IMPORTANT POINT
Criminal proceedings under Section 138 of Negotiable Instruments Act against Company are not in respect of assets of the Company and cannot be stayed under Section 446 of Companies Act.

R. Rajendra Babu, J. - This appeal is at the instance of the applicant in C.A. No. 257/98 in C.P. 20/94 on the file of this Court (Company Court). The applicant, the Managing Director of M/s. Belhouse Associates (P) Ltd., who was an accused in C.C. No. 456/96 pending before the Additional Chief Judicial Magistrate's Court, Emakulam filed C.A. 257/98 before the Company Court to stay the above proceedings invoking Section 446 of the Companies Act. The Company Court dismissed the above application and the above order is under challenge in this appeal.

2. The 2nd respondent herein (complainant) filed C.C. 456/96 before the Additional Chief Judicial Magistrate's Court, Emakulam against the applicant and M/s. Belhouse Associates (P) Ltd., a Company under liquidation, for the commission of an offence under Section 138 of the Negotiable Instruments Act. It was alleged that cheque for Rs. 1.12,000/- issued by the accused on 19-1- 1996 towards discharge of a liability to the complainant for the electrical works done by them, was dishonoured when presented for encashment, due to the insufficiency of funds in the accounts in the name of the accused and they had not cared to pay the amount in spite of demand through registered notice. Accordingly, the complainant filed the complaint after complying with all the legal formalities.

3. The first accused in the complaint M/ s. Belhouse Associates (P) Ltd. is a Company under liquidation as per the order passed by the Company Court in C.P. 20/94 and the Official Liquidator had been appointed as liquidator of the Company. According to the appellant he issued the cheque as the Managing Director of the Company and as there was no allegation made personally against him, the liability under C.C. 456/96 was entirely upon the Company and as such the entire proceedings of the case are to be stayed under Section 446 of the Companies Act. The Official Liquidator filed an objection contending that the proceedings cannot be stayed under Section 446 of the Companies Act, and similar applications in MCA Nos. 106 and 109 of 1990 and 155/94 in C.P. Nos. 54 and 57 of 1989 were dismissed by this Court by its order dated 12-6-1997. The Company Court after hearing the appellant and the Official Liquidator held that Section 446 of the Companies Act, cannot be attracted in criminal proceedings where the assets of the Company are not involved and the proceedings pending against the accused were only in respect of the Commission of the offence and the punishment thereon. Accordingly the petition was dismissed and the above order is now under challenge.

4. Heard the learned Counsel for the appellant and the learned Official Liquidator.

5. Admittedly the Company, M/s. Belhouse Associates (P) Ltd., was under liquidation and the Official Liquidator was appointed as the liquidator of the Company. The 2nd respondent filed C.C. 456/96 before the Additional Chief Judicial Magistrate's Court, Emakulam alleging the Commission of an offence under Section 138 of the Negotiable Instruments Act against the Company and the appellant as accused Nos. 1 and 2 respectively. A cheque issued by the Company and signed by the appellant as the Managing Director of the Company was dishonoured for want of sufficient funds in the accounts of the Company. Learned Counsel for the appellant argued that the Company was under liquidation and no personal allegations were made in the complaint against the appellant and the liability in the proceedings pending before the Chief Judicial Magistrate's Court was only against the Company under liquidation and hence the proceedings were liable to be stayed under Section 446 of the Companies Act. The Official Liquidator contended that the allegations in the complaint were only in respect of the criminal liability punishable under Section 138 of the Negotiable Instruments Act and as no claim or allegation was made against the assets of the Company under liquidation, the provisions under Section 446 of the C