Research › Search › Judgment

Delhi High Court · body

2000 DIGILAW 757 (DEL)

STEPHEN ARANHA v. JINDAL LEASEFIN LIMITED

2000-09-04

body2000
M. S. A. SIDDIQUI ( 1 ) THE common question that arises in these petitions filed under Section 482cr. P. C. , is whether a company and its directors can be proceeded against for havingcommitted an offence under Section 138 of the Negotiable Instruments Act (for shom the Act ) after the expiry of the period of payment of the cheque amount beforepassing of the order of winding up under Section 433 (e) and (f) of the Companiesact. Since the relevant facts involved in all the cases are similar and a commonquestion of law arises in all the cases, they were heard together and they are beingdisposed of by this order. ( 2 ) THE factual score depict that post-dated cheques were issued on behalf of thecompany in favour of the complainant in the course of the business of the company. When the cheques were presented for encashment, they were dishonoured by thedrawee bank. The complainant issued notice to the company calling upon it to paythe amount. As the company failed to pay the amount, a complaint was filed beforethe Metropolitan Magistrate against the company and its directors for the offenceunder Section 138 of the Act. The Magistrate who took cognizance of the offenceissued process to all the accused. Aggrieved thereby, the petitioners have filedseparate petitions under Section 482 Cr. P. C. seeking quashing of the complaint/proceedings in the criminal case mainly on the ground that in view of the provisions ofsections 441 (2) and 536 (2) of the Companies Act, the criminal case institutedagainst them for commission of the alleged offence under Section 138 of the Act ismisconceived and compelling the accused to face ordeal of a trial in the case willamount to abuse of the process of court. ( 3 ) LEARNED counsel for the petitioners contended that on the company beingwound up by the order of the Company Court, no steps could be taken by thecomplainant for realisation of the amounts said to be due to it and, therefore, thecriminal proceedings initiated against the drawer company and its directors ismisconceived and should be quashed. He submitted that the expression "in the caseof a winding up by the Court" employed in Section 536 (2) of the Companies Act doesnot mean that the said, Section is to come into force only after a winding up order ispassed. He submitted that the expression "in the caseof a winding up by the Court" employed in Section 536 (2) of the Companies Act doesnot mean that the said, Section is to come into force only after a winding up order ispassed. According to him, the said expression must be read in the light of Section441 (2) and, therefore, once a petition for winding up is filed, Section 536 (2) comesinto operation and there can be no transfer or disposition of properties. He submittedthat even if any transfer takes place, such transfer would be void. He further submittedthat in such a situation the company and its directors would be entitled not to makepayment because if such payment is made it would be void. He submitted that thecourt cannot force a company or its directors to make a void payment or do something,which is not sanctioned or permitted by law. He further submitted that on 12/08/1999, an order of winding up was passed by the Company Court and an officialliquidator was appointed, which bars the company and its directors from making anypayment. According to him, the said bar would operate retrospectively by virtue ofsection 441 but the bar would come into existence only on the order of winding upbeing passed or a provisional liquidator being appointed. He submitted that the saidlegal disability prevented the company and its directors from making payment. Hesubmitted that the offence under Section 138 of the Act is deemed to have beencommitted only if the drawer of the cheque fails to make payment of the money to theholder in due course within 15 days of the receipt of the notice as stipulated insection 138 of the Act. If before the period of 15 days is over, any circumstanceintervenes which makes it impossible to make payment, then there can be no failureto make payment within the meaning of Section 138 of the Act. ( 4 ) ON the other hand, learned counsel appearing for the respondents submittedthat under Section 138 of the Act the offence is deemed to be committed ondishonour and non-payment of the amount covered by the cheque within 15 days ofreceipt of notice of demand and a subsequent order of winding up, even though itrelates back, would have no effect on the offence which is already deemed to becommitted. ( 5 ) IT is significant to mention that the winding up order dated 12. 8. ( 5 ) IT is significant to mention that the winding up order dated 12. 8. 1999 passed bythe Company Court shows that the winding up petition was admitted on 11. 6. 1998. The offending cheques were issued on 26. 2. 199. 8. Thus, till the end of the period of15 days there has been no order of winding up. That being so, the question forconsideration is whether merely by reason of a winding up petition being presentedthere was a bar or legal disability in making payment by the company and itsdirectors. In Pankaj Mehra and Anr. Vs. State of Maharashtra and Ors. , JT 2000 (2)SC 113, similar question was raised before the Supreme Court. After analysing thescope and ambit of Sections 441 (2) and 536 (2) of the Companies Act and Sections138/141 of the Act, their Lordships of the Supreme Court have held that a companyand its directors cannot escape from penal liability under Section 138 of the Act onthe premise that a petition for winding up of the company has been presented andwas pending during the relevant time. Their Lordships have also held that issuance ofa cheque does not amount to disposition of property. Their Lordships have furtherheld that "it is difficult to lay down that all disposition of property made by a companyduring the interregnum between the presentation of a petition for winding up and thepassing of the order for winding upwould benull and void. " If the payment is not abinitio void the company cannot contend that it is legally forbidden from makingpayment of the cheque amount when the notice was issued by the payee regardingdishonour of the cheque. In this context, I may usefully excerpt the following passagesof the judgment: "if the payment is not ab initio void the company cannot contend that it islegally forbidden from making payment of the cheque amount when noticewas issued by the payee regarding dishonour of the cheque. To circumventthis -hurdle an endeavour was made by some of the appellants counsel toshow that the very issuance of a cheque would amount to disposition ofproperty. We are unable to accept the said contention particularly in view ofthe definition of "cheque" in the Nl Act. "a Cheque is a bill of exchange drawnon a specified banker and not expressed to be payable otherwise than ondemand. " "bill. We are unable to accept the said contention particularly in view ofthe definition of "cheque" in the Nl Act. "a Cheque is a bill of exchange drawnon a specified banker and not expressed to be payable otherwise than ondemand. " "bill. of exchange is "an instrument in writing containing an unconditionalorder, signed by the maker, directing certain person to pay a certain sum ofmoney only to, or to the order of a certain person or to the bearer of theinstrument". The cheque, therefore, can be an order on the banker to paythe amount to the holder thereof and no disposition of property would takeplace until the payment is made by the banker pursuant thereto. At the most,drawing of a cheque can be considered as a step towards disposition ofproperty, but that is insufficient to amount disposition of property". "there is no provision in the Companies Act which prohibits enforcement ofthe debt due from a company. When a company goes into liquidation,enforcement of debt due from the company is only made subject to theconditions prescribed therein. But that does not mean that the debt hasbecome unenforceable altogether. Perhaps due to want of sufficient assetsfor the company the realisation of a debt would be difficult. But that is nopremise to hold that the debt is legally unenforceable. Enforceability of a debtis not to be tested on the touchstone of the modality or the procedureprovided for its realisation or recovery. Hence the contention that the specialprovision incorporated in the Companies Act regarding the debts and liabilitiesdue from the company will render the debt unenforceable, cannot be accepted. " ( 6 ) IT is relevant to mention that Section 536 (2) of the Companies Act does not laydown any bar or prohibition preventing the company from making payments or evendisposing of the property. Since there is no prohibition from making payments, therewould be a failure under Section 138 of the Act if the company or its directors do notmake payment only on the ground that a petition for winding up has been presented. That being so, a subsequent order by the Company Court appointing a provisionalliquidator or winding up the company does not affect a criminal case for an offenceunder Section 138 of the Act once the offence is deemed to be committed prior tosuch order being passed. That being so, a subsequent order by the Company Court appointing a provisionalliquidator or winding up the company does not affect a criminal case for an offenceunder Section 138 of the Act once the offence is deemed to be committed prior tosuch order being passed. It has to be borne in mind that under Section 138 of the Actthe deemed commission of offence is not by virtue of any disposition of property orpayment but by virtue of non-payment of the amount covered by the cheque within theperiod of 15 days after receipt of the notice of the demand. Thus, in my opinion, thepresent case is squarely covered by the decision of the Supreme Court in Pankajmehra and Anr. Vs. State of Maharashtra and Ors. (Supra ). ( 7 ) LASTLY, it is submitted by learned counsel for the petitioners that the petitionershad resigned as directors of the company much before issuance of the offendingcheques and so they cannot be proceeded against for having committed the offenceunder Section 138 of the Act. This being the disputed question of fact cannot bedecided by this Court in exercise of the inherent power under Section 482 Cr. P. C. ( 8 ) FOR the foregoing reasons, I am of the opinion that the impugned order dated24. 6. 1999 passed by the Metropolitan Magistrate does not suffer from any legalinfirmity warranting interference of this Court under Section 482 Criminal Procedure Code Accordingly,the petitions are dismissed.