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TMI Blog2022 (8) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... o the submission on behalf of the applicants, would amount to playing into the hands of a party who succeeds in avoiding the liability under the original proceedings as well as the one incurred under the consent terms. In a case of this nature, a distinction is necessarily required to be made between a winding up order passed after weighing of all the options, especially after recording satisfaction under sub section (2) of section 440 of the Companies Act, 1956 and an order of winding-up, which is invited, by executing consent terms. It is trite, an order of winding-up on merits manifests a judicial exercise upon recording a satisfaction that having regard to the interest of the creditors or contributors or both, winding-up is imperative. In all the complaints, the process was issued in the year 2016-17. Trial has commenced. Two of the complaints are at the stage of recording the cross examination of the complainant s witnesses. At this juncture and in the light of the facts which have emerged, inherent jurisdiction to indict the complaints need not be exercised - application dismissed. - CRIMINAL APPLICATION NO.589 OF 2019 WITH CRIMINAL APPLICATION NO.590 OF 2019 WITH CR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred order dated 30th January, 2015 was set aside and the Company Petition came to be disposed. d] Under the consent terms it was, inter alia, agreed that M/s. Rangara would pay to M/s. Surajbhan a sum of Rs. 4,50,00,000/- towards full and final settlement of the claim of M/s. Surajbhan and its sister concern M/s. Shree Durga Iron Steel Co. Ltd. A schedule of payment was agreed by and between the parties. After initial payment of 60 lakhs in two installments, the balance sum of Rs. 3,90,00,000/- was agreed to be paid in 30 monthly installments of Rs. 13 lakhs during the period from 15th June, 2015 to 15th November, 2017. Upon payment, the consent terms provided for withdrawal of prosecution and giving consent for allowing the appeal preferred by M/s. Rangara. In case of default in payment, the parties agreed, that the Company Petition would stands allowed in terms of prayer clause (a) and (b). e] Asserting that M/s. Rangara committed default in payment of the amount in accordance with the consent terms and thus the complainant M/s. Surajbhan was constrained to deposit the cheques, and consequent to the dishonour of the cheques M/s. Rangara failed to comply with the dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016, the applicants assert that the entire exercise commencing from the presentment of the cheques to the lodging of the complaint was mala fide. Thus, the learned Magistrate committed a grave error in ordering issue of process against the accused. Hence, these applications. 6. The applications are resisted by respondent No.3/ complainant. 7. I have heard Mr. Ramprakash Pandey, learned counsel for the applicants, Ms. Anamika Malhotra, learned APP for the State /Respondent No.1 and Mr. Jatin Shah, learned counsel for respondent No. 3 at some length. The learned counsels took the Court through the pleadings and the record of the previous proceedings between the parties. 8. Mr. Pandey, learned counsel for the applicants would urge that the complainant in spite of having been fully aware of the fact that with the default in compliance with the consent terms, M/s. Rangara stood wound up automatically, pursuant to the order dated 27th February, 2017, could not have presented the cheques for encashment. A strenuous effort was made by Mr. Pandey to draw home the point that once a company is wound up, a prosecution for offence punishable under section 138 of the Act, 1881 against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany Judge was persuaded to recall the order dated 30th January, 2015 and dispose of the Company Petition in accordance with the consent terms. It may be expedient to extract the relevant clauses of the consent terms which bear upon the controversy at hand. 12. Paragraph Nos. 2 to 4 of the consent terms, read as under:- 2] The respondent have confirmed and admitted the claim of the petitioner. The respondent have expressed their inability to repay the entire outstanding dues along with interest till date and has agreed to settle their dues by paying Rs. 4,50,00,000/- towards full and final settlement (hereinafter settlement amount ). 3] The respondent shall pay to the petitioner a sum of Rs. 4,50,00,000/- towards full and final settlement of all claims of the petitioner and their sister concerns M/s. Shree Durga Iron Steel Co. Ltd. against the respondent as per the following schedule of payment. a) The respondent shall pay a sum of Rs. 30,00,000/- by cheque bearing No. 089441 dated 05.04.2015 drawn on ICICI Bank Limited, Bhat Bazaar Branch, in favour of petitioner. b) The respondent shall pay a sum of Rs. 30,00,000/- by cheque bearing No. 089442 dated 05.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or respondent No. 3 joined the issue by canvassing a submission that none of the aforesaid submission is worthy of acceptance. Neither is it the requirement of law that while instituting a complaint for the offence punishable under section 138 of the Act, 1881, where it is alleged that the company has committed an offence, leave of the Company Court under section 446 of the Companies Act, 1956 is necessary. Nor the company and its directors are absolved of the liability in respect of the cheques which were drawn in discharge of legally enforceable debt incurred before the company stood wound up. 16. Mr. Shah, would further urge that the stage of the proceedings before the trial Court cannot be lost sight of. Plea of the accused has been recorded. Evidence of the complainant has also been recorded. The applicants had, in fact, sought recall of the complainant s witnesses for cross examination and, at that stage, the applicants have moved these applications which are nothing but abuse of the process of the Court. The element of delay and latches, in the circumstances, also becomes relevant and on that count alone the applications deserve to be dismissed summarily, urged Mr. Shah. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Land and Mills Co. Ltd. (In Liqn.) vs. V.M. Deshpande, Income Tax Officer, Companies Circle I (8), Bombay and Another AIR 1972 SC 878., and Division Bench judgment of this Court in the case of Orkay Industries Limited and Ors. vs. State of Maharashtra and Others 1998 (2) Mh.L.J. 910., concurred with the view recorded in the case of Firth (India) (supra) and answered the reference as under:- The expression suit or other proceedings in section 446(1) under Chapter II of Part VII of Companies Act, 1956, does not include criminal complaints filed under section 138 of the Negotiable Instruments Act, 1881 . 24. The observations in paragraph Nos. 29 and 30 are material and hence extracted below:- 29. Learned counsel for the Petitioner in this case has also relied upon the decision of Orkay Industries Limited Ors. Vs. State of Maharashtra Ors., 1998 (2) Mh.L.J. 910. The Division Bench of this Court, while dealing with the application of Section 446(1) of the Companies Act to proceeding under Section 138 of N.I. Act, has observed that, what was directly in issue in the case filed under Section 138 of the N.I. Act was the Company being liable for prosecution on dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 19th December, 2015 with the remarks account blocked . The statutory notice was addressed on 8th January, 2016. In Complaint No.1629/SS/2016 the cheques were returned unencashed on 19th March, 2016 and demand notice was issued on 7th February, 2016. In Complaint No.5872/SS/2016 the cheques were returned unencahsed on 7th July, 2016, followed by a demand notice dated 12th July, 2016. In Complaint No. 893/SS/2017 the cheques were returned unencashed on 17th January, 2017 and the demand notice was issued on 20th January, 2017. In Complaint No. 897/SS/2017 the cheques were dishonoured on 14th October, 2016 and the demand notice was issued on 27th October, 2017. 28. As indicated above, on 13th May, 2016 the Official Liquidator gave notice of having entered into liquidation. Evidently in two of the complaints i.e. Complaint No. 645/SS/2016 and Complaint No.1629/SS/2016 the cheques were presented and dishonoured and the demand notices were issued before the Official Liquidator gave notice dated 13th May, 2016. The cheques, in rest of the complaints, appear to have been presented after the said notice by the Official Liquidator. 29. With the aforesaid clarity on facts, the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court considered the said question in the context of the undisputed facts therein that as on the date of presentment and filing of complaint the company was in liquidation and held that : 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. 34. Holding thus, the Delhi High Court concluded that a complaint under section 138 of the Act cannot be filed as on the date of presentation of the cheque the company was in liquidation and cannot be stated to have committed any offence. 35. Mr. Pandey also placed reliance on two judgments of this Court. First, in the case of NRC Limited and Others vs. Fuel Corporation of India and Others 2019 SCC OnLine Bom 1222., and, second Rajeev Raj Kumar vs. State of Maharashtra 2018 SCC OnLine Bom 2352. 36. The judgment in the case of NRC Limited (supra) turned on its peculiar facts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a direction is necessary in the interest of the sick industrial company or its creditors or shareholders or in the public interest. In a case in which the BIFR has submitted its report declaring a company as 'sick' and has also issued a direction under section 22-A restraining the company or its directors not to dispose of any of its assets except with consent of the Board then the contention raised on behalf of the appellants that a criminal case for the alleged offence under section 138 NI Act cannot be instituted during the period in which the restraint order passed by the BIFR remains operative cannot be rejected outright. Whether the contention can be accepted or not will depend on the facts and circumstances of the case. Take for instance, before the date on which the cheque was drawn or before expiry of the statutory period of 15 days after notice, a restraint order of the BIFR under Section 22-A was passed against the company then it cannot be said that the offence under section 138 NI Act was completed. In such a case it may reasonably be said that the dishonouring of the cheque by the bank and failure to make payment of the amount by the company and/or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, make payments of salary to the staff and other employees and meet urgent contingencies. An interpretation which could lead to such a catastrophic situation should be averted. That apart, if any such view is adopted, a fraudulent company can deceive any bona fide person transacting business with the company by stage managing a petition to be presented for winding up in order to defeat such bona fide customers. This consequence has been correctly voiced by the Division Bench in the impugned judgment. 21] If the payment is not ab initio void the company cannot contend that it is legally forbidden from making payment of the cheque amount when notice was issued by the payee regarding dishonour of the cheque. To circumvent this hurdle an endeavour was made by some of the appellants' counsel to show that the very issuance of a cheque would amount to disposition of property. We are unable to accept the said contention particularly in view of the definition of cheque in the NI Act. A Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. 43. The Supreme Court further postulated that the special provisions co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the drawer. An illustrative case is, if the drawer is not a company but individual who has become so pauper or so sick as he cannot raise the money to pay the demanded sum. Can he contend that since failure to make payment was on account of such conditions he is entitled to be acquitted? The answer cannot be in the affirmative though the aforesaid conditions can be put forth while considering the question of sentence. 29] We therefore feel that legislature has thoughtfully used the word fails instead of other expressions as failure can be due to variety of reasons including his disability to pay. But the offence would be complete when the drawer fails to make payment within the stipulated time, whatever be the cause for such failure. 30] The drawer of the cheque can have different explanations for the failure to pay the amount covered by the cheque. But no such explanations would be sufficient to extricate him from the tentacles of the offence contemplated in the Section. Perhaps same kind of explanations would be sufficient to alleviate the rigor of the offence which may be useful to mitigate the quantum of sentence to be imposed. But that is no ground for considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction is necessarily required to be made between a winding up order passed after weighing of all the options, especially after recording satisfaction under sub section (2) of section 440 of the Companies Act, 1956 and an order of winding-up, which is invited, by executing consent terms. It is trite, an order of winding-up on merits manifests a judicial exercise upon recording a satisfaction that having regard to the interest of the creditors or contributors or both, winding-up is imperative. An order of winding-up which automatically comes into force upon a default in compliance with the consent terms executed on behalf of the company, and its directors cannot be placed on the same pedestal as an order passed on merits, especially in a case like the one at hand where it appears to be in the nature of a device to obviate the liability at that moment. 48. At this juncture, the submission on behalf of respondent No. 3 that the conduct of the applicants deserves to be taken into account, also merits consideration. Attention of the court was invited to Application No. 1155 of 2016 filed by the applicants on 21st September, 2015 on behalf of M/s. Rangara, even after the Official ..... X X X X Extracts X X X X X X X X Extracts X X X X
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