The main legal point established in the judgment is that a pending winding up petition does not absolve a company from liability under S.138 of the NI Act, and the word 'void' in S.536(2) of the Companies Act does not necessarily render all dispositions ab initio void.

1. Can a company escape from penal liability under S.138 of the Negotiable Instruments Act (for short "the NI Act") on the premise that a petition for winding up of the company has been presented and was pending during the relevant time? A Division Bench of the Bombay High Court held that the company cannot avert its liability on the mere ground that such a petition was presented prior to the company being called upon by a notice to pay the amount of the cheque. By holding so, the Division Bench dismissed a batch of Writ Petitions filed by different companies challenging the criminal proceedings initiated against them in different criminal courts for the offence under S.138 of the NI Act. We have now to deal with the same question in this batch of appeals filed by special leave.

2. Though different cases now before us have differing facts we are not bothering ourselves with such differences. The common features in all the appeals, which alone are relevant for dealing with the aforesaid question, can be culled out from one of the appeals. The company involved in the said sample appeal will be referred to as "the Company". The cheque which the company issued bore the date 30.10.1996 and the amount covered by the cheque was Rs. 5,72,432/-. (There is a contention that the cheque was actually drawn much before that date). When the cheque was presented for encashment the drawee bank dishonoured it on 26.12.1996. The payee of the cheque issued a notice to the Company on 21.12.1996 calling upon it to pay the amount. As the Company failed to pay the amount a complaint was filed before the Magistrate on 29.1.1997 against the Company and two of its directors for the offence

under S.138 of the NI Act.

3. The Magistrate who took cognizance of the offence issued process to all the accused. It was then that the accused challenged the criminal proceedings by means of a Writ Petition filed before the Bombay High Court, on the premise that a petition for winding up of the Company has been filed on 27.5.1996 before the Court concerned and a Provisional Liquidator was appointed by that Court two years later ie., on 21.4.1998.

4. As the facts stated above were not substantially disputed the Division Bench of the High Court proceeded to hear the Writ Petition along with the other Writ Petitions in the batch, on the limited question whether the Company can avert the penal liability on that premise. The main footing on which the Company resisted the prosecution was that under S.536(2) of the Companies Act any disposition of the property of the Company shall be void if it was made after the commencement of winding up proceedings by the Court. To bolster up the said ground the company relied on S.441(2) of the Companies Act which says that winding up of a company by the Court shall be deemed to commence at the time of presentation of the petition for winding up. The Division Bench of the High Court noticed the common features in all the cases in the following sentences:

"In all these matters, a petition for winding up had been filed either before the cheques were issued (in some cases) and (sic or) in any event before the period of 15 days, after receipt of notice, expired. Thus the question for consideration is whether merely by reason of a winding up petition being presented there was a bar or legal disability in making payment."

5. Learned Judges proceeded to consider the question on the aforesaid admitted premise and, therefore, examined the contention whether disposition of any property by the company would become "void" immediately on presentation of the petition for winding up, or it would become void only when an order of winding up has been passed, or at least when a provisional liquidator has been appointed. S.536(2) of the Companies Act was sought to be interpreted in a wide dimension so as to render all transactions void merely because a petition for winding up was presented - whether or not it was succeeded by an order of winding up