Case Note & Summary
The petitioner, M/s Rajesh Exports Limited, filed a writ petition under Articles 226 and 227 of the Constitution read with Section 482 Cr.P.C., challenging the order dated 11-11-2014 passed by the XXVIII Additional Chief Metropolitan Magistrate, Bengaluru, in C.C.No.19781/2007. The criminal case was registered under Sections 138, 141, and 142 of the Negotiable Instruments Act, 1881 against the respondent, Mr. K.V. Kishore, the ex-Managing Director of M/s Jewels De Paragon Private Limited, in relation to a dishonoured cheque of Rs. 3,00,00,000/- issued in his personal capacity. After the company was ordered to be wound up by the High Court in Company Petition No.221/2013 on 07-08-2014, the respondent filed a memo seeking stay of the criminal proceedings under Section 446 of the Companies Act, 1956. The trial court stayed the proceedings on 11-11-2014. Four years later, on 07-07-2018, the trial court recalled the stay order, prompting the respondent to file two writ petitions. In W.P.No.33761/2018, a coordinate bench set aside the recall order and restored the stay, holding that Section 446 mandated such stay. In W.P.No.33760/2018, another coordinate bench allowed the petition, restored the stay, but reserved liberty to the petitioner to challenge the original stay order of 2014. Exercising that liberty, the petitioner filed the present petition. The petitioner contended that Section 446 could not be invoked to stay the criminal proceedings against a director in his personal capacity, and sought directions for expeditious disposal. The respondent argued that the stay was correctly applied and that the petition was barred by gross delay. The court examined the legal position under Section 446 of the Companies Act, 1956 and the scope of proceedings under Section 141 of the Negotiable Instruments Act. It noted that while the complaint was against the director personally and not the company, the coordinate bench had already interpreted Section 446 to require stay of such proceedings, and that order had attained finality. The court declined to reopen the issue, citing the binding nature of the coordinate bench's decision. On the question of delay, the court held that the challenge was timely since liberty was granted only on 19-03-2024 and the petition was filed on 29-05-2024. Ultimately, the petition was dismissed. However, considering the long pendency since 2007 and the advanced age of the accused, the court directed the trial court to dispose of C.C.No.19781/2007 expeditiously, within six months from the date of receipt of the order. Liberty was also granted to the petitioner to seek leave of the company court for continuation of proceedings, if required.
Headnote
A) Negotiable Instruments Act, 1881 - Dishonour of Cheque - Vicarious Liability of Director - Section 141, Negotiable Instruments Act, 1881 - The complaint was filed against the ex-Managing Director in his personal capacity for a cheque issued by him, not by the company. The court noted that proceedings against the director under Section 141 could continue even after winding up of the company, subject to any necessary leave of the company court. (Paras 14-15) B) Companies Act, 1956 - Winding Up - Stay of Legal Proceedings - Section 446, Companies Act, 1956 - Section 446 provides for an automatic stay of all suits and proceedings against the company upon winding up, except with leave of the company court. A coordinate bench had already interpreted this provision to stay the criminal proceedings and that order attained finality, thus the court declined to disturb the stay. (Paras 9-10, 12) C) Criminal Procedure - Expeditious Disposal - Delay in Trial - While dismissing the petition, the court directed the trial court to dispose of the long-pending criminal case within six months from the date of receipt of the order, considering the age of the accused and the pendency since 2007. (Para 16) D) Limitation and Delay - Challenge to Stay Order - The petitioner challenged the stay order of 2014 only in 2024, after liberty was granted by a coordinate bench on 19-03-2024. The court held there was no delay as the petition was filed shortly after liberty was reserved, and the matter was entertained on merits. (Para 12) E) Res Judicata/Precedent - Binding Effect of Coordinate Bench Decision - The court held that the stay order dated 11-11-2014, having been restored and upheld by a coordinate bench in W.P.No.33761/2018, could not be circumvented, and the matter stood concluded. The only course open was to seek leave from the company court. (Paras 8, 11)
Issue of Consideration
Whether the trial court could stay proceedings under Section 138 of the Negotiable Instruments Act, 1881 pursuant to the winding up of the accused's company under Section 446 of the Companies Act, 1956, and whether the petitioner was entitled to challenge the stay order after ten years.
Final Decision
The petition was dismissed. The stay order dated 11-11-2014 was upheld. The trial court was directed to dispose of C.C.No.19781/2007 expeditiously within six months from the date of receipt of this order. Liberty was granted to the petitioner to seek leave of the company court for continuation of proceedings, if required.
Law Points
- Section 446 Companies Act 1956 stay of proceedings automatic upon winding up
- proceedings against director in personal capacity not automatically stayed but leave of company court may be required
- coordinate bench order binding
- delay in challenging stay order condoned when liberty granted by court
- expeditious disposal directed for long-pending criminal case
