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02 June 2016

Action under Negotiable Instruments Act when not affected by winding up process

The Division Bench of the Bombay High Court on 6-5-2016 has held that 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. Submission that in view of Section 446(1), the complaint under the Negotiable Instruments Act cannot be proceeded with till such time the Petitioner secures leave from the High Court as Respondent-Company was ordered to be wound-up by the High Court, was hence rejected by the Court. 
 
The Court in the case of  Indorama Synthetics (I) Limited v. State of Maharashtra also noted that no civil liability or any liability against the assets of the drawer of the cheque is contemplated under Section 138 of the Negotiable Instrument Act. Section 446(1) provided that in case where winding up order has been made or where the Official Liquidator has been appointed, no suit or other proceedings shall commence. It was also provided that suits pending on date of winding-up order shall proceed only on leave of the Tribunal.
 
Relying on various precedents the Court was of the view that provisions of Section 446(1) of the Companies Act are to be invoked judiciously only when it has got any concern with either the winding-up proceedings or with the assets of the Company. It was held that the expression ‘suit or other proceedings’, as used in Section 446(1), has to be construed accordingly and not to be interpreted liberally and widely so as to include each and every proceeding initiated against the Company.