Case Law Details
Nizar Noorali Rangara Vs State of Maharashtra (Bombay High Court)
Conclusion: An order of winding-up which automatically came into force upon a default in compliance with the consent terms executed on behalf of the company, and its directors could not be placed on the same pedestal as an order passed on merits, especially in a case like the one at hand where it appeared to be in the nature of a device to obviate the liability at that moment. Therefore, the court dismissed the application for quashing of the complaints under section 138 read with 141 of the NI Act.
Held: In the facts of the case, the applicants were directors of M/s. R Private Limited (M/s. R) which was in liquidation. M/s. R owed a certain liability towards M/s. S Private Limited (M/s. Surajbhan). Alleging that M/s. R could not repay the debt, M/s. S filed a Company Petition for winding up of M/s. R. M/s. R and M/s. S entered into a settlement which included a schedule for payment in monthly instalments. The parties agreed that the Company Petition would stand allowed in case of default in payment. M/s. R defaulted in payments according to the settlement. M/s. S deposited the cheques given by M/s. R which were dishonoured. M/s. S lodged five complaints under section 138 read with 141 of the NI Act. The applicants approached the High Court under section 482 of Cr.P.C. praying for quashing of the complaints. It was held that indoubtedly the consent terms provided for the consequence of the winding up petition being allowed in the event of any default. But that stipulation appeared to be in the nature of a dyke against the default. In such a situation, to accede to the submission on behalf of the applicants, would amount to playing into the hands of a party who succeeded in avoiding the liability under the original proceedings as well as the one incurred under the consent terms. a distinction was 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 was invited, by executing consent terms. It was trite, an order of winding-up on merits manifested a judicial exercise upon recording a satisfaction that having regard to the interest of the creditors or contributors or both, winding-up was imperative. An order of winding-up which automatically came into force upon a default in compliance with the consent terms executed on behalf of the company, and its directors could not be placed on the same pedestal as an order passed on merits, especially in a case like the one at hand where it appeared to be in the nature of a device to obviate the liability at that moment. The court noted that the trial has commenced and two of the complaints were at the stage of recording the cross examination of the complainant’s witnesses. The court dismissed the applications on account of the facts of the case and the advanced stage of the trial.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule. Rule made returnable forthwith and, with the consent of the counsels for the parties, heard finally.
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