandhi has , therefore, submitted that even after deletion of Sub-section (3), the Court can certainly exercise its power under Section 446(2)(a) of the Act. 9. Mr. Gandhi has further submitted that the learned Magistrate has committed a serious error in law in not entertaining the application moved by the applicant Company for joining the Official Liquidator as party. It is contrary to the provisions contained in Section 446 of the Act. In support of his submission, he relied on the decision of the Calcutta High Court in the case of International Shipping Limited v. Chandpur Jute Co. Ltd., 52 Company Cases 121 wherein it is held that after a company is wound up, it is only the Official Liquidator who becomes the custodian of all the assets and propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Co-operative Cotton Growers Marketing Federation Limited and Anr., 70 Company Cases 440 wherein it is held that before a reference can be made to the Board for Industrial and Financial Reconstruction to institute an enquiry into the causes of sickness of the industrial Company and make recommendations for its rehabilitation, the pre-requisite is the existence of a Board of Directors to the industrial company which is sick. If that board of directors does not exist, the competence to make a reference disappears. From the date of communication of the order of the Court winding up the industrial Company, its board of directors ceases to hold office for all purposes other than for filing the statement of affairs in aid of the winding up proceedings. Therefore, the reference made, if any, by any body of persons claiming to be the board of directors after the winding up order was passed, was wholly incompetent and the provisions of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, were not attracted. 12. Mr. Gandhi has further relied on the decision of Allahabad High Court in the case of Sushila Pulp and Papers Limited v. Official Liquidator and Ors., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company are nothing but abuse of process of law and such applications should not be entertained by this Court. He has further submitted that before filing the present applications before this Court, the applicant Company has tried to delay the proceedings by filing several applications before the Trial Court. All these Criminal cases were filed on 05.08.2000 wherein the learned Metropolitan Magistrate, Ahmedabad has issued process under Section 120B, 34, 114, 409 of Indian Penal Code on 17.08.2000. The present applicant and the Opponent Nos. 3 to 6 had not challenged the process issued by the learned Metropolitan Magistrate before the learned Sessions Judge by filing Criminal Revision Application or before this Court by filing quashing petition under Section 482 of the Code of Criminal Procedure Code. After service of summons, the accused persons have preferred a stay application dated 27.07.2001 wherein written arguments were filed on 03.01.2002. After hearing the parties, the said stay application was rejected on 30.09.2002. Thereafter, the present applicant and the Opponent Nos. 3 to 6 had applied for time to file an appropriate petition before the higher Court for challenging t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Magistrate Court who has ordered police inquiry under Section 156(3) of the Code of Criminal Procedure which was registered as M. Case No. 48 of 1997 with Naranpura Police Station. Inquiry Case No. 240 of 1997 was challenged by respondent No. 2 - original complainant before this Court by way of filing quashing petition being Cri. Misc. Application No. 4373 of 1997. The said application was allowed by this Court vide its order dated 16.06.1998 whereby Inquiry Case No. 240 of 1997 Naranpura Police Station M. Case No. 48 of 1997 was ordered to be quashed and set aside. Mr. Soparkar has further submitted that the present applicant challenged the said order before the Hon'ble Supreme Court of India by way of filing Petition for Special Leave to Appeal (Criminal) No. 3528/1998 which came to be dismissed by the Hon'ble Supreme Court on 30.08.1999. The present applicant had also filed 13 criminal complaints under Section 138 of the Negotiable Instruments Act being Nos. 3090/97 to 3101/97 and 4140/97 against the Company in liquidation and others on the same subject matter in the Court of 9th Metropolitan Magistrate Court, Ahmedabad which are pending. The respondent No. 2 had file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction under the Act with respect to the matters relating to the Company under Section 10 of the Act and in respect of any offence under the Act, the Judicial Magistrate, First Class, or Presidency Magistrate having jurisdiction. The ordinary power of the Magistrate to entertain a complaint is not controlled by the company court. The power to try criminal offences is conferred on the Magistrate and Sessions Courts by virtue of the provisions of the Code of Criminal Procedure, 1973. The Court has further held that the expression legal proceedings in Section 446 of the Companies Act means only those proceedings which have a bearing on the assets of a company in winding up or have some relation with the issue in winding up. It does not mean each and every civil proceeding which has no bearing on the winding up proceeding or criminal offences where the Company was liable to be prosecuted. It is not as if there is no control over such other proceedings. The liquidator under Section 537, if he feels the need, can apply to the company court to intervene and the Company court can always grant or refuse sanction. The language of Section 621(1) will therefore indicate that the Company co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e four applications filed by the present applicant are required to be rejected with cost. Mr. Soparkar has further submitted that the present applicant and the Opponent Nos. 3 to 6 had successfully delayed the aforesaid criminal cases for a period of almost five years and granting stay at this stage will further delay the matter which would be prejudicial to the Company in liquidation as in that case, there is every possibility of the evidence being lost and proceedings getting abated. There is also possibility that the accused may not be alive or even the witnesses may not be available to give evidence. He has, therefore, submitted that the present applications be rejected. 20. Since the arguments canvassed by Mr. Soparkar are based on the affidavit-in-reply filed on behalf of respondent No. 2 on 29.07.2005, Mr. A.C. Gandhi, learned advocate appearing for the applicants has objected to filing of the affidavit-in-reply. The present applicant has, therefore, filed affidavit-in-rejoinder to the said reply. 21. Mr. A.C. Gandhi has submitted in rejoinder that the reply filed by the respondent No. 2 cannot be considered by this Court as it is being filed at a very late stage after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence, delay, if any, is not caused by the applicant and/or Officers of the applicant but the respondent No. 2 is trying to exercise the authority which he does not have in law. Mr. Gandhi has also denied the allegations made by the respondent No. 2 in his affidavit that the accused have misappropriated any amount. Mr. Gandhi has denied the contents of the affidavit that the Company Court does not have power or jurisdiction to stay criminal prosecution for offences committed before a Provisional Liquidator appointed and order for winding up was made. Lastly, Mr. Gandhi has submitted that the applicant is not praying for any stay of the criminal proceedings but is only praying for transfer of the said proceedings to this Court with a view to see that the same are expeditiously and judicially decided. 22. Pursuant to the notice issued by this Court on 27.06.2005 on Opponent Nos. 3 to 6, Mr. K.M. Modh, learned advocate appeared for Opponent Nos. 3 to 6 and adopted all the arguments canvassed on behalf of the applicant Company. He has also submitted that Opponent Nos. 3 to 6 have no objection if all the criminal complaints which are pending before the Metropolitan Magistrate, Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual capacity, but in the capacity of such Director or Officer, on winding up order being passed by the Court, the Official Liquidator enters in the shoe of such Director or Officer and he only can prosecute the said complaint. It is the duty of such Director or Officer who has filed the complaint on behalf of the Company to point out to the Court that now the winding up order is passed and he ceased to be the Director or Officer of the Company and he is no more authorised to represent the Company. Instead of adopting this course of action, the application moved by the present applicant was strongly opposed and based on such opposition, the learned Magistrate has rejected the application and refused to issue notice on the Official Liquidator. It is nothing but the travesty of justice and an obvious violation of the statutory provision. The Court, therefore, finds much force in the arguments of Mr. Gandhi and grants the prayer made in the present application to transfer all the four criminal complaints from the Court of learned Magistrate to this Court. 24. There is one more reason to get these complaints transferred to this Court. It prima facie appears to the Court that the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the same should be further continued. While taking this decision, the Court takes into consideration the historical evolution of Section 446 of the Act, which is succinctly traced by the Hon'ble Supreme Court in the case of Suddarshan Chits (I) Ltd. v. O. Sukumaran Pillai, (1985) 58 Company Cases 633, wherein it is held that to save the Company which is ordered to be wound up from this profitless and expensive litigation and to accelerate the disposal of winding up proceedings, the parliament devised a cheap and summary remedy by conferring jurisdiction on the Court winding up the Company to entertain petitions in respect of claims for and against the Company. This was the object behind enacting Section 446(2) and, therefore, it must receive such construction at the hands of the Court as would advance the object and at any rate not thwart it. 26. The proceedings enumerated in the affidavit-in-reply filed by the respondent No. 2 and heavily emphasised by Mr. Soparkar, were all prior to the date of winding up order. After the winding up order, the whole scenario or complexion of the proceedings is changed. It is not open for the respondent No. 2 the Ex-Chairman to cham ..... X X X X Extracts X X X X X X X X Extracts X X X X
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