The main legal point established in the judgment is that the expression 'other legal proceedings' in Section 446(1) of the Companies Act, 1956 does not encompass criminal prosecutions, and the Company Court lacks jurisdiction to transfer criminal cases.

S. B. SINHA, C. J.

( 1 ) WHETHER the expression "other legal proceedings" occurring in Section 446 (1) of the Companies Act, 1956 does include the criminal proceedings is the question involved in these applications.

( 2 ) APPLICATION No. 179 of 2001 has been filed by the Official Liquidator to direct the first respondent herein to transfer Criminal Complaint No. 1026 of 2000 on the file of the Judicial Magistrate of First Class, Nagpur to this Court and to order costs of this application to come out of the assets of the company. Application No. 188 of 2001 has been filed to stay the proceedings in the said criminal complaint.

( 3 ) THIS Court by an order dated 24-11-1999 appointed the Official Liquidator attached to this Court as the Provisional Liquidator of M/s. Pennar Paterson Limited. The liquidator pursuant to the said order took over the assets of the company. It was found that a criminal complaint against the aforementioned company and its Director has been filed knowing that a Provisional Liquidator has been appointed in relation to the said company and without bringing on record the Official Liquidator.

( 4 ) THE learned single Judge, having regard to the fact that this Court by an order dated 19-1-2001 held in Company Application No. 360 of 2000 that the expression other legal proceedings does not include prosecution relying on a decision of this Court in Nagarjuna Finance Limited v. Kanosia Laboratories Limited, 1998 (4) ALT 563, and the ratio in three decisions cited viz. , Khosla Fans (India) P. Limited v. Ramesh Khosla and Ors. Vol. 53 Company Cases 858, D. K. Kapur v. Reserve Bank of India and Ors. , Vol. 105 Company Cases 643, and Re J Burrows (Leeds) Limited, (1982) 2 All ER 882, being contra thereto, referred the matter for an authoritative pronouncement on the question.

( 5 ) MR. Adinarayana Rao, learned Counsel on behalf of the applicant would contend that the provisions contained in Section 446 of the Companies Act must be given widest interpretation. The learned Counsel would contend that as Official Liquidator is an Officer of the Court, it was incumbent upon the complainant to obtain prior permission before lodging proceedings. It was urged that having regard to the provisions contained in Section 450 (3) of the Companies Act, even a provisional Liquidator would come within the purview of the definition of official Liquidator .

( 6 ) MR. S. R. Ashok, learned Counsel of the other hand would submit that the Parliament has used different expressions keeping in view different situations. The learned Counsel would contend that whereas in Section 446 (3) of the Companies Act, the expression suit or other legal proceedings had been mentioned.

( 7 ) OUR attention in this connection has been drawn to the fact that while granting benefit of stay to the trustees, the word prosecution has not been used in Section 391 (6) of the Act. The learned Counsel would urge that the offences committed by the Company or by the Directors thereof would come within the purview of the Companies Act. The learned Counsel would contend that in fact Section 457 of the said Act is a pointer to show that the Official Liquidator is required to obtain permission of the Company Court for defending any suit or criminal action on behalf of the company. It was submitted as against the Official Liquidator merely a fine of Rs. 5,000. 00 can be imposed. It was urged that in a case of this nature, the Official Liquidator can only file an application before the concerned Court in terms of Section 633 of the Companies Act. On the aforementioned premise, the learned Counsel would contend that the prosecution initiated in the Court of Judicial Magistrate First Class at Nagpur cannot be directed to be transferred to the Company Court in exercise of powers under Section 446 of the Companies Act. Strong reliance has been placed on the decisions in Nagarjuna Finance Limited (supra), Raghunath Cotton and Oil v. Ramarao Cot. Company, 95 CC 852, and

Click Here to Read the rest of this document