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High Court Of Calcutta
Gitesh Ranjan Bhattacharjee
COMMITTEE OF MANAGEMENT OF THE BARANAGORE JUTE FACTORY - Appellant
Versus
STATE OF WEST BENGAL - Respondent
CRI. REVN. CASE 1367 Of 1992
Decided On : 04/26/1993
COMPANY LAW - Winding-up - Prosecution - Leave of the court - Section 446 of the Companies Act, 1956 - Negotiable Instruments Act, 1881 - Section 138 - Ad hoc Committee of Management - Position analogous to receiver - Requirement of leave to sue or prosecute.
Fact of the Case:
The accused company, Baranagore Jute Factory PLC (Pvt. Ltd. Company), issued two cheques in favor of the complainant company for discharge of existing liability, but the cheques were dishonored by the drawee bank. The complainant filed a petition of complaint under section 138 of the Negotiable Instruments Act against the accused company and two others, Radheshyam Ajitsaria and Raj Kumar Nemani, who were looking after the day-to-day business of the accused company. The accused persons filed an application before the trial court praying for staying further proceedings of the case, but the trial court rejected the application. The accused persons filed a revision petition in the High Court.
Finding of the Court:
The High Court held that the prosecution against the accused persons was not maintainable without the leave of the court under section 446 of the Companies Act, 1956, as a winding-up order had been passed against the accused company and the Official Liquidator had taken over possession of all assets and properties of the company. The High Court also held that the members of the ad hoc Committee of Management appointed by the court to run the Mill of the company were entitled to the protection of the requirement of leave of the court concerned for being sued or prosecuted in respect of anything done in discharge of their functions, as their position was analogous to that of a receiver.
Issues: 1. Whether the prosecution against the accused persons was maintainable without the leave of the court under section 446 of the Companies Act, 1956? 2. Whether the members of the ad hoc Committee of Management appointed by the court to run the Mill of the company were entitled to the protection of the requirement of leave of the court concerned for being sued or prosecuted in respect of anything done in discharge of their functions?
Ratio Decidendi: 1. The High Court held that the prosecution against the accused persons was not maintainable without the leave of the court under section 446 of the Companies Act, 1956, as a winding-up order had been passed against the accused company and the Official Liquidator had taken over possession of all assets and properties of the company. The High Court relied on the provisions of section 446 of the Companies Act, which states that no suit or other legal proceeding shall be commenced, or if pending at the date of winding-up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose. 2. The High Court held that the members of the ad hoc Committee of Management appointed by the court to run the Mill of the company were entitled to the protection of the requirement of leave of the court concerned for being sued or prosecuted in respect of anything done in discharge of their functions, as their position was analogous to that of a receiver. The High Court relied on the principle that a receiver appointed by the court is an officer of the court and cannot be sued or prosecuted without the leave of the court, and that the same principle applies to the members of the ad hoc Committee of Management appointed by the court.
Final Decision: The High Court allowed the revision petition and quashed the proceedings of the trial court. However, the High Court directed that the proceeding in the court below will remain stayed initially for a period of three months from this date so that the complainant may obtain necessary leave from the concerned court in the meantime. In the event further stay is necessary for the said purpose the complaint will be at liberty to apply before the court below for extension of stay and the learned court below in that case will be entitled to pass such order on such application as may be considered proper after giving opportunity of hearing to the parties concerned. In case no application for leave is made before the concerned court within this initial period of three months or in case leave is refused by the concerned court the proceeding of the court below shall stand quashed.
( 1 ) MIDNAPORE Commercial Company, the opposite party No. 2 herein filed a petition of complaint under section 138 of the Negotiable Instruments Act against the Baranagore Jute Factory PLC (Pvt. Ltd. Company) as accused No. 1 and two others namely, Radheshyam Ajitsaria and Raj Kumar Nemani as accused No. 2 and accused No. 3 respectively on the allegation that the accused Nos. 2 and 3 were looking after the day to day business of the accused company and were responsible for the conduct of the business of the said company and that the complainant company sold raw jute to the accused company and in discharge of the existing liability two cheques were issued in favour of the complainant company on 21st July, 1990 for Rs. 64,050/- and Rs. 77,385/- respectively, but the cheques on presentation were dishonoured by the drawee, bank by returning the same for referring to the drawer thereby indicating that there was no sufficient fund in the bank account of the accused company to honour the said cheques issued in discharge of existing liability and that the cheques were dishonoured ultimately (again) on 10th November, 1990 and then notice was duly issued by the complainant to the accused demanding payment but the same having not been complied with the complainant field the petition of complaint for prosecuting the accused persons under section 138 of the Negotiable Instruments Act. The accused persons filed an application before the learned court below praying for staying further proceeding of the case, but the learned court below after hearing the parties rejected that application and thereafter the matter has come up before this court in revision.
( 2 ) IT is the case of the revisionist that this court on 28th October, 1987 passed an order for winding-up the accused company in C. P. No. 2 of 1987 and the Official Liquidator took over the possession of all assests and properties of the company. Subsequently on the 15th September, 1988 Manjula Bose, J. passed an order appointing a Committee of Management to run and manage the Jute Mill Unit of the accused company and thereafter by an order dated the 30th November, 1988 the Supreme Court in Civil Appeal No. 4022 of 1988 sanctioned a Scheme for running the said Jute Mill by the Committee of Management appointed by the High Court and pursuant to the said order passed by the Supreme Court this court by an order dated the 16th June, 1989 made a detailed scheme for running of the said Jute Mill by the Committee of Management. In this background, Mr. Pradip Ghosh on behalf of the revisionist argued two points mainly. The first point of his argument was that the prosecution on the basis of the complaint was not maintainable under section 446 of the Companies Act, 1956 as no leave of the court which was winding-up the company was taken for the prosecution as required under the said section. The second point argued by Mr. Ghosh was that the committee of Management of the Jute Mill having been appointed by the High Court for running the Mill during the pendency of the proceeding in the High court its position was similar to the position of a receiver appointed by court and therefore the members of the Committee of the Management were not liable to be prosecuted without the leave of the court appointing the committee.
( 3 ) LET us now lake up the first point argued by Mr. Ghosh. It is the contention of the accused persons that the winding-up order in respect of the accused company was passed by the High court on 28th October, 1987 and pursuant to the said order the Official Liquidator took over the possession of all assests and properties of the said company. It appears that Raj Kumar Nemani who is the accused No. 3 moved an application before the High Court for an order staying the winding-up proceeding permanently and for constituting a Committee of Management with the persons mentioned in the scheme submitted by him for revival of the company pending disposal of his a
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