1998 Supreme(Bom) 332

IN THE HIGH COURT OF BOMBAY
S.N. Variava V.R. Datar, JJ.
Orkay Industries Limited others ..... Petitioners.
Versus
The State of Maharashtra others .... Respondents.
Criminal Writ Petition Nos. 173, 188, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 318, 320, 321, 322, 323, 324, 330, 331, 332, 333, 334, 335, 336, 337, 338, 349, 350, 351, 352, 353, 358, 359, 360, 361, 362, 363, 364, 370, 371, 372, 373, 374, 375, 376, 377, 378, 379, 380, 381, 382, 383, 384, 385, 386, 390, 391, 392, 393, 394, 396, 398, 410, 412, 429 and 430 of 1998, decided on 25/26-6-1998.
Advocates appeared :
V.R. Manohar with Prashant Naik with W.N. Yande with A.V. Doijode, for the petitioners in W.Ps. 173, 188, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 318, 320, 321, 322, 323, 324, 330, 331, 332, 333, 334, 335, 336,337, 338, 349, 350, 351, 352, 353, 358, 359, 360, 361, 362, 363, 364, 370, 371, 372, 373, 374, 375, 376, 377, 378, 379, 380, 381, 382, 383, 384, 385, 386, 391, 392, 393, 394, 412, 429 and 430.
G.P. Yadav, C.P. Grade II, for Official Liquidator in W.Ps. 173, 188, 294, 295, 296, 297, 298, 299, 300, 301, 302, 302, 304, 305, 306, 307, 308, 318, 353, 358, 359, 360, 361, 362, 363, 364, 390, 391, 392, 393, 394, 396, 398, 410 and 412.
R.Y. Mirza, A.P.P., for the respondent No. 1 in W.Ps. 173, 188 and 294.
Pravin Samdani with Gaurav Joshi S.N. Vimadalal, i/b/ M/s. Vimadalal Co., for respondent No.2 in W.Ps. 294 and 295.
S.R. Shinde, A.P.P., for respondent No. 1 in W.Ps. 295, 296, 297 and 298.
Mahesh Jethmalani with S.B. Jijina with Kocharekar, i/b/ M/s. Mulla Mulla C.B. C., for respondent No. 2 in W.P. 296.
J.D. Singh with Mrs. Vandana Jaisingh, for respondent No. 2 in W.Ps. 297, 298 and 299.
Smt. S.G. Joshi, A.P.P., for respondent No. 1 in W.Ps. 299, 300, 301 and 302.
Meher Gowala with Shrikant Bhat, for respondent No. 2 in W.Ps. 300, 301, 303 and 304.
Smt. P.H. Kantharia, A.P.P., for respondent No. 1 in W.Ps. 303, 304, 305 and 306.
M.P. Galeria, A.P.P., for respondent No. 1 in W.Ps. 307, 308, 318 and 320.
D.N. Salvi, A.P.P., for respondent No. 1 in W.Ps. 322, 323 and 324.
Ms. Usha V. Kejariwal, A.P.P., for respondent No. 1 in 330, 331, 332 and 333.
Naval A. Agarwal, i/b M/s. Apte Co., for respondent No. 2 in W.Ps. 330 , 331, 338, 377 and 381.
Miss A. R. Kamath, A.P.P., for respondent No. 1 in W.Ps. 334, 335, 336 and 337.
Pravin Singal, A.P.P., for respondent No. 1 in W.Ps. 338, 349, 350 and 351.
Ishwar J. Mankani, for respondent No. 2 in W.P. 349.
V.V. Kanabar, for respondent No. 2 in W. Ps. 350 and 351
S.G. Deshmukh A.P.P., for respondent No. 1 in W.Ps. 352, 353 and 358.
Vinay kumar Tiwari, i/b M/s. M.V. Kini Co., for respondent No. 2 in W.Ps. 352,353, 363 and 371.
Manoj Mohite with Vijay Tawde, for respondent No. 2 in W.P. 358.
N.P. Dalvi, A.P.P., for respondent No. 1 in W.Ps. 359, 360, 361 and 362.
S.H. Ahuja, for respondent No. 2 in W.Ps 360.
Miss Ruby Kerawala i/b M/s. Little Co., for respondent No. 2 in W.P. 361.
D.P. Adsule, A.P.P., for respondent No. 1 in W.Ps. 363, 364, 370 and 371.
R.L. Patil, A.P.P., for respondent No. 1 in W.P. 372 and 376.
I.S. Thakur, A.P.P., for respondent No. 1 in W.Ps. 373, 374, 375,
J.J. Bhat with A.K. Desai with M.B. Sabnis with G.S. Rao, i/b M/s. Purnanand Co., for respondent No. 2 in W.Ps. 373, 374, 375, 376, 378 and 379.
Smt. J.S. Pawar, A.P.P., for respondent No. 1 in .W. Ps. 377, 378 and 379.
R.S. Deshpande, A.P.P., for respondent No. 1 in W.Ps. 380, 381 and 382.
Girish S. Godbole, for respondent No. 2 in W.Ps. 382, 383, 384, 385 and 386.
D.S. Mahispurkar, A.P.P., for respondent No. 1 in W.Ps. 383, 384, 385 and 386.
R.P. Behere, A.P.P., for respondent No. 1 in W.Ps. 390, 391, 392 and 393.
Sanjay Udeshi, i/b Sanjay Udeshi Co., for respondent No. 2 in W.Ps. 392 and 396,.
Virendra Tulzapurkar with S.S. Parab, i/b M/s. Madehar Co., for respondent No. 2 in W.P. 393.
S.R. Borulkar, A.P.P., for respondent No. 1 in W.Ps. 394, 396 and 398.
R.Y. Mirza, A.P.P., for respondent No. 1 in W.P 410.
V.K. Jailramani, A.P.P., for respondent No. 1 in W. Ps. 412, 429 and 430.
Aspi Chinoy, i/b M/s. Mehta Girdharlal, for respondent No. 2 in W. Ps. 429 and 430.

Headnote:Section 138-Winding up of many-Proceeding withheld due to dishonour of cheque under Section 138 of N.I. Act-Absence of conflicting provisions-Non payment within 15 days-Offence made out-Offence cannot based upon the happenings of incident.-It must be seen that "failure to make payment" would be there only if, during the 15 days after receipt of notice, the company or its Directors thought themselves restrained by law from making payment. Neither of these companies have approached the Company Court for validation/sanction to make payments. This prima-facie indicates that there was no intention to make payment. Further both these companies, even after petitions for winding up have been presented, have made certain payments to certain creditors. It is thus obvious that whilst making those payments neither of the companies nor their Directors considered themselves as restrained by law from making payments. Not only that but Atash Industries (India) Limited and its Directors had given undertakings to the Magistrates in some of the proceedings under Section 138 of the Negotiable Instruments Act that they would make payments in instalments. This is at a time when, to their knowledge, company petitions were pending. Thus it is clear that, at the time when these undertakings were given and/ or payments made, neither the company nor its Directors thought that they were prohibited by law from making payment. The facts of these cases therefore show that the non payment within 15 days from the receipt of notice was not because the company or its Directors considered themselves to be under a legal disability to make payment. If that be so, then "failure to make payment" is factually not by reason of any provision of any law. The "failure to make payment" is factually because as stated above, either there was inability to payor lack of funds or for some other reasons best known to the Companies.

       It is clear that there was no payment within the period of 15 days after receipt of the notice. Therefore, there was a failure to make payment. Thus at the end of the period of 15 days, the offence is deemed to have been committed. The offence was therefore completed at that point of time. The Court was in agreement with the submission that a subsequent order appointing a Provisional Liquidator or winding up the company can have no bearing on the proceedings under Section 138 of the Negotiable Instruments Act once the offence is deemed committed prior to such an order being passed. If prior to the order of winding up or appointment Provisional Liquidator an offence has already been committed then the subsequent order cannot absolve the company or its Directors of the offence nor give rise to any defence in the proceedings under Section 138 of the Negotiable Instruments Act. To be remembered that the subsequent order would only relate back and affect dispositions of property or payments made. In proceedings under Section 138 of the Negotiable Instruments Act the deemed commission of offence is not by virtue of any disposition of property or payment but the by virtue of any non- payment. Thus once there is "failure to make payment" during the period of 15 days from receipt of notice, the subsequent order of winding up or appointment of Provisional Liquidator does not absolve the failure during the period of 15 days. For this reason Court dont accept the submission that the subsequent order appOL1ting the provisional liquidator and also that the certainty of an order of winding up being passed in case of Orkay Industries Limited absolves the offence which has already been committed much earlier.

       There is no conflict between Section 138 of the Negotiable Instruments Act and Section 536(2) read with Section 441(2) of the Companies Act. As stated above, the two operate in separate fields. In any case, as stated above, the offence is complete on the 15th day after receipt of the notice by virtue of non-payment and if during that period there was no voidlless then a subsequent order of winding up has no effect on the offence which has already been committed. This is also clear from the fact that if the winding up petitions were dismissed or withdrawn then it would be very clear that an offence under Section 138 would have been committed because in that case there would be no void ness. The law can never be that on a winding up there is no offence but on a dismissed of petition an offence is deemed to have been committed. As stated above, the commission of the offence is not dependent upon the winding up of the company but is dependent upon dishonour and non-payment of the amount within 15 days of the receipt of the notice. It is at this stage that the offence gets completed.