1.2010 G.P. Forest Development (India) Ltd & Anr. v. Sharda Rani

Mr. Gaurav Mohunta, Advocate for the petitioners. ..... S.S. Saron, J. This order will dispose of the above said four petitions filed by M/s G.P. Forest Development (India) Limited and another against Smt. Sharda Rani, Parvesh Kumar, Kavita Rani and Parveen Kumar respectively. In the said four petitions, the respondents had filed complaints under Section 138 of the Negotiable Instruments Act, 1881 (`NI Act' – for short) against the petitioner-Company as the cheques that had been issued in favour of the respondents on presentation to their Bank were dishonoured. The respondents in the respective petitions had invested their money with the petitioner-Company by depositing the amounts in certain Schemes floated by it. They were assured that the money that had been invested would fetch them handsome amounts in return. The cheques that were issued by the petitioners for the refund of the amount were dishonoured which resulted in filing of the impugned complaints. Learned counsel for the petitioners has contended that, in fact, the petitioner-Company in terms of order dated 16.5.2003 have been ordered to be wound-up by this Court and an Official Liquidator attached to this Court has been appointed. Therefore, in terms of Section 446 (1) of the Companies Act when a winding-up order has been passed or an Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceedings shall be commenced or if pending on the date of winding up order, shall be proceeded with, against the company except by leave of the Court and subject to such terms as the Court may impose. Therefore, it Cr. Misc. Nos.M-34002 of 2009 etc. [3] is submitted that other legal proceedings including the complaints under Section 138 of the NI Act are not maintainable and the complaints as have been filed are liable to be dismissed. In support of his contention, learned counsel for the petitioners cites M/s Shalimar Forests India Ltd. and others v. Mani Kapoor, Criminal Misc. No.M-1561 of 2009, decided on 13.8.2009 (P&H) and also M.L. Gupta and another v. Ceat Financial Services Ltd., (2008) 145 Company Cases 837 (Delhi). I have given my thoughtful consideration to the contentions of the learned counsel for the petitioners. It may be noticed that the case of the petitioners is that criminal prosecution in pursuance of the impugned complaints under Section 138 of the NI Act would not be maintainable against the petitioner-Company in view of the order dated 16.5.2003 passed by this Court whereby the winding-up of the petitioner-Company had been ordered and an Official Liquidator attached with this Court has been appointed. Therefore, in view of Section 446(1) of the Companies Act when a winding up order has been passed or an Official Liquidator has been appointed as provisional Liquidator, no suit or other legal proceedings are to commence, or if pending on the date of the winding-up order, shall be proceeded with, against the Company except by leave of the Court. In order to appreciate the same, Section 446(1) of the Companies Act, may be noticed which reads as under:- “S. 446. Suits stayed on winding up order:- (1) when a winding up order has been made or the Official Liquidator has Cr. Misc. Nos.M-34002 of 2009 etc. [4] been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of winding up order, shall be proceeded with, against the company except by leave of the Court and subject to such terms as the Court may impose.” .....(Emphasis added) The case of the learned counsel for the petitioners is that no suit or other legal proceeding would be maintainable once an order of winding up of the Company has been passed and the expression “other legal proceeding” in Section 446(1) of the Companies Act would include proceeding under Section 138 of the NI Act. It may be noticed that the expression `suit and other legal proceedings' are not to be read in isolation and the rule of ejusdem generis would apply. In Black's Law Dictionary Sixth Edition it is stated that the ejusdem generis rule is, that where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same general kind or class as those specifically mentioned. The rule envisages that where the general words would be construed as apply only to things of the same general clause as those enumerated. Therefore, the words; `other legal proceedings' which are preceded by the word; `suit' is to be construed as applying only to the things of the same general class. In G. Claridge and Company Ltd. v. Collector of Central Excise, Pune, (1991) 2 SCC 229, it was held that the general words to be construed in the restricted sense in which the analogous less general word is used. It was observed that when two or more words which are susceptible of analogous meaning Cr. Misc. Nos.M-34002 of 2009 etc. [5] are coupled together they are understood to be used in their cognate sense. It is based on the principle that words take as it were their colour from each other, that is, the more general is restricted to a sense analogous to less general. Therefore, the use of the expression “other legal proceeding” in Section 446(1) of the Companies Act would not mean every and any kind of legal proceedings including that under Section 138 of the NI Act. The expression `other legal proceedings' are restricted to the suits which are of civil nature. In Jose Antony Kokkad v. Official Liquidator, High Court of Kerala, Kochi and another, 1998 Cr. L.J. 4095 it was held that the provisions of Section 446 of the Companies Act have no application to proceedings under Section 138 of the NI Act. The provisions of Section 446 of the Companies Act are intended to safeguard the assets of the Company under liquidation against wasteful and expensive litigation with regard to matters which can be decided expeditiously and cheaply in the winding up proceedings itself. It is the object of Section 446 to preserve the assets of the Company in liquidation which are in the hands of the Official Liquidator appointed by the Court, so that the assets of the Company can be distributed in an equitable manner to the creditors and members of the Company. Section 138 of the NI Act, it was observed, is enacted in order to safeguard the credibility of commercial transactions and to prevent bouncing of cheques by providing a personal criminal liability against the drawer of the cheque in public interest. No civil liability or any liability against the assets of the drawer of the cheque is contemplated under Section 138 of the NI Act. Besides, Section 138 it was observed has overriding Cr. Misc. Nos.M-34002 of 2009 etc. [6] effect against Section 446 of the Companies Act. In Kusum Ingots and Alloys Ltd. v. Pennar Peterson Securities Ltd. and others, (2000) 2 SCC 745, the question that arose for consideration was whether a Company and its Directors can be proceeded against for having committed an offence under Section 138 of the NI Act after the Company had been declared sick under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (`SICA' – for short) before the expiry of the period for payment of the cheque amount. It was considered whether a complaint would be maintainable in a case where a cheque drawn by a Company is dishonoured but before the offence under Section 138 of the NI Act is complete, the drawer-Company is declared sick by the Board of Industrial and Financial Reconstruction (`BIFR' – for short) under SICA. It was held that if the ingredients of Section 138 of the NI Act are satisfied thereafter Sections 22 or Section 25 of the SICA would not bar criminal proceedings against the company and its directors on a complaint made by the payee under the NI Act. However, where before drawal of the cheque by the Company or before expiry of notice period of 15 days prescribed under clause (b) of proviso to Section 138 NI Act, a direction not to dispose of assets is passed under Section 22-A by BIFR against the company, offence under Section 138 cannot be said to be complete and such criminal proceedings would not be maintainable. In the said case post-dated cheques were issued on behalf of the Company in favour of the complainant in the course of business of the Company. When the complainant presented the cheques in the Bank they were returned without payment. The complainant then issued a notice to the Company and/or its Directors stating the facts Cr. Misc. Nos.M-34002 of 2009 etc. [7] regarding dishonour of the cheques and demanding payments. Since no payment was made within the period of 15 days stipulated under the NI Act, the payee filed a complaint against the Company and/or its Directors alleging, inter alia, that they had committed an offence under Section 138 NI Act. However, before the cheques were presented in the Bank or after the Bank declined to honour the cheques the drawer Company was declared sick under the provisions of SICA by the BIFR. On receipt of summons from the Court in the criminal case registered on the basis of the complaint, the accused Company and/or its Directors filed petitions under Section 482 Cr.P.C. or under Article 227 of the Constitution seeking quashing of the complaint/proceedings in the criminal case mainly on the ground that in view of the provisions of Section 22 of SICA the criminal case instituted against them for commission of the alleged offence under Section 138 NI Act was misconceived and compelling the accused to face trial would amount to abuse of the process of the Court. The High Court had declined to interfere with the proceedings and dismissed the petition. The Supreme Court, however, held that if the ingredients of Section 138 of the NI Act are satisfied then the person who has drawn the cheque shall be deemed to have committed the offence. In the said case the ingredients of Section 138 NI Act were prima facie held to be established from the complaints and the documents filed with it. Therefore, it was held that no exception could be taken against the order of the Magistrate taking cognizance of the offence under Section 138 NI Act against the appellants therein. Section 22 of SICA, it was held, only deals with proceedings for recovery of money or for enforcement of any security or a guarantee in respect of any loans or Cr. Misc. Nos.M-34002 of 2009 etc. [8] advance granted to the company and proceedings for winding-up the Company. The section it was held does not refer to any criminal proceedings. The judgment in Kusum Ingots and Alloys Ltd. (supra) was considered by the Delhi High Court in M.L. Gupta and another v. Ceat Financial Services Ltd. (supra) cited by learned counsel for the petitioners. In the said case it was held that a complaint would not be maintainable when the cheque is presented after the company had already been ordered to be wound up. In the present case, the cheques in the four cases had been presented before the order of winding up had been passed by this Court on

16.5.2003. In Criminal Misc. No.M-34002 of 2009, the cheque for a sum of Rs.12,120/- drawn on Punjab and Sind Bank, Sector 22-B, Chandigarh was issued by the petitioner-Company in favour of Smt. Sharda Rani. The said cheque was presented on 27.10.2001 for collection and it was dishonoured vide memo dated 7.11.2001 for “insufficient funds”. The complainant Sharda Rani received intimation in this regard on 8.11.2001 and the complaint was filed on 7.1.2002. In Criminal Misc. No.M-35303 of 2009, the complainant Parvesh Kumar deposited a sum of Rs.3,500/- and Rs.5,000/- in fixed investment vide receipts No.4492 and 4453 receptively for a period of three years. A sum of Rs.10,000/- was deposited under the Money Showering Scheme under Table No.08A vide receipt No.3956 for a period of 3.5 years. Against the said schemes the petitioner-Company issued post-dated cheques dated 26.10.2000 for a sum of Rs.7,000/-, dated 19.10.2000 for a sum of Cr. Misc. Nos.M-34002 of 2009 etc. [9] Rs.10,000/- and dated 26.12.2000 for a sum of Rs.20,000/-. The amounts of the said cheques were the maturity amounts. The cheques were drawn on PNB, Mani Majra. The said cheques were presented for collection on

5.3.2001 which were dishonoured vide memo dated 10.3.2001 on account of insufficient funds. The complainant Parvesh Kumar received intimation regarding dishonour of the cheques on 16.3.2001 and the complaint was filed on 27.4.2001. In Criminal Misc. No.M-35746 of 2009, the complainant- Kavita Rani wife of Parvesh Kumar deposited a sum of Rs.7,000/- and Rs.5,000/- in the Money Showing Scheme under Table No.08 vide receipt No.4082 dated 23.7.1997 for a period of 3.5 years. Against the said scheme the petitioner-Company issued a post-dated cheque dated 22.1.2001 for a sum of Rs.14,140/-, as the maturity amount. The cheque was drawn on the Punjab National Bank, Mani Majra. The cheque was presented for encashment on 5.3.2001 and was dishonoured with the remarks “insufficient funds” vide memo dated 10.3.2001. The complainant received intimation regarding the dishonour of the cheque on 16.3.2001. A legal notice was sent to the petitioner-Company on 19.3.2001. Thereafter, the complaint was filed and the summoning order was passed on 23.11.2002. In Criminal Misc. No.M-35829 of 2009 the complainant- Parveen Kumar deposited Rs.14,000/- with the petitioner-Company in the Money Showering Scheme Table No.08 and 03A vide receipt No.4882 dated

9.1.1998 and Rs.15,000/- vide receipt No.4883 dated 9.1.1998 which were to mature on 8.7.2001. A sum of Rs.98,280/- and Rs.30,300/- was to be paid to the complainant-Parveen Kumar on maturity. The petitioner- Cr. Misc. Nos.M-34002 of 2009 etc. [10] Company issued post-dated cheques for a sum of Rs.28,200/- and Rs.33,300/- in favour of the complainant Parveen Kumar. The cheques in favour of Parveen Kumar for a sum of Rs.28,280 and Rs.30,300/- issued by the petitioner-Company were presented for encashment, which were dishonoured vide memo dated 7.11.2001 with the endorsement “insufficient funds”. The complainant received intimation in this regard on 8.11.2001. Legal notice was sent to the petitioner-Company on 27.11.2001. Thereafter, the complaint was filed on 7.1.2002 and the summoning order was passed on 23.11.2002. Therefore, in all the cases the presentation of cheques and taking of cognizance by the Court is before the order of winding up was passed by this Court on 16.5.2003. As such, the ratio of the judgment in M.L. Gupta v. Ceat Financial Services Ltd. (supra) would not apply. Insofar as the case of M/s Shalimar Forests India Ltd. and another v. Mani Kapoor (supra) is concerned the post-dated cheque in the said case bearing a date 12.4.2004 was issued for a sum of Rs.50,000/- by M/s Shalimar Forests India Limited. Said cheque on presentation for encahsment was dishonoured on 15.5.2004 and a demand notice dated

7.6.2004 was served on the petitioner on 10.6.2004. A complaint was filed in which summoning order dated 3.11.2004 was passed. This Court in view of the judgment in M.L. Gupta and another v. Ceat Financial Services Limited (supra) and Rattan Lal Garera and others v. State (NCT of Delhi ) and another, 2007 (1) RCR (Cr.) 636 (Delhi) held that a petition would not lie against the Company or its Directors after the order of winding-up of the Company is passed. The Company in the said case was ordered to be wound-up vide order dated 9.5.2002 whereas the summoning order was Cr. Misc. Nos.M-34002 of 2009 etc. [11] passed in the said case on 3.11.2004 i.e. after the order of winding-up. As such, the ratio in the said case would not apply to the facts of the present case where the order of winding-up has been passed after the cognizance had been taken by the Court in the criminal complaints filed by the respondents. In Rattan Lal Garera and others v. State (NCT of Delhi) and another (supra) the cheques were issued by the Company and thereafter winding-up order of the Company was passed and an Official Liquidator was appointed. The cheques were presented and dishonoured after the winding-up order in respect of the Company was passed and it was held that complaint under Section 138 of the NI Act against the Directors of the Company is not maintainable. The said case also relates to taking cognizance of the offence after an order of winding-up had been passed. In the facts and circumstances of the present case, it may be noticed that the plea of the petitioner-Company with regard to maintainability of the complaint in view of the bar created by Section 446 (1) of the Companies Act in respect of suits or other legal proceedings would not be tenable or applicable to criminal proceedings as the same relates to maintainability of the `suit' or `other legal proceedings' and the expression `other legal proceedings' is to be construed in the restricted sense in which the analogous general word is used to the word `suit'. Therefore, it is only civil proceedings in respect of suits to which the bar in terms of Section 446(1) of the Companies Act would apply. A complaint under Section 138 of the NI Act is not analogous to a `suit' or `other legal proceedings'. In any case, as has already been noticed, the criminal Court had already taken cognizance of the offences in all the four cases before the Cr. Misc. Nos.M-34002 of 2009 etc. [12] order of winding-up of the petitioner-Company had been passed by this Court on 16.5.2003. Therefore, as already discussed, the complaint would be maintainable. In the circumstances, there is no merit in these petitions and the same are accordingly dismissed. January 27, 2010. *hsp* (S.S. Saron) Judge